How I failed at raising funds and how you can fail too

Don't blame investors

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Why I sucked at raising funds

Among all my failures as a CEO, one of the most significant came when trying to raise funds.

I tried it a few times, mostly from VCs. At one point—after a few years of running my company, I got offered potential angel investments. But I turned them down because they came with a price: meeting with investors and absurd equity dilution. In the end, I’ve never had any type of external funding.

When I tried to raise a pre-seed or seed round with VCs, it was a giant failure. Back in those times, I did not really understand why. It was frustrating, and I wish someone had explained me a few things before opening a potentially VC-backed business.

Basically, I did not have the fundamentals of raising money. This article is about my failure to raise funds, and how you can fail too if you want to.

Don't let the early bloom fade

Fundraising is a dynamic process. Both your company’s stage and the timing of your investors outreach matter. You’re operating in a complex context: your market, your geography, your pitch, and even the life cycle of the investor’s own fund when they meet you are multiple variables to take into account. I tried to raise selfishly, only focusing on the great potential value my company could offer. This type of approach makes for a great bootstrapping mindset because you focus on what matters most. The problem is that VCs are not interested in it—or, more precisely, not only in it.

When you start a company, the first few months have some freshness to them. There is no proof of success, but there’s also no proof of failure. This short window matters.

This is why you need to decide—before you even start—whether you’re going to raise money extremely early or much later, once you have some proof of market fit. In the early stage—the two to five years between starting and becoming a sustainable company—most VCs will not invest. I think that’s a mistake on their part. They don’t always understand the basics of entrepreneurship. But reality is reality : they don’t invest. That means your early investment offer is made almost entirely of promises.

If you don’t want to start with no cash, you have to leverage the emotional excitement at the very beginning, when you just have an MVP (maybe some AI app) and a few early customers. Later, cracks will show in your story, and investors will use those as reasons not to invest.

They’ll think they now have enough information to decide whether your idea will work, and if you didn’t succeed without their money, they’ll assume their money won’t change that. That’s a chicken and egg problem, and you will end up explaining them that things would be easier if they helped you with some cash. That won’t cut it; a year or two of slow growth is enough for them to decide your company will never be high-growth¹.

Early-stage investors

When looking for early-stage investors, you should distinguish between individual investors and institutional investors. Smaller, individual investors often know you personally, and they tend to behave better than VCs because their investment horizon is longer. In my opinion, they’re the ideal people to reach out to when you’re creating a company, because they mainly invest in you. If they have enough trust to give you cash, there’s a good chance they’ll also provide meaningful support.

This remains true even in the event of a major failure. These relationships can be the start of great mentorships and future investments, especially if they see you as someone with strong integrity. Early stages are the perfect time to prove your values and build trust with people who not only believe in you but also did show it with skin-in-the-game.

On the other hand, most early-stage VCs want to find a company that needs their money to grow fast quickly, and keep growing until they sell their equity. Many VCs are short-term by design and want returns within three to five years. This worked during the zero-interest-rate period, when everything moved fast. So be careful when you create your company, and remember that things usually take longer and are harder than you think. You don't want short-term VCs becoming impatient on your cap table.

The most important questions about your market

Raising money should come after answering those questions: What problem you’re addressing, and just as importantly, where and when you do it.

Particularly, if you want to launch a VC-backed company. Ask yourself the following: does your market—at least the one you’re tackling in the next few months—offer a genuine opportunity to raise?

It sounds obvious, but so many people assume a company is fundable simply because it exists. They overlook whether there’s an active VC market for what they’re building. Without it, they’ll struggle. They might get clients, but that can actually make pivoting into a VC-friendly story much harder. I’ve been in that position myself.

The second question, less obvious but just as critical: do these opportunities actually reach you? If you’re an outsider in your market, does that market even accept profiles like yours. Outsiders in this context are people without deep roots or an established network.

Some markets are closed, like France or Colombia. Others are more open, like the US, the UK, and even Mexico or Brazil. I made the mistake of trying to raise funds in Colombia, where all of the previous questions would have been answered “no.” Colombia and France are prime example of ecosystems with two negative characteristics: no outsiders, and VCs who almost never lead a fundraising round.

That leads to another important point: what type of investors exist in your market? In Colombia, most VCs will openly admit they are “followers.” They don’t make decisions based on their own analysis. They usually wait for a big investor, like Kaszek or 500 Startups in Mexico, to lead the way, and then they join in.

They have some money, but little time or willingness to research opportunities themselves. As a result, they never make original investments. And note this: the “no outsider” culture and the “follower” mentality almost always go hand in hand. Because followers tend to always converge toward the same profile. Typically in Colombia, it's ex-Rappi or ex-Los-Andes. In France, it's ex-HEC.

