Dear founder,

Your job is the same as it’s always been for founders at this stage. The only difference is that you have to actually achieve the validation required from investors early on. You have to do the hard work of finding some product-market fit whereby what you are building is something many people feel the need to purchase today.

It turns out, especially in a high-inflationary recessionary environment, this is hard and takes time. Rather than seeing this time as agony, take it as a gift. This is prime learning time. The more you know when you raise your first big round, the less apt you are to waste those funds.

When it is time to raise money, you need to be crystal clear on the narrative (what you do and why people care), the opportunity (i.e., size of the market), and your traction (customers, ARR, etc.).  If you are looking to raise money from venture capitalists (which is not historically a cheap source of capital), then be honest with yourself: Do you have a real painkiller for your target customers? If not, keep at it until you do or consider alternative financing options instead of high-growth venture capital.

You also must not mess up the fundamentals of the round. If you are raising a pre-seed round, have pre-seed answers to the above, target pre-seed investors and raise a pre-seed type round. The same with seed.

Be crystal clear on where you will be as a business (realistically) after you have spent that amount of money in that round. I say this because I spend 50% of my time fixing start-up founders’ asks/assumptions for their fundraises. They fail at answering the most basic questions:

• If you raise X amount of money in this round, where will your business be when that money is gone?
• Why do you think those metrics are enough for the next stage investor?
• What assumptions are you making to hit those metrics? Of those assumptions, which do you have the most confidence in and which do you need to learn/refine over the next 24 months?

Finally, when you think you are ready to raise, take the time to assess what type of investor you want.  Understand your own strengths, weaknesses and growth areas. Look for more than just money. If all goes well, you will be with this investor for over 10 years. Ask them how they will help you. Ask them how much of their fund is focused on follow-on investments. Ask them what happens if things don’t go as magical as you have shown in your P&L model.

The upside is, it is now unlikely that five companies trying to do the exact same thing as you will get over-funded and throw millions at the market, thereby inflating your cost of acquiring talent and customers. Only the strong will get funded and thrive — go be one of those.

You can do it.