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Reka Borole, founder at HeyJemby shares his insights into fundraising - everything from when it's a good time to start to how much to raise.

Is venture capital for you?

Not every new business should raise venture capital (VC) funding.

Venture capitalists only make money when they exit the business. So if you don’t want to sell your business in 10 years and you don’t see an initial public offering (IPO) in your 10 year horizon then maybe venture capital funding isn’t for you.

First of all, decide if you’re a startup or a new business. My definition of a startup is a high growth business. Paul Graham has a great definition below of a startup.

A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.

Venture capitalists want to invest in businesses that they believe will grow fast. If you want a seed valuation of $5m you are implicitly saying that you can see a time in the next 10 years when your business will be worth $100m. At a 5x revenue multiple that means you think you have a good shot of making $20m in revenue in 10 years time.

If this sounds like too much pressure to grow then consider looking for small business funding, not VC funding.

Why raise money?

Startups raise money because they need money to continue operating or to expand operations. Very few companies raise VC funding for other reasons. For example, eBay raised money because they couldn’t attract a serious CEO without headline-grabbing VC backing. They were cash-flow positive before they got VC funding.

The best fundraises have explicit, credible target milestones. The credibility of your milestones rests on the experiments your startup has already run or the success that the founders have already experienced.

The following message is explicit and credible “We are raising $1m to expand our client base to include the Middle East. Our current revenue is $1m annual recurring revenue (ARR) growing at 100% per annum in Africa.”

When is a good time to fundraise?

Look at signals of quality

Founders need to have some evidence that they can realise their vision before raising capital from outside investors. This evidence may be an idea, a product or some customer traction - it all depends on the stage of your business and the nature of your business.

  • Customer traction is always most convincing. People are actually buying your product! You have some level of product market fit!
  • You generally want your traction to show increasing rates of customer adoption. A good rule of thumb is that growth rates above 20% a month will grab investor interest and start a conversation. Anything above 45% a month is seriously impressive.
  • I won’t comment on ideas and products because successfully raising significant capital without traction is a Jedi mind trick that very few founders successfully achieve. If you’re a Jedi you don’t need this post.

Figure out if you are front foot or back foot fundraising

Front foot capital and back foot capital fundraising

If you are front foot fundraising, the messaging is positive. You say you need money to execute a few experiments. You have high confidence in these experiments because of your traction to date. You confidently communicate your go-to-market strategy and you confidently communicate the milestones you are targeting with this funding (e.g. $1m ARR).

If you are back foot fundraising, the messaging is negative. You are running out of money. Your traction isn’t looking good. You basically have two options, close the business or hope that a knight in shining armour comes in and saves you and your business.

Someone once said the only reason investors say “no” is because you haven’t figured out how to get far enough on your own. This is true. I would add that you haven’t figured out how to convince investors that your lack of traction isn’t a sign of impending death or a future lifestyle business.

When to start a front foot fundraise

It is obvious that a front foot capital raise is more positive and will receive more investor interest than a back foot capital raise. You want to raise money on the front foot. If your growth is less than 20% per month then you want to run experiments to get the growth rate up. Startups are high growth vehicles after all.

There is a Wall Street saying “When the ducks are quacking, feed them”. This means when investors are desperate to invest in your business you should generally take the money (on good terms). If you’re growing at more than 45% a month then you will hear the ducks quacking. Beware of being in permanent fundraise mode because investors will continue to ask for meetings. Once you have enough runway to run a few experiments and give yourself a safety buffer you should stop feeding ducks and go back to building your business.

If you aim to raise $500,000 and the ducks keep on quacking past $500,000 you can raise $1,000,000 I suggest doing this via a high resolution fundraise.

When to start a back foot fundraise

  • Start your back foot capital raise when you hit your redline.

Back foot messgaing

  • Even if you’re in a back foot capital raise scenario, you need to articulate your mission well and tell a compelling story that convinces investors that you can realise your vision. You must be convincing in communicating the experiments you will run to increase growth.
  • Fundraising often takes several months - > 6 months in my experience. Especially on the back foot. Even though you’re on the back foot, the goal of fundraising is still to raise enough money to run several experiments and raise your growth rate. Your milestones and experiments must be credible. Saying you need $250,000 to pay salaries and pay for Google & Facebook Ads (even though you don’t have evidence that these work for your business) is a poor message.

What is a Redline?

A redline is a date/ trigger that you set in advance to take a specific action, that you cannot ignore. Your runway redline is when your runway is equal to the number of months it will take you to raise capital.

At this stage you need to take action to get more money. If you never reach your runway redline because you always manage to extend it then you won't need to use it.

  • Your redline needs to be simple to work out. I suggest a redline of 6 months unless your experiments are working out and you are set for a Front Foot raise in the near future.
  • When you reach your redline you must have an explicit discussion about it with your founding/ management team.
  • Send an explicit invite to all attendees!
  • You are not allowed to postpone your redline chat - even though you are always going to want to! By definition they happen when things aren't going well so you will have a very strong desire to avoid the meeting.


Runway is the amount of time you have left until you run out of cash and need to shut down the company.When you run out of runway you will need to fundraise or you will die.

Runway = (Actual cash left + definite income)/ forecast monthly burn

How to find investors

I found this advice for identifying relevant investors for your startup from Nicole Glaros (the Chief Investment Strategy Officer of Techstars) interesting. I’ve seen similar advice from some of the top names in silicon valley.

  • Identify which investors you’re targeting by turning to fellow successful entrepreneurs and asking them who they spoke to and who they raised money from. Look for entrepreneurs who are a round or two ahead of you and have successfully raised capital (in a similar space, not competitors). These entrepreneurs will have more intel on these investors than you’ll get off a public list.
  • Collaborative founders may be willing to show you their pitch decks and explain what worked for them and what didn’t work for them.
  • A winning strategy is to create a peer group of founders just beyond your level that you can speak to about what they experienced. This helps you adapt to current market circumstances and understand what specific investors are looking for when assessing your business.