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Friends, 

Once upon a time, not so very long ago, it was possible to raise venture money on the back of a pitch deck and a few text messages. The heady days of 2021 and 2022 will be remembered in venture capital as an era of compression and expansion: investment decisions shrunk to the time needed to finish a cappuccino while valuations swelled to a frothy peak. During bull markets of such magnitude, little strategy is needed. It was not quite as simple as showing up, but it was more than half the battle. 

The rules of the game have changed significantly in the past few years. Though the mood among investors has lightened of late, even stellar startups can find it difficult to raise in the current environment. (Exceptions are granted for those who have appended a dot-ai to their domain name.) Savvy and strategy are needed once more. Though nous alone is not sufficient – you must have a strong company on your hands, too – a little wisdom can go a long way toward shortening fundraising timelines and optimizing outcomes. 

Today’s guide is designed to help founders on that journey. The eight unicorn founders featured below have raised more than $4 billion in capital from many of the best investors in the industry. They’ve made mistakes, faced rejection, and earned unique wisdom along the way. I’m excited to share it with you all. 

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Tactical lessons 

1. Keep investors warm. Even when you’re not fundraising, it’s worth carving out time to talk to venture capitalists. Use it as a chance to hone your storytelling skills, discover potential weaknesses, and gauge which investors are most interested in what you’re building. It will help streamline your process when the time comes. 

2. Run a tight process. When you are ready to raise a round, do it with conviction. Raising in a half-heartened manner is a recipe for a drawn-out process with little momentum. Drive investors towards a close, but be careful not to create artificial urgency. It can turn VCs off and cause them to step back. 

3. Raise on story or metrics – not both. Focus your fundraise on either a galvanizing narrative or your strong numbers. If you try to tell both stories simultaneously, you may end up with a vaguer and less compelling pitch. Choose one or the other based on the state of your business. If you don’t have great numbers yet, focus on the story of the market opportunity. If there’s less conviction in the overall market, lean into your stellar metrics. 

4. Optimize for the right partners, not the highest valuation. It may be tempting to go with the term sheet that values your startup most highly. Often, that’s the wrong decision. Instead of optimizing for valuation, pick the investors that can do the most to help your business over the coming years. That profile will likely change depending on the round and the state of your company. 

5. You only need a few yeses. Rejection is an inevitable part of fundraising. Even the hottest companies are unlikely to be a fit for everyone. When you’re in the midst of a tough raise, it’s worth remembering that you only need a couple of yeses to close a round. The process is about finding those true believers as efficiently as you can. 

Read on to discover the full list of tactics and strategies.

“Scarcity and demand are important to driving an oversubscribed process to completion, but those rounds don’t become high demand because the founder has created the illusion of high demand.”

Trae Stephens, Executive Chairman and Co-founder at Anduril

Fundraising is a skill. At the earliest stages, storytelling ability is a big differentiator between being a successful founder and an unsuccessful one. When your startup is at an early stage, you often don’t have metrics or even a product to point to, so you have to be able to tell a narrative about what you’re doing and why you’re doing it. For many founders, storytelling doesn’t come easily, but it’s a skill you can build. In later stages, company metrics drive most investment decisions. There are a lot of really smart growth investors out there, and if you feel that you’re getting shut down by them, ask them to be specific about the elements of your company’s metrics that are causing them to be cynical about an investment. 

Founders often treat fundraising like a sales process where they try to use leverage and create scarcity/urgency. In my experience, this doesn’t work. Scarcity and demand are important to driving an oversubscribed process to completion, but those rounds don’t become high demand because the founder has created the illusion of high demand. They become high demand because they are companies that people are excited to invest in. It’s obvious to investors when a founder is playing a game (though it’s often not obvious to the founder how transparent they’re being). It’s incredibly off-putting to investors when they realize you’ve inserted artificial scarcity into a process. 

At Anduril, every round has been treated as an opportunity for us to advance the company and not screw the company up. Often, people don’t think about long-term implications; they just look at maximizing valuation and minimizing dilution at every round. You can set yourself up for a world of hurt if you end up being too far out over your skis when it comes to valuation. At Anduril, we try to find the right price, not the highest price. I’ve never regretted taking the valuations we have, even when we could’ve gotten higher prices, because the valuations we’ve taken have enabled us to hit consistent growth from round to round. Investors recognize that and go into the next round seeing us as a mature counterparty who isn’t playing games with them. 

Often, founders feel like they want to be done with fundraising and “get back to building their company;” however, part of building the company is maintaining relationships with investors. You should carve out a small percentage of your weekly time, even when you’re not actively fundraising, to build relationships with investors. If you invest a couple of hours a week, you’ll have a much easier time bringing people up to speed on your business when it comes time to fundraise, and you’re more likely to have a successful round. It’s a disservice to your company to think that the time when you’re fundraising is a separate part of your company’s lifecycle from when you’re not. As Alec Baldwin’s character in Glengarry Glen Ross says, “Always be closing.” You should always be out there telling your company’s story.

“You can raise on numbers or you can raise on story, but you shouldn’t raise on both.”

