What *Actually* Matters When Raising a Funding Round
Synthesizing Insights From the Data
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This week, weāre pulling back the curtain on what the science says about raising a venture roundāspecifically, 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 whoās 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 hereās the challenge: founders often misjudge which milestones and metrics really resonate with investors.
Whether itās traction, team dynamics, or market potential, each funding round brings its own yardstick for success. Misunderstanding this can lead to frustrating rejectionsāor, worse, time and energy spent chasing goals that wonāt actually move the needle with VCs.
Beyond just the capital, raising a venture round is about finding the *right* partnerāone 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 arenāt just investing in businesses; theyāre buying into the stories they believe will shape the future. Knowing how to craft that narrative by stage can be a founderās secret weapon.
In this episode, weāll break down the insights and nuances that can make all the difference, including some counterintuitive truthsālike how uncertainty at pre-seed can be an asset, signaling opportunity and flexibility, but at Series A, itās often a red flag. With a clearer understanding of these nuances, youāll 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 (MolnƔr & JƔki, 2020).
For VCs, a strong founding team is one of the most critical determinants at pre-seed; theyāre 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).
