💰 Fundraising

Introduction

You're on a call with an investor. The demo works, the deck is clean, the market looks huge. But then always comes the same phrase: "Interesting, but for us it's still too early." Translation: you're not losing because you explain yourself badly. You're losing because you haven't removed enough risk yet.

Fundraising serves exactly this: transforming a startup from "interesting idea" to "investable opportunity". For a European founder it's even more critical, because you play in a market where capital, network and rules are more fragmented than the US, and where finance access, market integration and appetite for risk remain real obstacles to growth. (Research and innovation)

When you have fundraising clarity, you stop living it as a lottery. You understand when to raise a round, from whom, to do what, with which materials and on what terms. When you don't, you make the typical mistake: you start raising too early, talk to the wrong investors, confuse meetings with commitments and end up negotiating price before you've built leverage.

What is Fundraising and why it matters

Fundraising doesn't mean "convincing someone to believe in you". In practice, it means raising capital to fund the next block of startup de-risking: product, distribution, team, market or scale. It's a structured process made of target investor list, materials, outreach, meetings, due diligence and negotiating terms.

It matters because a startup gets funded not for abstract potential, but for the ratio between upside and remaining risk. This is why fundraising became a universal framework: venture capital standardized rounds, term sheets, dilution, control rights and due diligence processes; in parallel, startup ecosystems codified decks, SAFEs, data rooms and milestones as common language between founders and investors. (Y Combinator)

How to use it: step by step

1. Decide if you're really ready to raise

The first question isn't "how much can I raise?", but "which risk have I already removed?". If you're pre-seed, the investor wants to understand if you've validated the problem, if you have a credible solution and if there's early evidence of demand. Steve Blank would say it this way: first comes customer validation, then you accelerate. Bill Aulet frames it in terms of unit economics and customer acquisition process: persona, value, LTV, acquisition cost, critical assumptions. If you don't yet have these basics, the problem isn't the deck: it's timing.

1. Define round size and milestone

A round isn't built "by feel". It's built from the next milestone that truly changes risk perception. Venture Deals is very clear: instead of fixating on a precise financial model, tie the amount raised to the time and target needed to reach the next demonstrable success point. In practice: how many months do you need to reach launch, traction, revenue, retention or readiness for the next round? And what's your burn to get there?

For many early-stage software startups, this means funding 12-18 months of runway to a precise milestone. Not "we raise 2 million because it's a nice number", but "we raise 2 million to reach 150 paying customers, CAC under control and demonstrated retention". When the round is anchored to the milestone, your narrative with investors becomes stronger too.

1. Prepare materials that move the process forward

Investors don't fund chaos. They fund clarity. Minimum requirement: a strong one-liner, a deck, a concise executive summary, a demo and an organized data room. Venture Deals insists on a simple but often ignored point: what you send by email is often both the first and last impression. It needs to stand on its own.

On the deck, the classic reference remains Sequoia: company purpose, problem, solution, why now, market, competition, product, business model, team, financials. It's not an aesthetic exercise. It's the test of your startup's strategic coherence. If you can't explain these ten blocks simply, the problem isn't PowerPoint: it's strategic thinking. (Sequoia Capital)

1. Build an investor list and open a real process

A round closes better when it's a process, not a random sequence of coffee chats. You need to target investors by stage, ticket size, geography, sector and thesis. A European B2C pre-seed fintech isn't pitched the same way to an angel operator, a generalist seed fund and a growth investor. Venture Deals recommends knowing well who you're talking to, what role they have in the fund and which evaluation channel they prefer.

The practical point: compress meetings into a tight time window, create momentum and aim for multiple term sheets, not multiple calls. Process gives you leverage. Leverage improves terms. And terms matter almost as much as capital. A platform like OpenVC today reflects exactly this approach: targeted investor research, organized pipeline and structured outreach management. (openvc.app)

1. Negotiate the round, not just the valuation

The inexperienced founder looks at one number: pre-money. The smart founder looks at the full package. Venture Deals spends pages explaining that a round is made of economics and control: valuation, liquidation preference, board, protective provisions, option pool, antidilution, information rights, drag-along. A seemingly "high" term sheet can become terrible if it includes clauses that lock you out of the next round.

Here also comes the choice of instrument. In very early-stage rounds, SAFEs and similar instruments are used because they're faster and lighter; YC continues providing standard documents and the related user guide. But speed shouldn't make you forget dilution: post-money SAFE, for example, makes clearer how much ownership you're actually selling. (Y Combinator)

5 Best Practices

Raise after de-risking something concrete
The investor doesn't buy just vision. They buy risk reduction. So enter the fundraising market when you can show a real jump: active users, paying customers, gross margin, retention, pipeline, partnership or a demo that immediately makes clear what you're building.

You're selling momentum, not cash need
Saying "we need money" is weak. Saying "we're opening a round to hit this precise milestone in 15 months" is strong. Capital is the means; the milestone is the message. Investors follow convincing trajectories, not generic requests.

The deck must be consistent with the numbers
Many founders tell an ambitious story then show metrics that contradict it. If you say you have a huge market, you need to know who buys, how they buy and why you win. If you say you're growing well, you need to show growth quality, not vanity metrics. Sequoia and Venture Deals converge: clarity beats decoration.