Their laziness usually leads them to an easy solution, and that easy solution is the ultimate insider (same university, same ex-whatever). That's why the US is such a great ecosystem: the diversity of profiles that get funded is amazing. Follower VCs almost exclusively invest in insiders, people everyone already knows, who are seen as obvious, safe choices. In closed ecosystems like this, breaking in from the outside is nearly impossible.

Avoid creating seeking VC funds in a closed ecosystem where almost no outsiders have ever received funding.

These are usually underperforming spots because they don’t accept the best outside ideas. On the contrary, that’s a mark of innovative ecosystems like Brazil or the US. You shouldn’t be angry about this. These people have money, but they raise it through long-standing relationships. Sometimes these family or business networks go back decades, and they’re not going to invest in someone they don’t know. To them, it means risking blame later when that person fails.

So before starting a company where you plan to raise money, ask yourself: what is your market really like? For most people, the honest answer will point them toward the US market. It can also be a niche that matches their profile, where they have a built-in advantage. For example, you might be part of a university incubator with investors already in the room, or you might operate in a specialised niche where your former employer could become your first client or investor.

Ultimately, where you venture and who you are are the same question. Who you are defines what you do, and what you do should define the best place to operate, raise funds, and attract clients. Ideally, the best place to find clients and the best place to raise money should be one and the same.

Once you’ve answered these questions, that’s the stage where you can finally start talking to VCs. If you’ve made your choice wisely and shaped a profile that matches both your personality and your natural skills, you might start getting some calls.

This leads to my next point: what not to expect from VCs when you start. Most pre-seed VCs are not long-term thinkers. Their incentives are not the same as yours, and their horizon is much shorter. Let me explain.

What not to tell them about the future

I think I failed partly because I wanted them to align with my long-term vision: a sustainable, profitable company. Historically, this approach has built billion-dollar businesses.

But here’s the problem: how are you going to convince a 2021 or 2022 zero-interest-rate VC, someone who has seen people get rich, or become rich themselves, through successive rounds of unprofitable and subsidized growth—that your way is better? You’re telling someone with a money-printing machine to shut it down because your vision is “historically correct.” That’s ridiculous.

Here’s the trap: they will almost always say, “Love your vision.” They might even mean it. But it doesn’t change the fact that they make money in a completely different way. They don’t make money from steady profitability and dividends. You can’t blame them.

This applies to almost everything: your market, your technology, AI, blockchain, or whatever the current trend is. In a bullish environment, don’t assume the people raising huge funds all truly believe in the underlying technology over the long-term. Most are opportunistic. Your VCs are opportunistic. So don’t walk in saying, “I’m different; I’m building for the long term,” and expect that alone to win them over.

You should be opportunistic too if you want to raise funds, especially with pre-seed VCs. If you see an opening, take it. I know that’s not the most noble-sounding advice—integrity and honesty are things I deeply believe in—but sometimes you have to be strategic. I’m not saying you should lie. But don’t volunteer information that disqualifies you. There’s no need to shoot yourself in the foot. I say this, yet I never followed it. I failed, never raised a dime, so take it for what it’s worth.

You need to understand your VC’s incentives as clearly as possible. Their core question is almost always: how can this investment bring money back within five years? That’s what they need so they can raise another fund—ideally a bigger one—with LPs.

Look at how they’ve made money before. Then check if your vision and your plan fit that model. If they’ve made money by selling their equity in Series A or Series B of unprofitable companies, don’t walk in saying, “I’m only going to raise once, keep dilution low, and make money through profits.” They won’t care. They’ve never made money that way. They might say it’s a good idea, but deep down, they’ll be too scared and that’s understandable.

Think about it: if I became rich doing “A” and someone comes to me saying, “I’m going to do ‘B’ and make you rich,” I’m not going to care. I’ll keep doing “A” because I know it works. That’s the conflict—more often than not—and over the long term, this misalignment of incentives can be a real problem between VCs and founders.

This is also why the very best investors—or top-quality incubators and accelerators—can be so valuable: they don’t need that five-year turnaround and can take the long view while being agressive early.

That’s one reason I like Dalton Caldwell from YC, who talks about seven or eight years as an “overnight success.” YC is both short-term aggressive and long-term patient. They make money partly because they have a massive surface area for “luck” and are positively exposed to volatility and compounding.

I think one of the fastest and most unnecessary ways to disqualify yourself is to show investors that you’re not aligned with them on how to make money over the next few years. It’s probably the number one mistake you can make.

