{"id":8861,"date":"2014-09-02T14:00:00","date_gmt":"2014-09-02T18:00:00","guid":{"rendered":"https:\/\/www.wework.com\/creator\/?p=8861"},"modified":"2020-03-30T19:00:10","modified_gmt":"2020-03-30T23:00:10","slug":"9-startup-funding-mistakes-need-avoid","status":"publish","type":"post","link":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid","title":{"rendered":"Three startup funding mistakes you need to avoid"},"content":{"rendered":"

I\u2019m not trying to be an alarmist, but startup fundraising can oftentimes feel like you\u2019re navigating a minefield: one false step and the money blows up! That\u2019s why you need to be clear on what you\u2019re looking for, where to look for it, and what you need to get it.<\/p>\n

You start the process by targeting the right investors, seeking connections for warm intros, and then doing your research and homework to prepare yourself for investor meetings. For more details on this process, check out my previous post<\/a>.<\/p>\n

Assuming you\u2019ve done all this, you\u2019re on the right track. But at this point, there are still many mistakes you can make that can sabotage your fundraising process. From my perspective as CEO of Early Growth Financial Services<\/a>, so many of the worst mistakes have to do with the way companies understand, monitor, and communicate their financials\u2014or don\u2019t.<\/p>\n

Here are some of the most egregious financial fundraising blunders, and how to avoid them.<\/p>\n

1. No clear funding objectives.<\/strong>\u00a0If you want an investment, you need to be clear on how much capital you need. This may seem obvious, but I can\u2019t tell you how many companies I\u2019ve seen who miss this step. This is why milestone fundraising is the way to go. Figure out how much money you need to get to the next milestone (whether that\u2019s getting out a beta product or some other discrete achievement). Then determine how much capital you\u2019ll need to hit your milestone, from operational costs to essential professional services. This is your magic fundraising number (plus a little cushion built in for comfort).<\/p>\n

2. Seeking funding too early.<\/strong>\u00a0Don\u2019t be too quick to raise money. Bootstrapping is a viable option for many companies. The sooner you sell equity, the more it will ultimately cost you in loss of leverage and dilution. Early dilution is offset by valuation increases, but early funding just ups the ante and is often a poor move.<\/p>\n

3. Not providing a cash-flow analysis.<\/strong>\u00a0Potential investors want to see that you understand your cash flow and how you intend to spend their money. Carefully monitor your cash in and cash out. Use these numbers as the foundation for your business decisions.<\/p>\n

4. Overestimating future revenue.<\/strong>\u00a0Financial projections are essential. While a top-down financial forecast can be inspirational, it is really just a bogus means of generating unrealistic numbers. While some investors might want to see this, be sure you back it up with a more substantial and reliable bottom-up forecast. For more information on top-down versus bottom-up forecasting, check out my article Bottom-Up vs Top-Down Forecasting: Realistic Financial Planning.<\/a><\/p>\n

5. Underestimating your variable expenses.<\/strong>\u00a0While fixed expenses are you can expect to pay consistently, variable expenses will vary depending on your level of business activity. Of course there\u2019s no way to definitively account for all variable expenses, but you can identify key variables, take them into consideration, and factor them into your calculations. Because if you don\u2019t understand your total costs, how can you be sure that you can cover them?<\/p>\n

6. Not using GAAP (Generally Accepted Accounting Principles).<\/strong>\u00a0To keep track of money in and money out, you need a dependable accounting system. Using GAAP standards ensures that you have reliable accounting information on which you can base important financial decisions. GAAP statements are essential for investors. If you need help with these standards, this is a good time to hire an accounting firm for support.<\/p>\n

7. Raising too much money.<\/strong>\u00a0I\u2019ve said this time and time again, but it bears repeating: more is not better. Really. Raising just what you need is capital efficiency: a much more telling indicator of your company\u2019s success than capital access. Not to mention, the more capital you raise, the greater your dilution.<\/p>\n

