How to Not Screw Up Your First Fundraise

Thanks for reading! If you have anything you want to hear about, just reply! The best topics come from founder conversations—like this one. Hope you enjoy.

Raising your first round of venture capital is a rite of passage. Done well, it can buy you time, clarity, and talent. Done poorly, it can saddle your company with a bloated cap table, misaligned investors, or worse: the illusion of momentum.

The decisions underneath the raise–including whether or not to raise at all–will shape your next two to ten years, whether you hit product-market fit or not. Because when your startup veers off-plan (and it will), these early funding choices can have a big impact.

Start here

Raising money is not success. It’s just another lever. A founder I spoke with recently was struggling with whether or not to raise “If I raise, I could go faster and maybe make this a lot bigger. But I’m not sure I want the incentives that come with raising.”

Exactly. Capital is a tool. Not a finish line. It magnifies your current trajectory—but doesn’t create one. Before you raise, ask: What lever are you pulling?

Mark Gainey, an early mentor of mine and founder of Kana Software and Strava, told me there are three levers to building a startup: selling (engaging with customers), building your team (hiring), or raising money. If you can’t do the first two, you may have no choice but to raise. But if you can? Raising is optional. That optionality is powerful.

SAFEs are simple but not harmless

Today, most first-time raises happen on SAFEs (Simple Agreements for Future Equity). They’re fast, cheap, and founder-friendly. No control rights. No board seats. No preferences. That’s why founders love them.

But here’s the catch: SAFEs defer complexity, they don’t eliminate it.

Every SAFE you sign is a pre-allocated slice of your cap table. If you raise $1M on a $5M post-money SAFE, that’s 20% of your company—before options, before a priced round, before real traction.

Founders often pile on a few SAFEs over time without modeling their impact. Then they get to a priced round or even an early exit, and realize they own less than 30% and didn’t know it. The advent of post-money SAFEs have made the instrument even more dilutive than it was before. A pre-money safe calculates the valuation to include other SAFEs that are converting, while the post-money safe actually honors the actual cap in the safe. This can make a huge difference for both founder and investor, and post-money has become the standard.

It’s all well and good to talk about how you’ll structure your round. But first, you’ve got to find someone who wants to invest. Who do you raise money from? Are you raising from a larger single investor, or a lot of them? What are the tradeoffs?

One big check vs. many small ones

There’s a temptation to raise from one large investor: cleaner, faster, maybe even less work. These rounds also tend to get more press, making them seem better. But as I told a founder last week, who asked “Isn’t it easier to just get one big check than wrangle ten $100K checks?” It is—until it isn’t. There are pros and cons to both approaches.

First, let’s talk about whale hunting for a moment. There are way more fish than whales. If you are whale hunting, realize it’s very easy to invest a lot of time and energy in the expedition–and come up empty. (This is just as true for enterprise vs SMB sales) If you go fishing, you’ll catch something. Maybe $500k, from 10 different people, not that $1mm whale check. But if you only talk to people that can write $1mm checks, you’ll have fewer conversations and there’s a nonzero chance that you don’t raise anything.

Before you think, I’ll just ask the $1mm investors for $50k, know that that’s not a thing. The people who invest $1mm at a time don’t write $50k checks–even if you can think of lots of rational reasons why they should. They don’t. Tailor your ask to who you are speaking with (better yet, ask how they typically invest, and then–if that suits you–fit your ask to that model).

The pro and con with one large check is that they will feel ownership. If they lose conviction, you might too. Should they turn sour or disagree with a change in direction, your options become limited quickly. Pivots can be particularly tricky—what felt like a partner can become deadweight or worse, a blocker. While on a SAFE they might not have legal control, or a board seat, but they will have rights if you convert to equity. Which means if they’re upset with you and soured on the business, it will be much harder to raise another round. No VC wants to buy into extra drama and problems.

That said, there are upsides to feeling ownership. A large investor is far more likely to bridge you when things go sideways. They're often helpful in a Series A, bringing signal and network. Many good seed funds or “super angels” will walk you into top investors, and help orchestrate a round. They’re the ones who start rumors that your startup is hot and a deal is imminent–the kind of rumors that make a deal imminent. And with only one voice at the table, there’s far less herding cats when decisions need to be made.

