What *Actually* Matters When Raising a Funding Round
Synthesizing Insights From the Data
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This week, we’re pulling back the curtain on what the science says about raising a venture round—specifically, everything up to and including Series A. In subsequent rounds, the sample size gets too small and the variance too large, so we focus on pre-seed, seed, and Series A.
For any founder who’s been in the fundraising trenches, you know securing capital is about more than showing a great idea. Each stage has its own set of investor expectations, and understanding what VCs prioritize can significantly improve your odds of success.
Every pitch deck, every coffee meeting, and every metrics report plays into what VCs are looking for at these different stages. But here’s the challenge: founders often misjudge which milestones and metrics really resonate with investors.
Whether it’s traction, team dynamics, or market potential, each funding round brings its own yardstick for success. Misunderstanding this can lead to frustrating rejections—or, worse, time and energy spent chasing goals that won’t actually move the needle with VCs.
Beyond just the capital, raising a venture round is about finding the *right* partner—one who believes in your vision, understands your industry and can add fuel to your growth journey.
Knowing the determinants of success at each stage helps founders secure funding and attract partners who will truly add value. And remember, VCs aren’t just investing in businesses; they’re buying into the stories they believe will shape the future. Knowing how to craft that narrative by stage can be a founder’s secret weapon.
In this episode, we’ll break down the insights and nuances that can make all the difference, including some counterintuitive truths—like how uncertainty at pre-seed can be an asset, signaling opportunity and flexibility, but at Series A, it’s often a red flag. With a clearer understanding of these nuances, you’ll be better positioned to align your strategy, avoid common missteps, and make a compelling case to investors at every stage.
What Actually Matters
Pre-Seed Stage
The pre-seed stage is all about high-risk, high-reward plays. At this level, investors are typically more willing to bet on a team, a vision, and potential rather than concrete proof.
At pre-seed, angels, accelerators, and incubators are key players, stepping in where traditional private investors might hesitate, given the uncertain returns typical of pre-seed ventures (Molnár & Jáki, 2020).
For VCs, a strong founding team is one of the most critical determinants at pre-seed; they’re looking for a group capable of weathering the high risks inherent to such an early investment (Bai & Zhao, 2021; Gu et al., 2020).
Interestingly, these early-stage investments often attract backers from smaller cities rather than the bustling Tier-1 urban centers we usually associate with VC activity. Smaller cities, facing a less saturated startup scene, offer more high-risk funding opportunities, and investors there may be motivated by the chance to get in early on emerging ventures (Annamalaisami, 2021).
