Startup fundraising tips Vol 1: Investors telling you “You’re too early”

I am a founder that has experienced most of the good, the ugly and the bad of raising capital for my startup from private investors and Venture Capitals. I have experienced co-founder break-ups, key employees leaving, secondary rounds, successful funding rounds, bridge rounds, flat metrics, growth metrics, massive partnerships with FAANG companies, hundreds of investors rejections and so on.

I've decided to post interesting tips and content that can be useful for founders that are right now fundraising to help them avoid certain mistakes or take some weight off of their shoulders.

This one is about investors telling you "You're too early", something that you've probably experienced if you are fundraising for your startup.

Having gone through 100+ pitch meetings, I can tell you that they will NEVER say the real reasons. When they throw a random metric, an expected traction, or whatever feedback, take it with a very fine grain of salt.

The true reasons normally are these:

1. They're Afraid to Say No: Investors want to keep their options open.
2. No Sense of Urgency: They think, "Why invest now? I can wait 6 months and see if the founder solves X."
3. Lack of Understanding/Belief: They don’t get what you’re doing but don't want to miss out if a big name like Sequoia/a16z decides to land a Term Sheet.

So, when you're fundraising, instead of focusing on changing your roadmap and do what they tell you, focus more on why the above didn't work out. All of them can be summarized to FOMO (Fear Of Missing Out). So, what can you do to generate FOMO among investors?

1. Be extremely optimistic about the fundraise. Investors don’t want to feel they are “helping” with their money, charities fill that gap better. They want to feel that they are going to have an extreme return. They want to feel they are betting on the 1% companies. They have to feel a sense of urgency.
2. Casually throw details about the progress of the fundraise with confidence. Don’t worry, those small details will become stronger facts as you make progress in conversations, and your confidence will grow and their sense of urgency too.
3. Obsess with the tough questions. Everyone is good at the easy ones. Construct short, simple and objective arguments for each tough question. As Pascal said, “if I had more time, I would have written a shorter letter”. Deliver the message through.
4. Be passionate and straightforward about what you want to build. Don't try to sound as something you think you should, or something you’ve seen around. VCs are tired of fabricated pitches, they speak with 10 different founders a day, all of them feeling they are the most special founder that will become the next Elon Musk. Don't let the air in the room eat you and act nervous. Be authentic and special.

These things may seem irrelevant, but investors are not rational animals. What pushes them to dive into a company and invest in it, is not the data. It's the feeling of closing a deal that potentially will return their entire fund several times. Those things happen once every 100 companies and there's no empirical analysis in the world that can give you such insight.

Therefore, the story you build around you and your company can have a greater weight in your investor interactions than having a good CAC.