Misconceptions about startup fundraising

So I’m the CEO of a company called Slidebean, we have a platform that many startups use to create pitch decks. We are trying to get involved with them and find out what they are struggling with. The most common topic seems to be fundraising, followed by hiring marketing talent.

Having failed at fundraising for the first company I started (2011), I look back and realize the problem was we spent too much time trying to find investors, and we failed to notice some of the fundamental flaws in our product. For Slidebean, we raised a seed round of $800,000 and things have moved along since then.

I have this problem with startup press. It gives new founders a false notion of how fundraising works. You read the story of Yo, an app that just sent notifications saying ‘Yo’ and how they raised a $1,000,000 seed round, and companies assume that’s something anyone with a couple of lines of code can do.

In my experience, most companies raise money AFTER getting traction. Very few companies raise money with just a prototype and no users; and certainly, NO company raises money without a fully formed founding team.

The most extreme case here is tech companies that are trying to raise money to hire a CTO, we see so many of those. Tech talent is expensive, and it’s scarce, and the first proof that a company is worth something is that you managed to find a full stack developer that would turn down a job at Google to work on this idea. As a CEO, you need to be able to find and convince that guy, who joins your company for the stock and not for the salary; when he could be making $150,000/yr otherwise.

The reality of startup fundraising today, at least in Silicon Valley and New York, is that companies are pitching investors with traction, excellent traction, ie revenue (tens of thousands of dollars per month, growing over +20% month-over-month). Sourced this from Elizabeth Yin ([https://elizabethyin.com/2018/10/18/should-you-raise-money-or-bootstrap/](https://elizabethyin.com/2018/10/18/should-you-raise-money-or-bootstrap/)).

As an exception, pure play, no-revenue traction counts only when you are dealing with millions of users and fantastic retention rates.

How can we get this into their heads?

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