Christina Cacioppo, CEO and Co-founder at Vanta

The three best pieces of advice I’ve gotten on fundraising are:

1. You only need a couple of yeses

2. Raise on numbers or raise on story, but don’t raise on both

3. The best way to get investment is to not need investment

One of the hardest things for me to understand about fundraising is that the “pass rate” – the number of investors who want to fund your company versus those that don’t – can be very, very low, and you can still succeed. You just need a couple of yeses. 

This is contrary to most of what we learn in school, where we try to “collect all the ‘yeses.’” I still remember the first investor who sent a term sheet after YC Demo Day; I didn’t particularly want to take that term sheet. But that one “yes” made me realize we were going to fundraise.

Second, you can raise on numbers or you can raise on story, but you shouldn’t raise on both. You should always be clear with yourself about which one you're raising on, and your pitch should make it clear, too. 

It’s hard to do both well: the vision obscures the numbers, and the numbers detract from the vision. The same company can raise on either vision or numbers at different times. At Vanta, we raised on our numbers in the early days because people didn’t buy into the market or its potential. As we matured, so did our ability to bring investors along on that vision.

Third, the best way to get investment is to not need investment. The plan for Vanta was always to build a large, independent, enduring technology company. We were cashflow break-even for our first couple years until we got to $10 million ARR and raised a Series A. It was a really powerful advantage for us, even though we never intended to be a bootstrapped or break-even business. It’s just that “we don’t need money” is a magical incantation that makes investors really want to give you money.

“When I am not fundraising, I will take casual 30 - 45 minute calls with 10 or so investors every six months.”

Immad Akhund, CEO and Co-founder at Mercury

It’s a pretty basic notion, but the hardest fundraises are the ones where your company is either not realistically fundable or not even close to being fundable. So, my normal approach to fundraising is to be so “fundable” that it’s quick and easy to get the investments you’re looking for. Being fundable is a combination of a few things, most importantly:

• Having a strong narrative that sets your company apart and communicates clearly to investors the “why now” of your company and why you’re uniquely positioned to solve a particular problem. (Our team spoke with Packy McCormick to put together some guidance around how to do this well here.)  

• Having enough proof points – i.e., metrics – that demonstrate a clear understanding of any funding benchmarks that might be expected for your current stage. (For example, metrics that illustrate steady growth and increase in market share.)

I also generally interact with new investors in one of two ways. When I am not fundraising, I will take casual 30 - 45-minute calls with ten or so investors every six months. This helps build relationships, see which investors are particularly excited about what we’re doing, and continuously get an idea of what “fundable” looks like. It’s also a chance for me to get in the habit of regularly honing our narrative. 

When I am fundraising, I focus on trying to do it in a short time period – typically less than four weeks – from start to term sheet. If you already have investor relationships and are very “fundable,” this is often easy to do. I generally avoid preemption – while it’s nice when it works, it doesn’t necessarily optimize the terms or investors you get, and it will often waste time when it doesn’t work out.

If we break it down into a very basic timeline, what an active fundraise typically looks like for me is: 

• Week 1: Prepare deck and data room.

• Week 2: Practice your pitch on friendly entrepreneurs, existing investors, and some new investors you don’t know well.

• Weeks 3 and 4: Talk to >30 investors and try to use the momentum to get a term sheet.

“A CEO should always know their business’s risks, ordered from high to low.”

Avlok Kohli, CEO at AngelList

I like to raise based on a step-function change in the company. Usually, that means you’ve addressed some major risk since the last round. A CEO should always know their business’s risks, ordered from high to low. If you’re in that seat, it’s your job is to work methodically through them one after another. Ideally, you raise on the back of addressing one of them. It gives you a crisp, clear narrative for the raise: you’ve reduced the business’s jeopardy and increased your probability of success.

This is how I thought about AngelList’s last round, our Series B. We had grown really fast over the previous year and grabbed a lot of market share. We’d managed to do that even while moving upmarket. We have this internal chart at the company that shows as we increase the size of the funds we serve, we increase our market share. We never thought about starting with large funds first because we understood the complexity that entailed. We started small and then built the software and infrastructure needed to move upmarket. The year leading up to our Series B demonstrated that we could do that effectively, gaining market share while maintaining (or increasing) customer love. That was the step-function change.

It’s ideal to raise on a major upgrade in your business, but that’s not always possible, of course. There could be broader market forces that make it harder or easier to raise your round. In addition to being aware of market forces, founders must realize that every raise is different. The right strategy to optimize your round depends a lot on the stage of your business. Raising a pre-seed or seed is very different than raising a Series B. Founders don’t always get that. Sometimes they think, “The seed round was super simple, so of course the Series A will be simple.” In reality, they’re fundamentally different rounds with very different risk profiles. By the time you raise a Series B, most parts of the business should be humming – it’s just about pouring gas on the fire to go even faster. Then, a Series C is more or less about taking the company’s numbers, plugging them into a spreadsheet, and modeling them out. That’s a very different methodology than a seed investor would rely on.

“Fundraising success and company success are correlated, but most founders confuse what causes what.”

David Hsu, Founder and CEO at Retool

I find that founders generally focus too much on fundraising. This is especially true for founders early in their journey who associate fundraising with success. (Fundraising success and company success are correlated, but most founders confuse what causes what.) Overall, your goal in starting a company is to deliver value to customers. In the early stages of building a company, you should be entirely focused on that, and fundraising is interesting insofar as it is helpful in delivering value to customers. ...