With many small checks, the risks flip. No one feels real ownership, which can be liberating until you need help. If you're running low on cash or need support, don't expect anyone to step up. Sometimes they will, but it’s on you to manage the herd, and if things are going ok not great, don’t expect anyone to up their $50k check with that $500k you need to hit your next milestone: follow on bridge rounds are usually less than the initial investment, not more. Herd behavior cuts both ways, and when things go bad, the default reaction is usually silence.

But small checks come with freedom. No one can push you around. You can sell or shut down the company without permission. If Amazon shows up and offers you $800k/year to take a job, nobody’s venture investing career ends because you did the rational thing. (Yes, that happened, though in fairness the company was out of runway). Perhaps most importantly, in the doing great scenario you retain optionality to go institutional later, without having to unwind terms or deal with a misaligned lead investor.

A bonus of having a good, single or lead investor is that they are more like a partner to the founders. If there are multiple cofounders, and they have a dispute (which is not unusual) there is someone with context and aligned interests that can help navigate that challenge. Of course, if that investor is a difficult or bad investor, they can make things much worse–possibly even pushing a founder out that they disagree with.

There is no right answer. Just know what you’re trading. Because as I told another founder recently: You are not just raising capital. You are choosing who sits next to you when things get weird.

Raising doesn’t solve go-to-market

Founders often think, “If I raise, I can finally hire a designer. A marketer. A salesperson. And all of my GTM problems will be solved.” That may be true, but if it is I’ve never seen it work that way. As I learned the hard way, capital doesn’t fix go-to-market. Or product. Or engineering. But it can definitely give you more time to avoid fixing it–which is not always a good thing.

I’ve talked to pre-funding founders across the spectrum. One was struggling with VC conversations even though he had over $1mm in ARR–because it was all from just one customer. Another had 5 very engaged, non-paying customers across 5 different industries and 5 different use cases. Those are go-to-market problems that funding will not fix. And they’re common.

Before you raise, nail at least one repeatable wedge. Find a specific, narrow use case. With a specific user, and a story and value proposition that resonates with that user. Who, I should add, has ready budget.

You don’t need to sell to everyone. You need to sell to someone. And then to raise (or invest your own time and money) you need to prove it’s real by selling to ten similar someones. Because venture capital is gasoline. If your engine is misfiring, more gas just means bad things.

Control is not what you think it is

A founder once told me he liked SAFEs because he didn’t give up control.

Legally? True.

Practically? Not really.

Control isn’t just board rights or vetoes. It’s the expectations set, the narrative implied, the psychological weight of someone else’s money in your hands. When your only investor is your rich uncle with a $25K check, that pressure is low. When it’s a $1M check from someone who does this for a living, who actually spent time reviewing your model and expects you to hit it? That’s different.

By different I don’t mean necessarily bad. Some founders thrive on that pressure. Others buckle.

The decisions you make on behalf of your While the venture world has expanded exponentially over the last decade, if you do wrong by your investors and try to raise for another company–it will come back to haunt you.

Know yourself.

So should you raise?

One founder said it best: “If you can bootstrap, you should. But I worry about moving too slowly and someone else eating my lunch.”

That’s the trade. Raising lets you go faster. But it also raises the stakes.

Here’s what I tell founders:

• If you’re still figuring out what you’re building, don’t raise yet.

• If you know what you’re building, but not how to sell it, maybe raise.

• If you know (really know!) what you’re building and how to sell it and just need to grow, raise now.

But don’t raise to feel legit. Raise because it will bend the curve, up and to the right faster. Not flatline for longer, or down to the right slower.

And when you do raise:

• Cap your round. Urgency matters.

• Stack SAFE caps. Reward early believers.

• Write investor updates. Keep optionality open.

• Avoid weird terms. They always come back.

Good VCs won’t put in weird terms. No board observer seats for $500k. No weird rights. It only hurts you later. Don’t assume that you can undo this in your next round–sometimes there may not be a next round, because after looking in your data room a VC on the fence doesn’t want the headache. Great and even just good VCs will not saddle you with terms that make the subsequent round harder, because they know they’ll be in this with you and it’ll be their headache too.

The TL;DR

• Raising money is optional. Owning your cap table is not.

• SAFEs are easy. But not cheap.

• One big investor is clean. But fragile.

• Many small investors are flexible. But passive.

• Don’t fund your way into product-market fit. Earn your way to it.

And above all: Venture capital is a tool. If you’re going to use it, use it deliberately. And be smart about it. If you’re taking VC from just one or two investors, make sure they are good at what they do. Not all of them are.