Funding Pitfalls

Insights and Advice from Years of Meeting Startup Founders

I have met more than a thousand founders in recent years. Here are my two cents for early-stage startup founders.

Communication and Transparency

• Directly ask questions, skip vague meetings.

• Ensure meetings have clear agendas.

• Aggressive communication hints at conflicts.

• Ghosting damages your credibility.

• Be open to feedback for growth.

• Don't take rejection personally.

• Avoid vague or unclear answers.

• Communicate calmly and effectively.

• Respond promptly to investors.

• Delayed responses signal poor time management.

• Founders should manage fundraising communication.

• Direct founder contact is crucial.

• PA fundraising use suggests poor time management.

• Using intermediaries limits direct contact.

• Refusing information shows lack of transparency.

Professionalism and Presentation

• Use company emails for communication.

• Organize your data room neatly.

• Monitor your social media closely.

• Update LinkedIn with current roles.

• Quality LinkedIn profiles help investors vet you.

• Accurately represent your education.

• Good demo day video prep shows audience regard.

• Avoid full check-boxes in competition slides.

• Don't mention on your presentation how you plan to exit.

Strategic Planning and Focus

• Focus on impactful metrics, not vanity numbers.

• Early stage? Short-term forecasts only.

• Value real achievements over titles.

• Beware getting distracted by events.

• Have realistic market entry plans.

• Over-optimism and weak plans seem risky.

• One commitment for full focus.

Team and Founder Dynamics

• Disclose family ties among founders early.

• Equity for passive co-founders is a red flag.

• Focus on core team quality, not size.

• Co-founder conflicts are a potential red flag.

• Resolve co-founder conflicts early.

• Co-CEOs hint at power struggles.

• Avoid power struggles, clarify roles.

• Ensure decision-making power matches equity.

• No technical co-founder risks product development.

• Co-founders are part-time, juggling other projects during funding is red flag

• Shallow industry knowledge is a red flag.

Financial Wisdom and Integrity

• Complex cap tables can complicate future deals.

• Uncapped valuations are a red flag.

• Answering that valuation will be determined by the market is a red flag.

• 5-year revenue forecasts add little value early on.

• Favor early revenue over large unvalidated spends.

• Seek revenue early, spend wisely.

• Luxury spending signals wrong priorities.

• High risk relying on a single customer/supplier.

• False urgency in relations is a red flag.

• Keep SAFE agreements unmodified for trust.

• Keep investor terms unchanged. Any edits must be clear and shared.

• Avoid NDAs for openness in due diligence.

• Aim for equitable terms for all early investors.

• Transparency in fundraising intent.

• Claiming not to seek funds may hide motives.

• Spin-offs have unique funding challenges.