The Raise Isn’t the Win

Founder 2 Founder Part 1: Don't Confuse the Raise With Key Business Objectives

As investors who have spent many years as founders ourselves, many hours working closely with the founders in our portfolio, as well as coaching other CEOs, we’ve seen some consistent mistakes that CEOs make - many we’ve made ourselves as we’ve worked to scale our own businesses. This is intended to be the first in a series where we want to highlight some of the mistakes we see and, hopefully, provide alternative ways to view them, in the hope that it will save time, money, and frustration for many of the incredibly hard-working founders/CEOs out there.

Founders who treat funding as the business objective are building their company backward.

It may be strange to hear this from a venture investor, but getting funded is just a tool to reach a business objective, it’s not the objective itself. We are way too conditioned as an industry to think about funding as the objective itself - the success story - the reason to celebrate. It’s understandable when all you hear about from the media and your founder friends is who raised how much. But when you treat the raise as the goal, you’ve already lost the plot. The raise is simply fuel. The business objective is the destination, and there are many ways to reach it when it comes to funding.

The Round Label Trap

One of the CEOs I spend time coaching spent months preparing for what he called his Series A. He used the Series A as motivation for the team and was all in with his Board on nailing it. The entire company had been emotionally oriented around this milestone.

Unfortunately, when he started reading the investor market, it turned out the smarter path was to extend existing insider ownership to drive a bit more growth — less dilution, less distraction, more runway. Objectively, a better outcome for where they were as a business. But because he had anchored his organization to the Series A label, it landed as a disappointment.

He was growing a great business and made a smart capital decision. But he had made the mistake of letting a funding label become a company goal. The goal should have been business growth, not the funding itself.

We always counsel people to avoid labels. Focus on business objectives, not funding title objectives.

What Investors Actually Want

Here’s something that took me a while to understand: the investors pushing you to raise a bigger, splashier round are not always doing it for you. Sometimes, they’re doing it for their portfolio metrics - especially at very early rounds like Pre-Seed or Seed.

A larger next round means a larger markup on their previous check. That’s not cynical, it’s how venture math works. But you have to live up to that raise. You have to close it. You have to run your company through the entire process. Most importantly, you need to have a real path to growing your revenue and business into whatever the post-money valuation of that round is, so you’re set up to raise the next round successfully (we know that once you get on the venture capital path, there are always multiple rounds) and you don’t end up underwater on your valuation.

The industry conditions companies to expect that the named round progression should be linear and that the company “isn’t working” if the jumps are not in sequence through the letters of the alphabet. We see the round labels as a reflection of the stage (early, scale-up, growth, pre-IPO, etc). Every round is actually the setup for the next round, and too often this game doesn’t work out for what could be a great company. A founder who raises a Seed round has to set up the story and the milestones to hit Series A metrics in 18 months. This is near impossible for most businesses, and different industries work on different timelines. Deep tech is completely different from SaaS and founders and investors that don’t understand that are setting themselves up for real trouble.

The milestones, metrics, and validation of product-market fit, customer demand, and pipeline growth are often better indicators of long-term potential than the named round or round size. We’ve all heard the phrase “an overnight success a decade in the making”, right? Progression is rarely linear; what matters is the durability and result in the end.

There’s a CEO we know who sold his previous company for over $1 billion. He’s raised probably 6 or 7 times for his current company. But if you ask him how many rounds he’s raised, he’ll shrug and tell you he’s still on his B. Because his goals aren’t funding label goals, they’re business goals. He’s growing the company and figuring out funding needs along the way. The round names are incidental to the mission.

That’s the posture we want you to internalize: What do you need to unlock next for your business, and what’s the smartest path to fund the company towards those objectives? That answer demonstrates leadership. It shows investors you’re thinking like an experienced CEO, not a first-time founder that’s caught in the hype trap.

We all know the best time to fundraise is when you don’t need to. The best way to fundraise is to walk into every conversation already knowing exactly what objective the capital serves because you’ve done the work to build a strategy that’s clear in your own head. You’ve clearly defined the business objective and worked backward from it to build a strategic plan that the funding will support.

The Reframe

Here’s one way to think about it going forward:

1. Start with the vision. Where is the business going, and why does it matter?

2. Define the key milestones that provide a clear path to getting there.

3. Work backwards to identify what you need (resources, people, time) to hit each milestone.

4. Figure out the right way to fund that journey based on where you and the market are now.

When you build it this way, the funding question almost answers itself. When you walk into an investor meeting, you’re not pitching a round; you’re sharing a roadmap and inviting someone to be part of it.

That’s a very different conversation. And it’s a much more powerful one, one that we always look for at Massive.

David Mandell

General Partner, Massive & CEO coach to early and mid-stage founders