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What's something no one tells you about raising capital?

What's something no one tells you about raising capital?

The impact of timing and the full role of VCs are sometimes opaque, founders say.

Good afternoon! In today's edition, we asked five founders to tell us what no one told them about the fundraising process for their companies. Questions or comments? Send us a note at

Zeb Evans

Founder and CEO at ClickUp

Don't expect VCs to tell you how to run your business. That's up to you. That will always be up to you.

VCs will certainly help you with many functions. They'll ensure that you get your house in order when it comes to finance, hiring, and certainly recruiting, but they won't come in and make your business better overnight.

It's really important for founders not to overvalue a VC in that regard. You must understand what their role is — and where your responsibility lies! A VC can be a great resource, but you should still be the one with the vision.

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Edith Harbaugh

CEO and co-founder at LaunchDarkly

I have been a product manager and an engineering manager, and I had never raised capital prior to starting LaunchDarkly. Now I’ve raised more than $300M, and I’ve learned no one tells you raising money should be thought of like building up a muscle.

Initially, my co-founder and I put in $10K each of our own money to buy laptops and domain names. We then turned to our friends and family, convincing past coworkers to put in anywhere from $5K to $50K. It was not easy to ask for their money, but it helped me start to build that muscle and get used to pitching LaunchDarkly. I still remember a coworker saying “I have no idea what your new company does, but I know that you’re the best product manager I worked with. You were relentless when it came to iterating on product, and I know you’ll iterate and improve your pitch.”

Building the pitching muscle did not happen overnight. I recall how our pitch at our accelerator Demo Day for our seed round was, in hindsight, grandiose. I talked about how LaunchDarkly would help software companies all over the world launch, measure and control their own software. While we are seeing that vision come to fruition today, at the time it did not land. We only had one new investor from that audience invest in our seed round, as the majority didn’t understand what LaunchDarkly would offer.

With every subsequent round, we improved how we told the LaunchDarkly story and honed in on what we heard from our customers: we were making software development faster while decreasing risk. As our customer numbers grew from 100 to 1,000 to now more than 3,000, we shared those in investor pitches. As I improved the pitch and built that muscle, our customers served as proof points simultaneously.

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Francesco Simoneschi

Co-founder and CEO at TrueLayer

The amount of funding a company raises sets its ambition and expected trajectory. I’m not sure first-time founders all understand that. When fundraising it’s crucial to work out the math and detail of what the numbers mean for you as the founder and for your investors, particularly when it comes to growth rate and forecasting future valuations. The key to unlocking this process is being able to find alignment between founders and investors. In my experience building TrueLayer, fundraising has been a very organic process and we always tried to put ourselves in a position of strength and partner with investors with a long term view and incredible ambition. But it requires you to think in decades and ultimately commit to build a long-lasting business. This is not common or easy. In the current funding environment, founders need to give greater consideration to the finer details of terms and conditions, too. Board seats, voting majorities, and liquidation preferences can play a bigger role as investors’ approach to funding rounds has adapted to reflect the current economic environment.

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David Hsu

Founder and CEO at Retool

Raising capital comes after building a great business. You need surprisingly little capital to get started. And once you have a great business, raising capital is so, so, so much easier.

Think about all stakeholders when you raise capital: your employees, your shareholders, and your customers. Your employees and shareholders will prefer lower dilution. Your employees and customers will prefer a lower valuation (such that you're more likely to be able to raise your next round).

If you have a truly incredible business (think, the chance to be the Google/Facebook of your decade) with an enormously large TAM, most metrics aren't important anymore. Investors invest because they think you have a 10% chance of being a $100 billion company, not because of how you beat last quarter by 20% or because your multiple is "cheap."

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Tracy Young

Co-founder and CEO at TigerEye

Time kills all deals, so timebox your fundraising. If you hear a no from investors, move on. If you hear a yes, know that the deal is not done until the money is in the bank. After you set a predetermined amount of time to fundraise, go back to real work even if there is no term sheet in hand. Fundraising is not an indication of success or failure. It signals externally that you now own less of your company. Remember that raising capital is just a financing event, so don’t fall in love with it, and don’t go into a pit of depression over it.

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See who's who in the Protocol Braintrust and browse every previous edition by category here (Updated Nov. 3, 2022).
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