Choose the investor like you choose a co-pilot
A seed round isn't just money. It's access, credibility, help with the next round, recruiting and support in tough times. Venture Deals recommends doing reverse diligence: talk to founders already funded by the fund, understand how they act when things go bad and don't be impressed by brand if no one in the fund will really spend time on you.

Close the round and get back to building
Fundraising is an extremely high opportunity-cost activity. It eats focus, roadmap and team attention. This is why it must be managed intensely then closed fast. A round open for months weakens you: the market senses tiredness, the team feels anxiety and investors start wondering why it's not closing.

3 Common Mistakes to Avoid

1. Confusing interest with commitment
Many founders leave a call thinking: "They're in." No. Until you have a term sheet or at least a clear soft commitment, you only have exploratory interest. This mistake happens because investors rarely say no sharply at the start: they keep options open, watch the process, wait for signals from other funds. If you can't distinguish between curiosity and intention, you overestimate the round and waste time.

2. Seeking the highest possible valuation
Maximum valuation isn't always the best deal. If you price too high today and don't grow enough by the next round, you get stuck: down round, tension with previous investors, destroyed morale. Venture Deals explains this well on seed: too good a price can be a trap if you can't sustain it with results.

3. Opening the round without ready materials and data room
Opening fundraising with incomplete documents is like launching a broken product: you waste the first feedback cycle. Investors will ask for cap table, contracts, financial model, team bios, commercial materials, demo, pipeline numbers. If every request creates a week of delay, the process cools. Operational preparation and response speed are part of founder quality.

Real Example: Klarna (early stage)

The Klarna case is instructive because it destroys three very common founder illusions: that the best are recognized immediately, that big investors only arrive when everything's perfect, and that a high valuation always rises in a straight line.

At the start there was no aura of "inevitable startup". In Klarna origin stories a recurring theme is early rejections, including the business-plan competition the founders joined as students and didn't win. What matters, past the mythology that always gets created afterward, is the pattern: the idea wasn't obvious to local establishment eyes. The first real signal came when Jane Walerud put 60,000 dollars on the table for 10% of the company, giving the founders not just capital but access to technical resources to actually build the product. (resources.latana.com)

This is the first lesson for a founder: the angel round doesn't serve to "maximize valuation". It serves to find the first credible believer who makes it possible for you to exist. Walerud essentially bought Klarna's possibility to actually execute. Without that round, the founders would still have an interesting thesis but no execution.

Then comes Sequoia. In 2010 they enter Klarna and, in the years after, the deal gets remembered as one of the first strong signals that a top-tier Silicon Valley VC was willing to seriously bet on a European startup. It wasn't just capital: it was enormous narrative validation. For the market, Sequoia was saying Europe could produce world-class company building, not just well-run local startups. (siliconrepublic.com)

The third stage is most instructive. In 2021 Klarna raises capital to a valuation of about 46-46.5 billion dollars. A year later, in July 2022, they close a round of 800 million at a valuation of 6.7 billion: roughly 85% lower. It's the textbook down round in public, at giant scale. It doesn't happen to a mediocre startup. It happens to one of Europe's technology icons. (Reuters)

The lesson here is brutal but healthy: the market doesn't owe you emotional consistency. In 2021 it rewarded growth and expansive narrative. In 2022 it wanted efficiency, profitability and discipline. Klarna had to readapt. Reuters already reported improved numbers in 2023 and a return-to-profitability trajectory; in March 2025 the company filed for a US IPO, paused it in April for market volatility and finally priced the IPO in September 2025 at a 15.1 billion dollar valuation. It never revisited the 46 billion, but proved a down round isn't a final sentence. (Reuters)

For an early-stage founder, here's the right takeaway: fundraising isn't linear. You get rejected. Then you find an angel. Then a top-tier fund arrives. Then the market celebrates you. Then it punishes you. Then, if you actually build, you can rise again. Fundraising doesn't measure your personal worth. It measures, in a precise moment, how much risk the market is willing to price.

Recommended Resources

• Venture Deals — the most useful book to understand rounds, term sheets, dilution and negotiation. URL: https://onlinelibrary.wiley.com/doi/book/10.1002/9781119259794 (Wiley Online Library)
• Sequoia – Writing a Business Plan — classic guide to building a clear deck: purpose, problem, solution, why now, market, business model, team, financials. URL: https://sequoiacap.com/article/writing-a-business-plan/ (Sequoia Capital)
• Y Combinator – SAFE Financing Documents — free templates and official user guide to understand how SAFEs work. URL: https://www.ycombinator.com/documents (Y Combinator)
• Carta – Startup Fundraising 101 — free, practical, well-made course for founders setting up a round. URL: https://carta.com/learn/startup-fundraising-101/ (Carta)
• OpenVC — useful tool to find aligned investors, organize pipeline and manage the process in an organized way. URL: https://www.openvc.app/ (openvc.app)

Next Step with IdeaLedger

If you want to use this framework on your idea, on IdeaLedger you'll find the interactive tool—coming soon—to understand if you're really ready to raise, which milestone to finance and how to structure the round with more logic and less improvisation.