It’s not pride, or even joy, that most founders feel when they close a funding round.
It’s relief.
Relief that it’s all, finally, over — at least until you need to go and do it all again.
I’ve raised three rounds of funding for my startup now. Here’s how I’ve prevented myself from completely burning out each time.
Before the fundraise
1. Don’t listen to the crowd
This is one of the first things we learnt when we got into Y Combinator: don’t ‘average’ advice. We were told it’s ‘bad decision hygiene’ (and a waste of time) to ask or even process (sometimes unsolicited) advice from a lot of sources. It’s best to pick the one or two people who have the widest range of knowledge and experience to answer the question, and to stick to them.
That person could be an investor who’s already on the cap table, so that your interests are aligned, who knows (i) your industry very well, and (ii) the deal size and stage you’re raising for. They could also be a founder who recently raised a similar round in a similar industry and has collected a lot of data points about what makes VCs tick and what gets done in the current market.
2. Anticipate rejection. Protect your enthusiasm at all costs. Get help if needed.
Fundraising rarely happens without a fair share of ‘rejections’. ‘You only need one ‘yes’, is a very common mantra. I like to visualise fundraising as a sales funnel that has a drop rate at each step. With that in mind, each rejection is less nerve wracking.
Making sure you have a buffer between each investor meeting is also key. Even if one meeting is dreadful, you still need to arrive fresh, enthusiastic and sharp at the following meeting. Investors want to see a company that’s onto a market that can lead to a $10bn valuation in the future, a founder who is relentlessly resourceful and a talent magnet. Identify what helps you reset your mind before each pitch: it can be a walk, a quick breathing exercise, a few minutes of visualisation or meditation. Find out what works for you and get professional help if needed.
3. Prepare your personal life and company to function without you
This means you need to get your personal life organised: you won’t be fully present until you close the round, whether you want it or not. That’s also true for your company; most of the projects you own should be either ‘delegated’ or ‘paused’. Making this clear to the people around you will help you avoid increasing your mental load and the inevitable feeling of guilt and of ‘failing to deliver on every dimension’ that the fundraising process will trigger.
Once you receive your first term sheet
4. Get to closing ASAP
We’ve seen term sheets being pulled much more frequently in 2023 than in 2021 (unsurprisingly). So for us, getting from the first term sheet to closing (when the money hit the bank) as fast as possible was critical. A signed term sheet that’s pulled can be dreadful for a startup: it’s not only a loss of time, but also a loss of momentum. Plus, the company’s data has been shared, offers have been made, a doubt has been voiced (“should everyone pull out of the deal?”) — so we wanted to minimise this risk as much as possible.
There’s no magic formula to accelerate this process: the competitiveness of the round helps negotiating the terms (leverage FOMO), and tight project management during due diligence gets the company to closing faster. Pre-Series A, few CEOs can delegate this process, or even get real support from team members, so anticipate some heated negotiations and lengthy legal reviews. This only gets worse if you’re based in Europe and raising from US investors: you need to make yourself available almost 24/7 to suit everyone’s time zones.
5. Stick to your guns
It’s easier said than done, but try to resist pressure from investors, who'll have different incentives to you.
Your existing investors might want to optimise for a ‘brand name’ VC rather than a good fit with the team, or optimise for valuation to show a higher markup.
Your potential new investors might also pile on the pressure. We received an “exploding term sheet” (an offer that's supposed to be pulled out 48 hours later). Although it could be seen as a sign of deep interest for our company, I resented this approach, which was supposed to rush us into taking a decision that could impact our company for the next 10 years.
Raffi (my cofounder) and I always kept time for ourselves, just the two of us, to discuss what was important to us as founders, and for the company, and we have a “let’s sleep on it” policy for any important decision.
After the raise
Once the money hits the bank, it’s always a huge relief. Then comes a wave of additional pressure and expectations to ‘grow into your valuation’ from your new investors. Future potential investors will reach out on the back of your announcement, and current investors will pressure you into building a relationship with them, because you ‘need to think about the next round now’.
Your current team will also add on the pressure. They will be waiting for directions, wondering how you plan to grow the company and the team, how their ESOP is impacted, and most of the time, hoping they can get a salary raise.
You’ll also need to bring the company back up to speed, before aiming at the next stage of scale.
Last but not least, while you were raising, your goal was clear (get millions in the bank under the best conditions, with the best partners). Now that you’re back running the company, what you need to do is not so clear, nor how to get there. It can become overwhelming very quickly.
6. Take a break
It’s very tempting to go straight from ‘closing’ into this next step, but I think there’s no better time to take a holiday than just after closing a round. If your company survived the weeks or months of fundraising, it will survive another week of you being out of office to recharge. Communicating with the team and your investors that you and the company will need three months’ recuperation before being square and fair for the next stage of growth is also good practice.
7. Bolster your team
Make it a priority to hire people who will be your direct support system: run a recruitment process to hire an executive coach if you need to, hire a head of talent if you’re hiring more than 10 new team members, and a head of finance who can help offload the daily operations, to make sure you can have a little space to think strategically.
