The 10 ways I f**ked up fundraising

In early 2021- by nothing short of a miracle- we closed a funding round. 

I say “nothing short of a miracle” as I was on fundraising duty. And I f**ked up. A lot. 

The good thing abut fundraising is the near-instant feedback, meaning the f**kups are painfully obvious but can also be dealt with. We ended up bringing some wonderful investors onboard and I learnt a huge amount during the process. Now I hope to help others avoid my mistakes.

I’ve compiled a list of the 10 ways I f**ked up. Enjoy.

#1 “Raising” without actually talking to investors

At the turn of the year we were ready to go. Ben (my cofounder) and I had been working hard on the pitch, and armed with a shiny new deck we began raising. Or so we thought. The next two months were spent rewriting the deck, lots of soul searching, and speaking to a couple of investors we already knew. I’d never properly fundraised before and, to be honest, I thought this was how it was done. Each day I waited for divine inspiration from the heavens. It didn’t come. 

It was only clicked when an Advisor connected me with two entrepreneurs who had just completed a round. I discovered it was all about talking to investors. Lots of them.

Lesson learnt and from that day forth I began spamming Angel Investors, in their hundreds on Linkedin, and sure enough the calls began trickling in.

#2 DJ Music

Our first pitch was with First Monday, an Angel group based in London. The first call went ok- well enough to get a second call with some of the angels. That’s where the wheels came off.

An advisor of ours had whipped up a Financial Model for me, with the intention that I’d work on it. I didn’t. In fact I barely checked it. In my naive excitement at our first pitch completed I sent out the financial model to anyone who wanted to see it. Big mistake.

In my followup call with First Monday not only was I pulled apart on the numbers (and rightly so!) but it was pointed out that the marketing line, for our digital detox startup, said “Marketing, Promoter, and DJ Music”. Ouch! A clue to what the template had been used for before. And a painful reminder of just how little work I’d done on it.

#3 Not Knowing My Numbers

Such a cliche: know your numbers. I also happen to be numbers guy- studying Maths at University. So you’d have thought I might have avoid this particular pitfall. Nope. I feel straight into it.

Honestly it was laziness. Not having built the financial model myself, the initial friction of getting to grips with it proved too much and I dragged my feet. We ended up losing a couple of wonderful potential investors due to gapping holes like not including the cost of cabins in our model. Who can blame them?

#4 “Why are you doing this?”

It’s a common question. I thought I had it figured out. turns out I didn’t. I told investors there’s two reasons we’re doing this…

Firstly: we think it’s missing in the world. I’d love to go to a cabin and lock my phone in a box!

Secondly: to learn. Both Ben and I are new to this and, honestly, are keen to learn how to build a big impactful business that makes a positive splash.

The big omission here is obviously money. It really is not about the money! Intellectually, I know money doesn’t bring happiness and when all is said and done it’s about the journey not the destination. That doesn’t mean I don’t absentmindedly think of a future exit- it’s hard not to- but that’s not what gets me up in the morning.

This was fine for most but I lost one great potential investor because he saw it as a red flag and thought it increased the chances of us giving up and walking away. Now, I know that’s not going to happen- we’re in it for the duration. But I failed in getting that across. Back to the drawing board!

#5 The SEIS Gamble

This one could have been curtains.

SEIS & EIS are wonderful schemes and they drive much of the angel investing in the UK. Alas, not everyone is eligible- they’re particularly tight around business whose main source of revenue is accommodation.

We didn’t apply for advanced assurance and instead applied directly for SEIS with investors from our initial Friends and Family round. I started the application process in December, just a couple of months before raising.

As our fundraising efforts got underway we still didn’t have a clear answer. I decided to gamble. I told investors we expected to get it and plastered “SEIS” all over our pitch deck.

Surely they wouldn’t turn us down?

They did. Halfway through the raise we got the hammer blow: Rejected.

Tail between my legs, I informed everyone I was in conversation with. A flurry of no’s followed. But, miraculously, some people stayed interested. Not having SEIS (or EIS) did significantly reduce the ticket size, but people came aboard regardless. Mercifully commits started coming in. 

#6 Yo-yoing valuation

Our valuation was all over the place. It started at ￡1.5m. Then, after doubling our targets, I got carried and moved it to ￡2.5m. This didn’t fly at all so I went down to ￡2m. Then SEIS-gate hit and I decided to get it done at ￡1.5m.

I would not recommend following in my footsteps. Pick a valuation that you’re comfortable with and stick with it! It’s all finger in the air at the early stages anyway…

#7 “How much are you giving away?”

I initially pitched that we were raising ￡150k at a ￡1.5m pre-money. The link between the amount and the valuation wasn’t too important in my mind. I was wrong. 

“How much are you giving away?” 

“Umm.. 8%”

“That’s not enough”

“…”

Every investor is different, but there were some who really cared what percentage of the company was being given away. Luckily there was an easy solution- double the amount we were raising!

From then on I pitched we were raising ￡300k, (￡150k now and another ￡150k later.) Problem solved. I didn’t hear a sniff about it from that day forward.

#8 Complacency on closing

Fundraising’s a rollercoaster. There are days when getting it done seems completely inconceivable. Then a couple of good conversations and your prayers seemed answered. 

On more than one occasion a few exciting conversations killed my urgency.

“There’s loads of people interested- we’ll close no problem.”

It’s not over until it’s over. 

Taking the foot off the gas meant that when a couple of people dropped out it all started looking rather bleak again. For the whole time I was raising it seemed to be alternating weeks of despair and weeks of complete calm. Something in the middle is probably what you want.

#9 Not unblocking investors

Another trap I fell into was not spending enough time figuring out how to get people over the line. After a good initial convo I’d send investors any documents they requested and just leave them to it- whilst I went off to get more people in the top the funnel.

A mentor highlighted to me that I didn’t even know what these investors needed to complete. I was clueless. Speaking with them I discovered there were blockers that could easily be resolved.

Ben Horowitz has a wonderful idea about this in “The Hard Thing about Hard Things”: You only need to find one investor.

Now for us, and many other startups, the round is made up of multiple investors but the idea still applies: you only need the number of investors you need, no more. Often you have enough investors in the pipeline, like I did, and the key is simply to get them closed.

#10 Lack of consistency

Another question I struggled with- “What’s your minimum ticket size?”

I wasn’t exactly sure how to think through this one so I went with ￡10k.

Once the raise was underway we decided to accept a number of smaller tickets (<￡10k). No regrets but this did come back to bite me.

One investor, right when we were getting the term sheet signed, didn’t like the fact that I’d told him ￡10k minimum ticket (which he was in for) and there were people in with less. He ended up not investing, resulting in some last minute scrambling to fill the hole.

Completely on me- I didn’t communicate to everyone that I’d mixed it up.

— — 

Well, there we are- the 10 ways I f**ked up fundraising. In actual fact there were far more than 10 but hopefully this offers a valuable insight into the fundraising process.

Over all it was a wonderful experience. I met some fantastic people- some of whom invested- and learnt a ton along the way. We’re raising our next round in the next few months so I expect I’ll have some more f**kups to share then. Please do get any touch if you’d like any more detail on anything discussed above.