Startup Fundraising 101

Fundraising is hard. But you can learn how to do it. In this journey Max shares some of his lessons.

Maximilian Fleitmann
Maximilian Fleitmann
Serial Entrepreneur & Founder

When I look at the whole startup ecosystem right now, it seems like money is flying around in massive amounts. Investors are raising larger funds than ever before and you can read of huge rounds every day on TechCrunch and other publications on the web.

It almost feels like everyone will get funded despite their traction or idea.

But I can tell you something. 

Fundraising is hard. 

It was, still is, and also will be in the future.

Only 1 out of 100 startups gets an investment from a VC firm.

I know it first hand. Around seven years ago, it was the first time that I wanted to raise money for my startup. And I had no clue what I was doing: I had never built a pitch deck before, nor did I know the standard terms for venture capital financing. Not to mention fundraising strategy at all.

So I ended up building a shitty deck that wasn’t telling a story, and I only talked to two investors in the process. No one wanted to invest, and I went home with broken self-confidence.

A lot has changed since then. First we managed to raise several rounds for the same startup later on. Besides that, I also changed the sides of the table, became an investor in startups worldwide, and helped founders raise tens of millions.

During that time, I was always fascinated by the way investors and founders work together. Today I want to share my five most crucial fundraising lessons and related resources:

#1 - Why are you raising?

The most important question of every fundraising is the reason why you are looking for capital? You should spend some time thinking about it and come up with a good answer.

There are some good reasons but also some that might be a red flag.

These days it almost feels like everyone is raising money just for the sake of it, and I think bragging in front of your friends or getting coverage in TechCrunch are not the right reasons to raise money.

Reasons for Startup Fundraising

Getting money is also not going to help you find product market fit. There are a lot of companies that are not suited for a venture capital path and are better off bootstrapping their idea.

On the other hand, there are also some good reasons to raise money, like scaling more quickly because you have found product-market fit, hiring a great team, or focusing on product development to solve real customer problems. 

Also, many of today’s bold bets need venture capital because they won’t be making any money soon.

#2 - Understanding investors

Most of the VC firms work like “startups” themselves. High net worth individuals and institutions give them their money to make more money out of it. VCs do that by investing in a selection of different startups.

Understanding Investors
How investors tick

Out of these startups, there will be a lot that won’t make it because they are running out of money or can’t find product-market fit. So the investors won’t get a return and even loose their investment.

Some of them will become sustainable businesses that make some money but are not a huge success, and these companies might return something in the range of 1-3x.

And then there are the breakthrough companies - the ones that found something unique and can change the world. These are the ones investors look for. Such a company can get the investor a 100x or even 1000x on their investment. These are also the companies responsible for most of the financial returns of a VC fund.

But what does that mean for you?

If our business does not have a chance to become at least a billion-dollar or more company, it won’t be interesting for most venture capital investors because the return of the single investment can't be big enough to cover their other losses.

#3 - Prepare and practice

It's obvious that you need a great pitch deck that includes a compelling story and every information from market size to your team setup. Besides that, you should have a financial model that shows your assumptions regarding the business.

Most founders would stop here, but I think there are several other things you can and should do. 

At first, you should change perspectives and think about questions you would ask as an investor. Some time ago, I also built a tool for this consisting of over 150+ common investor questions. For every question, you should think of a quality answer - I would even encourage you to create your little FAQ.

Besides that, you should also try to improve your pitch and pitch deck itself. Just invite your friends or fellow founders for a session and pitch them your idea. Getting feedback from them can help you drastically improve your performance for the actual pitch.

#4 - Talk to enough investors

The most important learning for me was to talk to enough investors in the process. Fundraising is a numbers game, and in the end, I want to be the one choosing from options. 

Investor CRM
Investor CRM / Funnel

Create a list with investors you already know, investors you have talked to along the way and new ones that you would like to have on your captable. You can use investor databases like OpenVC for that.

If you have created the long list, make sure to track every interaction in your own Investor CRM.

#5 - Close up the deal

During the whole process of meeting with different investors you should regularly update everyone. A) About your positive business news (like new customers) and B) about how the fundraising is going.

You want to create a sense of urgency.

At some point, try to get the first commitments and term sheets. Now is the time to create a real Fear of Missing out.

It’s one of the most powerful things to write to an investor:

“We got two term sheets and want to close the round in the next two weeks. If you want to be considered for the round, now would be the time for you to take the next steps”.

After that, it is your time to choose your dream captable and close the round.

I hope these lessons have been helpful and you are ready to raise your round now! Below you'll find some of my favorite resources.

You can also follow me on Twitter to learn more on startup fundraising: