#5 | How to raise investment

Welcome to How to Be a Founder, where we'll explore the challenges behind early-stage company building, and I hope support some founders along the way. I'm Matt Clifford, co-founder of Entrepreneur First, and I'm here with my co-founder and now co-author, Alice Bentinck.

Alice, hello.

Hello, Matt. Together, we've worked with thousands of founders to build companies now worth over $10 billion. Over this podcast, and with our newly released book, How to Be a Founder, out now, please do go and buy a copy, we'll be sharing with you the insights and knowledge we've learned while working with real-life early-stage founders on their questions. You can think of us as your startup agony aunt and, um, uncle.

So, sit back, get listening, and we'll try and answer your burning questions on how to be a founder. Welcome to How to Be a Founder.

Hello, Matt.

I'm also joined by my reasonably new newborn baby, so any snuffles, it's him, not me, I promise.

This week's topic is on how to raise investment, which I think, as a topic for someone who's never founded a company before, might feel like one of the steepest learning curves. Pitching for investment is both a very glamorous and, like, much celebrated part of the founder experience, but it's also very different from anything that most first-time founders have done before. It can feel like the bar for getting it done is impossibly high. I know that we absolutely felt like that when— I think Alice and I, we never really met an investor before we started EF. And I remember just thinking it was— the idea that someone would give us money to do this seemed impossible, didn't it?

I think we were always just a bit embarrassed whenever we met an investor. I remember one investor saying to us at one point, are you guys asking for money? And we were like, just too embarrassed to ask. But I mean, the stage we are at now, Matt, you're not going to toot your own horn about this, but I mean, Matt, how many How many early-stage companies do you think you've helped raise?

Certainly hundreds. I think we have been involved now in fundraisings for well over $1 billion of capital. So I'd like to think we've learned a little bit about what works and what doesn't. And I certainly think, you know, we've also raised a lot of money ourselves now, almost half a billion dollars. And I think we've, you know, made a few mistakes along the way. But, you know, in the end, I think got to a place where we're very excited about The Future of EF. So yeah, this is a topic I'm very passionate about. I feel this has been a big chunk of my last decade, is thinking through this problem.

Well, hopefully through this podcast, and if you buy the book as well, you'll be able to walk away knowing exactly how to fundraise, who to talk to, and how to get started.

So today we're joined by 2 founders who are now preparing to begin the fundraising process, having received their pre-seed investment from EF. So, Moritz Gessel and Daniel Partida, welcome!

Thanks for having us. Very excited to be here with you.

Do you want to start maybe just by introducing yourselves and telling us a little bit about the company that you're building?

Absolutely, with pleasure. Pleasure to be here. My name is Daniel Partida. I am the CTO and co-founder of Moonpath. I studied applied mathematics at ETH Zurich before joining EF and starting this amazing journey. I was building AI-driven crypto portfolios and also working as a data scientist, shipping many, many AI models.

Yes, and I'm Moritz. I'm the CEO of Moonpath. Prior to YEF, I co-founded another crypto startup, and before that, spent some time in venture capital and consulting. And to give you a short intro about Moonpath, essentially, we're building an analytics platform that uses sentiment and news data to generate an edge for Web3 investors. So in essence, what we're doing, we're mining data from over 10 data sources, using very advanced AI models to clean this data, structure it, and then draw actionable insights from that that gives investors and our users an edge through the crypto markets and all the stuff that's going on there.

Very exciting. So how can we help you today? What questions do you have about fundraising?

So yeah, I think we're preparing right now, thinking about what the strategy is that we want to go down to, that we want to to do in the next month concerning fundraising. And I think to kick it off, one big question that we have is that for us, there's like 2 pathways at the moment. Either we go and do a quick angel round, whatever, $500K and some good angels, or we do a larger round where you have a lead VC and it's a lot more structured and it's a larger amount of money. And in our cohort, we're seeing that both paths are kind of taken at the moment, that people are, have already raised or are raising at the moment one of those quick angel rounds, or are more preparing to raise a bigger round. And for us as a software company, currently the question is, what should we do? What are like the pros and cons from your guys' experience for one or the other way? And what would you recommend, especially for a software company?

Yeah, well, as you said, that's the sort of like, that's the big strategy question that most founders face at seed. And I suppose the first thing I would say is that fortunately or unfortunately, depending on how you look at it, there is no one correct answer. Both those paths are viable, and there are EF companies that have become very successful that took each of those. So maybe just to try and briefly give an overview of what the pros and cons are. I mean, I think if you think about what variables you're optimizing for when raising a round in general, there are quite a lot of different things that you could optimize for, and you can't optimize them all. You have to choose. And so, in a way, a lot of it comes down to the founder's decisions about what's most important to them, as well as some external factors like the market and how hot the company is and how popular you are with investors. But let's think about what you could optimize for. So one is speed. Time fundraising is spent not building, so it makes sense to optimize for speed. That's one thing. Another is valuation, or actually more importantly, dilution. In other words, how much equity are you going to give away overall to build your company? Clearly, less dilution is better, or all things equal, higher valuations are better, although there's some caveats to that that we can get to if it's helpful. You might want to optimize for who the investors are, like who do you want around the table, and how are they going to help you to build the business as well as providing capital? There are other things as well, but I think typically sort of speed, dilution, and who are the 3 big things. Now, I would say that if you are in a very attractive space where there's a lot of capital being invested, and you've got good traction, and as in your case, you've got a very strong team, sometimes there is no trade-off here. Very often, particularly these days, teams graduating from Entrepreneur First can just go out straight away and raise an institutional seed round led by a VC, and they can bring in great angels alongside that VC. And so they get the best of all worlds. If you can do that, broadly, I would say that's great. That's probably the path that has the fewest trade-offs. I suppose where it gets a little trickier is if you're in a space where you think, well, actually, I'm going to need some proof points here. People are not going to invest in this based on what we have today, at least not at the valuation that maybe we would like if we're going to be raising a larger sum of money. And that's where I think staging the investment, taking a smaller amount of money from angels who maybe are willing to take more of a leap of faith, they don't need to see as much in terms of proof points and traction, can make sense. I think the thing to just be careful of is if you're actually only a few months away from being able to raise that institutional seed, if you do take money in advance of that, you just want to be careful that you're not doing that at a price that means that you're getting diluted twice, effectively. So again, as with all startup advice, highly contextual. There's no one right answer, but I think a lot of it comes down to how much demand you think there'll be from VCs, and what the proof points are. Final thing I'll say before I shut up is, never compromise on the who. However much you feel that the valuation is important or the speed is important, you cannot fire your investors. These are people who will be around the table one way or another for a long time. So make sure you're always and only taking money from people that you actually feel that you could work with for a long time.

Just to build on that, one of the things that we see often happen, and I think, particularly if you're going through a programme like Entrepreneur First or an accelerator, often the valuation that you get and the amount you raise becomes a badge of honour and a badge of success. And you see founders going after, you know, I want to raise the highest valuation in my batch, or I want to raise the most and from the best VCs and whatever. This can be a very slippery slope. I think the speed point is probably the point that most of our founders get wrong most often, where they're trying to optimise rather than understanding the cost of being on the fundraising treadmill. Largely, if one of you is fundraising, you'll be fundraising full-time. You will be doing nothing else in the business. You won't be speaking to customers, you won't be doing sales, you won't be building product, you will be fundraising. So ideally, you want that period to be as short as possible. We're talking, ideally, it should be 6 weeks, not 6 months. But it's always amazing how many founders take 6 months to go through that process, often because they're trying to optimise for a higher valuation, a better round size, whatever it may be. One of the things I would say is, when you look at some of the most successful companies in EF's portfolio, many of them raised pretty small first rounds, as in, as you say, like a sort of $500K angel round. But often they raised it from some really great angels who were relevant to their industry or who had a very kind of extensive background in investing. And actually, when you look at how those companies developed, I think often they ended up with better products and were better able to serve customers, because instead of saying, great, we've got the money in the bank, let's go, go, go, let's Scale, let's hire. They continued to maintain their curiosity about the customer. They continued to maintain product development. And I sometimes worry when companies raise a lot of money very, very early stage— you know, your company's what, 4 months old, 5 months old— that it can sometimes trick you into behaving like a company that's almost at Series A with product-market fit. So there is nothing wrong with raising a small round. Sometimes I actually think it can be a much better path for founders to go down. But I think there is just this psychological barrier where founders want to have you know, the badge of having the big raise.

100%. Thank you. Thank you so much for your answers. I think, Alice, the point of having that badge, I guess, there we are all somewhat have an ego, I guess, especially on the CEO side, somewhat have an ego that needs to be filled. But concerning what you said, that a lot of the most valuable companies or more successful companies raise a small angel round beforehand, and then taking Matt's comment into, or also your comment into account, that fundraising is a lot of time. So how much time on average, or can you speak to that, was between this initial angel round and then the larger institutional round? Because if you go out twice fundraising full-time within the span of whatever, 5 months or something, then I guess this is not really good for progressing the product, building a nice business out of it. So that would be very curious if you can speak to that.

Again, I think the answer, unfortunately, is it varies quite a lot. I think if you've raised that round in order to try to get to proof points that will convince an institutional investor to come in, then a lot of it depends on how long it takes to generate those proof points. But this, in a way, is why Alice's argument from a couple of minutes ago is so important, in that if you do raise a small amount of money so that you have to stay really lean, it forces you to be really focused on getting the proof points that are going to drive that next round. I would say typically you're looking at a year is the— it would probably be, if I had to put a number on it, I would say 12 months between a pre-seed and a seed. The reality is, and this is something that we talk about a lot in the book, a lot of very early-stage investing is irrational. And I say that as an early-stage investor. This is not a part of the investment market where people are building fancy discounted cash flow models, right? And so one of the weird things, and it's worth being aware of, is if you go out and raise an angel round, in the process, that may turn into a VC round. There is not some clear clinical distinction between the two. A lot of it is driven by, frankly, FOMO and herd mentality. But what I would advise, again, going back to the who, is if you're going to raise an angel round with a view to raising a VC round later, It is really helpful to have angels that have either raised VC rounds themselves or are very well connected into the VC ecosystem. I mean, Moritz, your point is right. You don't want to be running 2 full processes in like 6 months. One way to shortcut that is to have angels who actually can make the very warm intro and say, hey, I've been invested in this company for 6 months. It's super impressive to see the rate of progress. This is going to get done quickly. You should really meet them. I think if you, you know, like, obviously, in the end, sometimes you have to take the money that's there. But if you can, finding angels that are going to genuinely be able to move the needle on the VC round is definitely best practice.

That makes, that makes a lot of sense. And actually, that leads into another question that we had. With the current market conditions, what would you suggest is a good amount to raise in terms of runway? Like, is it 12 months? Is it 18 months? There's— I guess it also depends if you raise an angel round or an institutional round. But looking at the current market conditions and looking at that fundraising during the last half year got significantly harder than before, what would you suggest is a good runway to have to be sure enough that the next round will be a significant uptick in in valuation. Obviously, it depends on the progress, it depends on a lot of things, but just, just what you think is a comfortable thing to have in terms of runway.

I wonder if it's worth just commenting, some of the listeners to this podcast may not know how conditions have changed. So just a quick comment on that. The last decade, we have been in the most amazing bull market for VC, where it has pretty much been continually increasing amounts of venture capital pouring in at higher valuations. And largely in the US, you're seeing absolutely crazy valuations, But actually, across Europe and Asia, we've seen the quantity of venture capital that's being deployed explode over the last decade. There's been a few kind of like wobbles along the way, but actually, it's been pretty much up and to the right. Where we are now is the market has changed, it's shifted. We don't need to go into the reasons why, but what we see now is increased caution from VCs. Now, this is mainly at the later stages at C, D, Series B, but we are seeing it trickle down to Series A and to seed as well. So I think this is exactly the right question to ask. You need to understand the conditions that you're fundraising in. And I think it does mean that founders do need to make slightly different decisions about how they think about raising and how much they raise. The timing question, and Matt, I'd be interested to know your thoughts on this as well, but the timing question, ultimately, you still need to have achieved something before you raise your next round. And actually, the pressure is even more on that, because it is probably easier to raise when you have nothing. than when you have a little bit of something. So what I mean by that is, when it's all on promise, yes, okay, you may not get quite the punchy valuation that you want, but actually everyone is thinking about what the upside could be. As soon as you start proving yourself, get some sort of revenue, some sort of traction, whatever it may be, actually that's when VCs are more likely to say, oh, actually we're looking for you to hit this bar, this target to raise your next round. So depending on your product, depending on your level of progress, you really need to give yourself enough runway To have been able to hopefully— and this is tricky, because founders are highly optimistic and always think things will happen in 12 months that actually take 24 months. But you need to be able to get to some sort of milestone that will give you another proof point to be able to raise. And that's even more true in the current market that we're in.

Yeah, I would completely agree with that. I think one thing that I would just be cautious of, and it's a small thing, but investors do think about it, is that, of course, as Alice says, what you really need to raise enough money for is to get a proof point. It really is about, by the time you raise the next round, you need to be a fundamentally different business from the business you were when you raised the last one. And that almost always is about de-risking one big assumption that your business is built on that is not yet proven. So typically at pre-seed or seed, by definition, you don't have product-market fit. And almost always, to raise a really great Series A, you do need product-market fit. And for those who aren't familiar with that phrase, that sort of means that you've got the product and your understanding of the customer to the point where customers are exerting organic pull for what you want— sorry, for what you're building. They truly want what you're building. Now, the tricky bit is you don't know upfront how long it's going to take to get there and how much it will cost. And so, It's just worth remembering that any length of time of runway is an imperfect proxy for what investors actually care about. And so one thing that we generally would encourage you to do is ignore time for a moment and actually start to think bottom-up as co-founders together. Like, what do you think it would take in order to get to product-market fit? Where will the product need to be? What experiments will you have had to run on that? Where will your distribution need to be? What experiments will you have had to run on that? Okay, so how many people does that take? Over what time period? When realistically, given things like notice periods, especially in Europe, when are those people going to start? What else might you want to spend? We would always encourage founders to actually go bottom-up to build a plan, like a budget, for what you might do, and then sort of add a bit because you're going to be optimistic. Founders are always optimistic. Now, If that number ends up being wildly different from 18 months runway, probably, if it's 4 years, you need to think about how to chunk it. If it's 6 months, well, you're either very optimistic or you're raising the wrong round. But I do think that simply saying, we're raising 18 months runway, doesn't tend to go down that well with investors. You want to really show that you've thought about what will it take to de-risk the business and what does that add up to.

It's probably worth just saying, now isn't a bad time to be fundraising. Now isn't a bad time to be starting a business. If you're listening to this podcast thinking, crap, there goes my chance, the early-stage market is still very— frothy is the wrong word, but there's still an abundance of capital. There's still more capital now than in European VCs than there has been, if you could look back to even 5 years ago. So, now is a good time to be raising. There are lots of amazing angels out there, lots of great VCs, and they are writing checks. We are seeing them write checks. So yeah, now is not a bad time.

Yeah, absolutely. I mean, for us, we as a team, we are preparing as local superstars, and we have a global ambition, which is also our product, MoonPass. For us, we believe that this is crucial for conducting fundraising in the US. From your point of view, Matt and Alice, what is one main or other main differences from fundraising in the US and fundraising in Europe?

Yeah, this is a great question. Something we've spent a lot of time thinking about. I suppose I would say 2 things. The first is, it's not scary. European, Asian founders should not be put off raising in the US. Like, people aren't a different species in Silicon Valley. We've raised most of our capital from the US, and it's been a really great experience. And I, we strongly believe that if you have global ambitions, You don't have to raise in the US, but there are huge advantages to bringing some Silicon Valley money, advice, and energy into your company. So that's the first thing I would say. The second thing I would say is that all the things that impress European and Asian investors impress Silicon Valley investors. But I do think there is one area where we consistently see an expectations mismatch between the very best Silicon Valley investors and entrepreneurs that have not been exposed to that. And that's around speed and urgency. I think there is a tendency, and Alice may have a view, I'm not 100% sure where it comes from, but there is a tendency, weirdly, outside the US sometimes to be sort of like, yeah, well, we're going to do this next quarter, and then next year we'll do this. One Silicon Valley investor said to me something recently which has really stuck with me and I've repeated so many times, and I think it's really worth absorbing, which is the best founders Talk in days and weeks, not months and quarters. And I think that's so true. Like one of the best ways to impress the best investors is to make tangible progress between your meetings with them. Like, oh yeah, we spoke to you on Tuesday. It's now Friday. And since then we've got like three new customers. Like showing that your cadence, your speed, your ability to like learn is just super fast. I think it probably my single biggest piece of advice. for people that want to get a top-tier US investor on board.

I couldn't agree with that more. So I spent 3 months earlier this year in San Francisco, basically just speaking to early-stage investors. And to back up Matt's point, if I asked them about their impression of European-based or Asian-based founders, they would say, yeah, they're very careful, and they're very intentional about their product development, and they are very structured. Basically, they're just avoiding saying, they're really slow. And I think often when founders think about raising in the US, they think, oh, I've got to have these big ambitions, massive vision, Hello, Elon Musk-style story. But actually, what US investors are looking for, to Matt's point, is ambitions about what you can achieve. So it's not ambitions related to the vision, it's ambition related to how fast you can move. I suppose the one point I would add to what Matt was saying, Silicon Valley is not paved with gold. There is a lot of gold there. There's a lot of competition. There are a lot of startups trying to raise from those well-known investors that we've all heard about. It's not easier to raise in Silicon Valley, necessarily. I would say it can be faster if you get it right. They just move much more quickly. But if you do want to raise in the US, you do need to be really intentional about how you go out there, how you plan and build momentum and signal before you actually go out there. So, yeah, if you're a good, high-performing startup, I would strongly encourage you to think about raising at least some capital in the US. But you do need to think about it as a process. You cannot just turn up, cap in hand, and expect money to fall in there. And of course, that's something that we'll help you with through Entrepreneur First.

Absolutely. Thank you for the candid answers. And I think, like, Moritz, it's good that we're planning every week and beyond that week. We always say, Like, we need to reassess because things change every time, like on a daily, on a daily basis.

Well, thank you both so much for joining us. We've really enjoyed this conversation and best of luck with the fundraise.

Awesome. Thanks so much for having us. It was super insightful.

Thank you very much for your time.

So one question that often comes from founders and that we have to tackle is, Not just how to get going fundraising, but actually whether it's worth fundraising from external investors, VCs, angels at all. And today we've got a letter from Tasha, who's currently thinking through that decision.

So Tasha says, dear Matt and Alice, my co-founder and I are currently deciding whether we want to raise a seed or bootstrap. For context, we built a SaaS product for teachers and are beginning to ship MVPs to some pilot schools. So MVP, that's your kind of first version of your product. We've now both quit our jobs and can afford to live off savings for a few months. Given we don't really have any overheads, other than our time and a few software subscriptions, we're pretty much sorted on the finance front, at least for now. We like the idea of bootstrapping so that we don't have to give away any equity and can also put our attention on our customers versus fundraising. However, we're also very aware that we're limiting ourselves this way. Firstly, we know that if we don't start properly getting money in, Within the next couple of months, we're going to run out of runway to live off and potentially have to go back to work part-time or even give up. Secondly, we definitely can't afford to pay anyone else right now, but we're already struggling for hours in the day, just the two of us, and feeling like we can't move as fast as we'd like. In an ideal world, we'd definitely have another engineer and someone else on sales. Should we raise? And as we're new to the game, how should we get started if we decide to? All the best, Tasha.

