How to Navigate a Stalled Fundraise

Hope everyone is having a good Friday. This is Ryan from Breakout Capital Group.

I had a conversation this week with a founder who's been raising for three years.

Three. Years. No close.

He's got a real business - operational history, a defensible market position, institutional affiliations that carry weight in his sector. The story isn't even that bad. But three years of active fundraising with nothing to show for it communicates something to investors before he even opens his mouth.

And most founders in that position don't realize how loud that signal is, or what to do with it.

What Investors Actually Hear

When a sophisticated investor sees three years in market, the immediate read isn't "this founder is persistent." The read is: someone else passed. A lot of someones. And now I have to figure out why.

It doesn't mean the company is bad. It usually means one of three things happened.

• The founder was talking to the wrong investors the whole time.

• The round was sized in a way that didn't fit anyone's mandate.

• Or the narrative wasn't built for the audience it was being pitched to.

A fundraising mandate that is built for everyone, is a mandate that is built for no one. This is due to the fact that investor groups are fundamentally different.

A venture fund is going to size an opportunity different than a family office, who is going to look at it different than an angel, or a private equity fund, and so on.

When you’re bringing a deal to the market, there has to be a profile on WHO, and there has to be a rationale on WHY.

I’ve seen too many founders bust their tails for warm intros, “networking”, and connections just to spin their wheels for months on end talking to the wrong people and getting nowhere.

When to Change Your Angle

Before we talk about this further, I want to iterate that it is NORMAL to have to make tweaks to your funding story.

It is extremely rare that as a pre Series B/C company you have your fundraising angle that investors understand, get excited about, and want to back in your first crack at it.

This just usually isn’t realistic.

So when do you know if you should change the story around your fundraise?

If you aren’t getting exceptional interest very quickly in the first few conversations you’re having, it is likely you need to make some kind of change to your story / investor targets.

This is a tough reality to comprehend, but this comes from first hand experience.

We have a fundraise live in the healthcare space we’re currently on of a 3M seed round.

Our client is getting his first term sheet 45 days into us working together. He had interest from 75-80% of the calls that he took.

This is just the reality of a hot deal that people have interest in. It will get eaten up with demand very quickly.

if this isn’t the case for you yet, you likely have some tweaks to make. And that’s okay.

The founders who close aren't always the ones with the best companies.

They're the ones who figured out the right room to be in, with the right ask, in front of the right people. That's the whole game.

I hope this helps shed some light on how we think about and deal with raises that aren’t home runs on the first pitch.

Thanks for reading - have a great Friday.

Ryan Bryden
Breakout Capital Group

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