8. Raising too little money.<\/strong>\u00a0The flip-side here, of course, is not raising enough money. Again, milestone funding is the key here. If you have mapped out the next milestones you want to achieve\u2014and what you will need to achieve them\u2014you should be clear on how much you need.<\/p>\n

9. Not using your financial model to create a narrative for your business.<\/strong>\u00a0It\u2019s important to calculate your startup costs, create financial projections, and analyze your revenue potential, etc. These financial calculations are important for your business. But numbers alone don\u2019t tell a very interesting story. It\u2019s your job to connect the dots for potential investors, drawing a compelling line between the financials and your company\u2019s future.<\/p>\n

As you can see, financial management isn\u2019t just about tracking your accounts payable and accounts receivable. Your finances are woven into every aspect of your business. Whether you\u2019re looking for your first funding round or are further on in the game, understanding your finances is key.<\/p>\n","protected":false},"excerpt":{"rendered":"

I\u2019m not trying to be an alarmist, but startup fundraising can oftentimes feel like you\u2019re navigating a minefield: one false step and the money blows up! That\u2019s why you need to be clear on what you\u2019re looking for, where to look for it, and what you need to get it. You start the process by […]<\/p>\n","protected":false},"author":1107,"featured_media":8863,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[43902],"tags":[],"class_list":["post-8861","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-professional-development"],"acf":[],"yoast_head":"\nThree startup funding mistakes you need to avoid<\/title>\n<meta name=\"description\" content=\"Here are some of the most egregious financial funding blunders, and how to avoid them.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Three startup funding mistakes you need to avoid\" \/>\n<meta property=\"og:description\" content=\"Here are some of the most egregious financial funding blunders, and how to avoid them.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\" \/>\n<meta property=\"og:site_name\" content=\"Ideas\" \/>\n<meta property=\"article:published_time\" content=\"2014-09-02T18:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-03-30T23:00:10+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?resize=1440,810\" \/>\n\t<meta property=\"og:image:width\" content=\"1440\" \/>\n\t<meta property=\"og:image:height\" content=\"810\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"David Ehrenberg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"David Ehrenberg\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\"},\"author\":{\"name\":\"David Ehrenberg\",\"@id\":\"https:\/\/www.wework.com\/ideas\/#\/schema\/person\/0b3aaf3d88ada2723ac27838d13672e0\"},\"headline\":\"Three startup funding mistakes you need to avoid\",\"datePublished\":\"2014-09-02T18:00:00+00:00\",\"dateModified\":\"2020-03-30T23:00:10+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\"},\"wordCount\":813,\"publisher\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640\",\"articleSection\":[\"Professional Development\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\",\"url\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\",\"name\":\"Three startup funding mistakes you need to avoid\",\"isPartOf\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640\",\"datePublished\":\"2014-09-02T18:00:00+00:00\",\"dateModified\":\"2020-03-30T23:00:10+00:00\",\"description\":\"Here are some of the most egregious financial funding blunders, and how to avoid them.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage\",\"url\":\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640\",\"contentUrl\":\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640\",\"width\":3960,\"height\":2640,\"caption\":\"9 startup funding mistakes to avoid\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"\/ideas\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Professional Development\",\"item\":\"\/ideas\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Three startup funding mistakes you need to avoid\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.wework.com\/ideas\/#website\",\"url\":\"https:\/\/www.wework.com\/ideas\/\",\"name\":\"Ideas\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.wework.com\/ideas\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.wework.com\/ideas\/#organization\",\"name\":\"WeWork\",\"url\":\"https:\/\/www.wework.com\/ideas\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.wework.com\/ideas\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2019\/04\/welogo_black_55x55.jpg?fit=55%2C55\",\"contentUrl\":\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2019\/04\/welogo_black_55x55.jpg?fit=55%2C55\",\"width\":55,\"height\":55,\"caption\":\"WeWork\"},\"image\":{\"@id\":\"https:\/\/www.wework.com\/ideas\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.wework.com\/ideas\/#\/schema\/person\/0b3aaf3d88ada2723ac27838d13672e0\",\"name\":\"David Ehrenberg\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.wework.com\/ideas\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/8c410d87c0337a4aa0257cacb8cf5e4d766caa8438f59ade93b49cc9681972a6?