That's a great question. I think Probably the first thing we should say is we are, in a weird way, VCs. And so we're probably quite biased in favor of people going down the raising venture route. So I say that so that, one, we declare our biases, but also as context for me, maybe to just briefly defend bootstrapping, which is something we tend not to advise very much at AEF. But what is the case for bootstrapping? I mean, Tasha sort of actually makes it pretty eloquently here. Raising capital is expensive. Every percent of equity that you give away is equity that you don't own. And that matters both in terms of the long-term economic outcome, but also control. The other thing, of course, as Stash says, is fundraising takes a lot of time. The thing that I would add is, once you're on the venture capital treadmill, it's quite hard to get off. If you're not a profitable company— and most venture-backed companies are not, that's why they're raising venture— Typically, you then, when you've run out of money from one round of fundraising, you have to raise another round of fundraising. And yes, obviously, the goal is to eventually be profitable. But it does put you on a path that makes it harder and harder to merely build a sustainable business. So if that's your goal, venture capital may not be right for you. We talk about this a lot in the book. So I won't, I won't go into detail. But one thing that is absolutely essential for founders to understand about VC is that VC is not suitable for the vast majority of businesses, and in particular, it is deeply unsuitable as a financing mechanism for founders and companies that don't have ambitions to get really large. If you are not intending to build a company that could be worth at least hundreds of millions of dollars, but ideally billions of dollars, venture capital is probably not the right path for your company. And you're going to end up with a very misaligned set of stakeholders because your VCs will be expecting you to swing for the fences to get that outcome. So, if you're not trying to do that, that's probably the best case for bootstrapping, I would say.

Just one word on bootstrapping, and we don't really talk about this very much. We bootstrapped EF for the first—

Roughly 3 years, yeah.

Yeah.

So, when we first started, we are founders of EF as much as we are now investors in other people's companies. But when we first started, we, A, didn't know anything about venture capital, B, couldn't raise any, and C, just kind of stumbled along trying to find a business model that would enable us not to have to raise. Now, ultimately, this struggle that we got to— so, we were able to bring in a small amount of money to kind of COVID our operating costs through sponsorship and other sort of paid programmes that we did. But actually, the real challenge was that we just couldn't scale, and we needed more capital to grow the business than we were able to generate with the existing scale of the business. And that was really the kind of aha moment for us of, actually, we've got to take this plunge into being a venture-backed company, because the scale of our ambition is currently outstripping the scale of the business. And so, I think, to Matt's point, there are many different kind of companies you can create. I think if you look at the frameworks and theories we talk about in the book, a lot of them are applicable to smaller businesses, but actually, they are designed to create these hyper-scaled, venture-backed businesses. And it is a choice. And I think one of the important questions that you need to ask yourself as a founder starting out is, what road do you want to go down? One of the bits that I think is talked about more, or is definitely seen as one of the more negative sides of venture capital, is loss of control. And as Matt was saying with our previous callers, you can't fire your investors. And so actually, who you choose as your investors will have a big impact on your experience as a founder, on the outcome of the business. So it is— Something that can feel very high risk. But I suppose to talk in favour of venture capital, one of the difficult things is, is if you are going into a market that has other venture-backed businesses, where there are winner-takes-all dynamics, if you aren't playing with the same level of resources as your competitors, you're not really playing at all. So, if you're trying to bootstrap along with 2 people and sort of working on something else in the evenings, and scrabbling for resources, your venture-backed competitors who are capitalised at 10 or 100x the amount that you are, they are just more likely to win. They'll have bigger teams, they'll be able to be more productive, et cetera, et cetera. So, I think you need to be very clear about the game that you are playing, both in terms of your choice as a founder, but also the competitive environment that you're in, and whether you are able to compete.

