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Everybody (kinda) lies
As an early-stage founder, there’s no easier way to become depressed than reading the tech press.
The figures look larger than what you’re discussing with potential investors. The founders all seem to describe a process that went much quicker than yours. The rounds are always oversubscribed.
When you’re deep in the trenches of fundraising, pushing hard to get that first investor to believe in the market you’re taking on, the product you’ve built for it, and, well, you… It can be tempting to treat those stories as benchmarks.
Not only is that not helpful, often it’s straight out misleading.
Startup press releases aren’t written to tell the exact story; they’re optimised for things like hiring and fundraising. And I can’t say that we at The Family aren’t complicit in this. We often tell our founders there’s no better time to announce your last round than when you want to raise your next one. A well-covered round also helps to push your brand when you’re looking to hire a few people.
How’s the sausage made?
Sometimes wording will be vague, being ambiguous as to whether the valuation is pre-money or post-money.
Sometimes “the round” will actually be a collection of rounds that are all announced at the same time. For example, rounds of $2M at $8M, $3M at $20M and $10M at $100M might be announced as one round of $15M at $100M.
Sometimes a lot of very different things (primary investments, secondary transactions & debt) will be bundled into one “raise”.
Journalists know all this and do their best to avoid these problems, but the info isn’t always very easy to check. So more often than not, what ends up in the press doesn’t encapsulate the whole truth.
More importantly, as a founder all this stuff just doesn’t matter.
At The Family, we like to say that benchmarks are for losers. And when it comes to early-stage fundraising, “benchmarks” are definitely a waste of time. Startup stories are all unique, and more often than not the early fundraisings of the most successful ones were far from being walks in the park.
Only a handful of our top ten companies received more than one term sheet the first time they raised. What they were building didn’t look like anything that already existed. The founders’ backgrounds or ages made some investors shaky. The initial market looked more like a gang of hobbyists than anything else. Every one of those founders were given dozens of different reasons.
But fortunately, you don’t need twelve term sheets. In those early days, you only need one. Sometimes it takes five meetings to get there. Often it takes fifty.
Our job at The Family is to help you get that first term sheet. It’s the hardest part of early-stage fundraising. That’s why once we’ve identified that you’re building something people want, we work alongside you to tell the best story possible. And then we do everything we can so that the world, or at least that first investor, is as excited about your potential as we are.
Join our 3-hour, free workshop on fundraising next Monday: you’ll get a concrete idea of what it takes to raise funds as an early-stage startup and how we work with founders at The Family.
Applications for The Family's next remote batch starting in January are open now. You're welcome to apply to our intense 6-week program, made for entrepreneurs willing to grow their startup in the best conditions: getting smart advice, accessing top operators and fundraising with the best investors.