I suspect this happens more often with bootstrapped founders, but it’s not exclusive to them. There are also other “don’t do this” mistakes—things you simply shouldn’t say about your company or about yourself.

What not to tell them about you and your business

In the early stage, you’re still operating in the world of promises, not demonstrations. That’s the reality. So let’s dig into what that means.

Now, let’s say you’ve made it to a second call. There are still a million ways to fail at raising funds. In the end, it boils down to what early-stage investors are really betting on: you, your track record, and your potential based on your ability. Founders often try to explain that they have a great vision, one that usually includes an exponential revenue curve.

The problem is the implementation. The best way to somehow analyze someone’s potential is to check their track-record. Concretely, don’t try to convince them with vague future visions that will “someday” deliver results. The weakest arguments are those based entirely on strategies you only plan to implement later.

The best approach when starting early is to focus on yourself and your abilities, however meager they may seem.. Always answer VCs doubts with something you’ve already implemented successfully, whether at your own company or somewhere else. Show that it worked before.

I think that’s why ex—whatever-famous-successful-company operators make attractive profiles for VCs. It shows some positive experience, even if, to be honest, it’s often a bit of a stretch to assume that an employee will be a great entrepreneur just because they worked at a high-growth company.

During the conversation, your examples should come from things you and your team have already done. Why? Because at the early stage, fundraising is mostly about getting people to invest in you, not just your company. The project is likely to pivot and change, but the team will remain.

Focus on your differentiator, just like when you sell to your clients. I understood too late that, for your brand, the enemy is not rejection but indifference. That’s why delivering a standard pitch with a forgettable structure is such a mistake.

Your differentiator should be front and center, just like in sales. VCs lose money on most businesses anyway, so they look for something that feels different. Trying to blend in makes no sense. And the most unique element in your company is you.

So again, focus on what makes you the best representative of your company, the strongest differentiator, and the one person they should trust to tackle this problem.

In fact, more often than not, except in a few incubators, VCs will not invest in two companies tackling the same issue. That means they are not already solving the exact problem you are working on. Instead, they are looking for new problems to address and new qualified teams to take them on. If you want their attention, you need to be able to answer four things with complete clarity.

First, why does this problem matter, not in a vague “nice-to-solve” way, but in a way that shows it is urgent, high value, and impossible for your target customers to ignore.

Then, what this problem translates to as a market, how big the real addressable market actually is, who is willing to pay, and why now.

Next, how you plan to make money in this market, showing the clear path from problem to monetisation and proving where the revenue will come from, how fast, and at what margins.

And finally, why you are the best person to tackle this problem in this market and turn it into profit, drawing on your track record, domain expertise, and whatever unique advantage you have that competitors cannot easily copy.

If you can answer all of that with clarity and evidence, you are making a serious case for investment.

On those four previous questions, “Why does this problem matter?” is one that many founders include in their slides, and often they end up disqualifying themselves with the way they answer it. Most, in my view, answer it poorly. I answered it poorly.

Too many make the mistake of explaining why it would be nice to solve the problem: “Oh, people lose time” or “Oh, people lose money.” But guess what? People lose time and money scrolling endlessly, and almost nobody’s going to finance an anti-scrolling app.

Nobody cares about that. What they do finance are ads or products that monetise scrolling. That’s where the money is. If your solution is “nice to have,” especially in a down market, your plan is dead on arrival. Or take process improvement: “They’re going to improve their workflow.” People can improve endlessly and become optimised, but VCs aren’t looking for that either.

Your problem statement should answer two questions:

1. Why does the VC you’re talking to have a strong incentive to invest and believe they’ll make money if you solve this problem?

2. Why does your client have a strong incentive to pay for the solution?

The strongest answers usually come from early proof, ideally your own first clients. It can also be a competitor who has already solved it poorly and whom you’re willing to crush. Other validations can come from other markets (maybe on the other side of the world) where this problem has already been solved successfully and proven at scale.

This is also why your “total addressable market” numbers are often meaningless. A TAM can be passive. I may look huge on paper but will never actually be addressed. The real TAM is about why you’re positioning yourself in a spot where you’re obvious to enough paying customers.

If you can make customers pay for a solution, and in the process make your VC rich, then you’re in the right territory. In fact, your best potential investor is often one who already has similar companies in other regions. They already understand the problem, so you can skip the whole boring part where they check Instagram while you try to explain why your problem “kind of” matters.

Those are my conclusions for now. I’ll talk more about these points in the coming weeks.

1. It’s historically wrong, and silly, but that’s how it works.