That's such a great point, because if you look at our own story, one of the When you look back, there was a real trade-off for us in not raising capital earlier. As you said, Alice, we bootstrapped for 3 years. And the good part about that was that when we did raise money, we were able to do it at a valuation that was pretty good. And as a result, we own more of EF today than we would have done. On the other hand, we definitely went a lot slower. And it was sometimes quite tough, I would say, knowing that we were capital constrained. And so I think we were only really able to do that because what we were doing was very contrarian, and there wasn't competition. Today, there is competition, and we're really lucky to be the best-capitalized player in our market. I think that's one of the reasons why we're winning. But it would have been very, very hard to take the bootstrap route if we'd had those competitors early on. I think the reality is, there's always exceptions. There are some Huge technology companies that were bootstrapped, but they are very rare. The reality is that although venture capital funds a tiny proportion of the number of companies started each year, it's a huge proportion of the value of the stock exchange. If you look at the Google and Amazon-scale companies, these were venture-backed, and that's not a coincidence. If you're going to build something where you're really trying— one thing we talk about in the book, by the way, which I guess is implicit in a lot of what we say at EF, but maybe for a broader audience is worth emphasizing. If you're building a software company, which we think you should broadly if you can, then the beauty of software is that you have to build it once and then you can sell it many times at basically zero marginal cost. But that means that there's a long period where you're building it where no one is paying you. And the reality is that Although there are some ways to build really great software and charge for it straight away, historically, a lot of the really huge software companies had to invest that time in product development before they could get anywhere near paying their bills. And of course, then had to invest in scale, in actually distributing the software before they could get anywhere near profitable. So I do think that it really depends what Tasha wants to do. Obviously, the whole book is about trying to nudge people towards being more ambitious, Of course, that's not for everyone. But if— I think if Tasha and her co-founder really want to try and do something huge, it's pretty likely that external capital will be part of that story.

I'm really glad we did this episode and the chapters in the book on fundraising, because My experience with early-stage or new founders is that it is probably the most misunderstood and feared part of building a business. And I hope that one of the takeaways from this is that you do need to learn how to fundraise, and there is a way to do it properly. You do need to understand who to fundraise from, but it's not that hard. And largely by being informed and educated about how to run the process, you can really improve your chances of success of actually landing that seed round. What are your reflections?

Yeah, it's funny. I really do— if this is a topic you're interested in, I really do recommend the book, because there's so much in there that you can't possibly get to in a short podcast episode. But one of my reflections is that the reason it's not that hard, and I agree with that, is because venture capital exists to fund ambitious companies. And I think that was maybe the disconnect that we had early on. It's like, why would people give us money? The reason people would give us money is because they exist to fund things like this. And I think once you understand that and really internalise that there is a whole industry out there whose job it is to fund ambitious entrepreneurs and make them succeed, a lot of things click into place. I suppose the one thing we didn't talk about today that I wonder whether we should just spend a minute on is a point that we make to every EF cohort, and I know we make it in the book, which is once you get into fundraising, it can go from feeling hard and scary to being quite addictive. Weirdly, the culture we collectively have built around startups is the thing that gets celebrated in the tech press, the thing that gets you the TechCrunch headline, is the fundraise, right? And yet, the really important thing to remember is fundraising is not building a business, and building a business is not about fundraising. In fact, it's kind of the other way around. Fundraising is the It's like filling up your car. It's not getting to the destination. You don't celebrate filling up the car. You celebrate having a product that customers pay for. That is the real win. And I think it's just so important that founders don't get caught up in the hype and the apparent, although in my experience, pretty nonexistent glamour of fundraising. Ultimately, fundraising is a tool. It's a way to get to the goal of having a great business. And, you know, one of the saddest things that can happen to founders is they raise too much money for something that doesn't actually work. And then eventually it's the weight of both expectation and the requirement to return all that money that means that it doesn't generate a good outcome for the founders. So maybe that would be my only thought there to add to everything we spoke about with the founders today is just, of course we believe in venture capital. Of course we think you should run a great process, but Don't fall in love with it. It's a tool. It's not the goal.

I'm glad Matt says this. I think, Matt, you must have spent 70% of your time over the last 10 years fundraising.

Yeah, yeah. But it's a tool.

It's a tool, not an addiction.

What I can say, Alice, is you have spent that money very effectively, so. Thank you for listening to How to Be a Founder, To take a deeper dive into the topics we discussed today and more, take a look at our book, How to Be a Founder. It's out now and available online and in bookshops.

We have also put together a website called howtobeafounder.com, which has even more resources on fundraising, including practical documents that you can download and take a look at. So do check out howtobeafounder.com.

Co-Fruition. Co-Fruition.