Fundraising is badly misunderstood | Data Driven Investor

Pierre Gaubil
6 min readDec 2, 2020

If there is one thing that most startups misunderstand entirely, that’s probably fundraising. Thus, they create their own mental image of what needs to be done to raise money successfully. After interacting with more than 1,000 startups, I can confidently say that it’s almost always wrong.

Who to blame?

VCs that stay opaque on why they say yes or no? Maybe! Most VCs never want to close doors, so they often remain open and vague on why they pass. They often say, “We like what you do, but it’s not completely aligned with what we are looking for; that does not mean what you are doing is not interesting; we are sure you will prove us wrong.” That does not help much. Sometimes you get something more specific, like “your go-to-market strategy does not convince us.” A bit better, but not quite.

VCs are most of the time smart individuals. They know what they are looking for; they have a framework to render their decision. Although they share pieces of it, never do we have a holistic understanding of it. The reasoning is that fundraising is an art more than a science.

On the other side entrepreneurs, for the most part, do not try to learn the rules of fundraising or worse, don’t understand them. They believe that they will blow away VCs with their idea/product.

So meetings are often a weird dance where the investor sees immediately what’s missing but don’t say it. On the other hand, founders are in seduction mode, rather than trying to understand what the VC wants to hear to trigger interest.

All right enough said, let’s try to fix it.

Understand perception

I will get into a sensible point but an essential one. VCs have a mental image of what a great founding team looks like; it all starts with the team. No one will admit it in our politically correct world, as the stand is to stay completely open-minded. However, that is not true; it’s impossible to be completely objective, our past, our experiences, our culture molds our convictions.

This is what it means for a founder. Before the meeting, look at the VC portfolio and look at the CEO’s persona. Let’s say the typical CEO they invest in is a 35 years old white male, from the VC ecosystem, preferably from Stanford/Harvard, and the same nationality as the VC. Now let’s pretend you are 45, female, and alien to the ecosystem.

You can do nothing about your age or gender, but be conscious of how you are perceived; the VC will look at you as being older than what they believe to be the right age. Being a woman might play in your favor as they are desperately trying to show that they have diversity in their portfolio (they don’t). Let’s say the VC is in San Francisco, and your startup is located in Denver. The VC will assume that given your ecosystem is not as developed, you might not be as “educated” as a local startup. So if you have done your research, you know that ahead of the meeting. Play with it, start counter fires, show that experience matters, show that you know people in the silicon valley ecosystem, and so on.

It is critically important. If you make the wrong impression at the beginning, it’s over. If you make the right impression, that opens the conversation.

Understand VCs reasoning

We can argue that VCs’ decision-making is a black box; however, we know what VCs want to hear.

Just take Sequoia. There is a page on what to pitch ( That’s pretty straight forward, and it comes from the best VC firm in the world! So step one, get answers to the key elements, team, purpose, market, etc. If your pitch is a product brochure, you are not taking fundraising seriously. Do not think VCs are not savvy on your topic; they see many things, they know more than you think. If the VC feels that he/she is more knowledgeable than you on the market, you are toasted! Investors will ask these questions, do not doubt it. There are tons of writings, blogs, podcasts on the subject, no excuse!

Then understand the stage you are in. The different elements have different weights based upon the fundraising stage. If you are raising a series A, you have to have revenue. In 2010, 15% of startups raising a Series A generated revenue; in 2018, it was 82%. So if you are raising a Series A and do not generate revenue, you’d better have a very good reason for it. If you are pre-seed, stop doing a presentation where 80% of it is product related. What matters is the team, the market potential, and the problem you are trying to solve. Your product is probably bad, VCs know that money can help build better products; however, money is not helpful to build incredible teams and find great markets.

Do not send a cold email

VCs value referred opportunities. A cold email won’t help much it sends the wrong signal. It tells the VC that the startup does not know anyone in the ecosystem capable of making a connection, or worse, that no-one wants to make a connection. So either the startup is isolated thus in the wrong dynamic, or not good enough for someone to open access to his/her network.

So find someone that could be a warm connection, that will go a long way with VCs.

Don’t sell blindly hoping something will stick

Most founders see the VC meeting as a sales exercise. The founders need to convince the VC of the opportunity. I think it’s almost (not entirely :-)) always the other way around. There are tons of VCs with money to invest; there is only one startup like yours. So instead of begging for money, try to assess if you want to work with the VC. Ask them questions, understand if you see your team working with them. Think about a doctor. When you go to a doctor, the doctor does not show you all medicine available to choose from. The doctor will try to get a diagnosis first and then propose the right medication. You are a doctor, qualify what the VC wants, and only if you have the medicine, pitch it, otherwise walk away, do not waste anybody’s time.

Finally, qualify your target

An investor is not someone with a large wallet who will invest as soon as he/she sees something amazing. Investment funds are constructed based upon investment models. Some will only invest in AI; others are generic but only do early stage, and so on. Do your homework and never dream that the VC will bend the rules and consider investing because you are so special. VCs have a responsibility vis a vis their Limited Partners (the one that gave the money to invest). They also have rules to follow.

Once you find the firm that matches your startup well, then look inside the firm to uncover who is the right partner to address. Each VC firm has partners driving a separate section of the investment thesis. Find the one for you and only address this person.

Fundraising is a process, it has its own rules. Play by the rules, do your homework, don’t think you are so unique that you can do things your way. If you do follow the playbook, you will eventually get closer to raising money. Best of luck!

Originally published at on December 2, 2020.



Pierre Gaubil

CEO @ 34 Elements and General Partner @ The Refiners