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/8c410d87c0337a4aa0257cacb8cf5e4d766caa8438f59ade93b49cc9681972a6?s=96&d=mm&r=g\",\"caption\":\"David Ehrenberg\"},\"url\":\"https:\/\/www.wework.com\/ideas\/author\/david-ehrenberg\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Three startup funding mistakes you need to avoid","description":"Here are some of the most egregious financial funding blunders, and how to avoid them.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid","og_locale":"en_US","og_type":"article","og_title":"Three startup funding mistakes you need to avoid","og_description":"Here are some of the most egregious financial funding blunders, and how to avoid them.","og_url":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid","og_site_name":"Ideas","article_published_time":"2014-09-02T18:00:00+00:00","article_modified_time":"2020-03-30T23:00:10+00:00","og_image":[{"width":1440,"height":810,"url":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?resize=1440,810","type":"image\/jpeg"}],"author":"David Ehrenberg","twitter_card":"summary_large_image","twitter_misc":{"Written by":"David Ehrenberg","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#article","isPartOf":{"@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid"},"author":{"name":"David Ehrenberg","@id":"https:\/\/www.wework.com\/ideas\/#\/schema\/person\/0b3aaf3d88ada2723ac27838d13672e0"},"headline":"Three startup funding mistakes you need to avoid","datePublished":"2014-09-02T18:00:00+00:00","dateModified":"2020-03-30T23:00:10+00:00","mainEntityOfPage":{"@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid"},"wordCount":813,"publisher":{"@id":"https:\/\/www.wework.com\/ideas\/#organization"},"image":{"@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage"},"thumbnailUrl":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640","articleSection":["Professional Development"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid","url":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid","name":"Three startup funding mistakes you need to avoid","isPartOf":{"@id":"https:\/\/www.wework.com\/ideas\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage"},"image":{"@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage"},"thumbnailUrl":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640","datePublished":"2014-09-02T18:00:00+00:00","dateModified":"2020-03-30T23:00:10+00:00","description":"Here are some of the most egregious financial funding blunders, and how to avoid them.","breadcrumb":{"@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#primaryimage","url":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640","contentUrl":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640","width":3960,"height":2640,"caption":"9 startup funding mistakes to avoid"},{"@type":"BreadcrumbList","@id":"https:\/\/www.wework.com\/ideas\/professional-development\/9-startup-funding-mistakes-need-avoid#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"\/ideas"},{"@type":"ListItem","position":2,"name":"Professional Development","item":"\/ideas"},{"@type":"ListItem","position":3,"name":"Three startup funding mistakes you need to avoid"}]},{"@type":"WebSite","@id":"https:\/\/www.wework.com\/ideas\/#website","url":"https:\/\/www.wework.com\/ideas\/","name":"Ideas","description":"","publisher":{"@id":"https:\/\/www.wework.com\/ideas\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.wework.com\/ideas\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.wework.com\/ideas\/#organization","name":"WeWork","url":"https:\/\/www.wework.com\/ideas\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.wework.com\/ideas\/#\/schema\/logo\/image\/","url":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2019\/04\/welogo_black_55x55.jpg?fit=55%2C55","contentUrl":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2019\/04\/welogo_black_55x55.jpg?fit=55%2C55","width":55,"height":55,"caption":"WeWork"},"image":{"@id":"https:\/\/www.wework.com\/ideas\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/www.wework.com\/ideas\/#\/schema\/person\/0b3aaf3d88ada2723ac27838d13672e0","name":"David Ehrenberg","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.wework.com\/ideas\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/8c410d87c0337a4aa0257cacb8cf5e4d766caa8438f59ade93b49cc9681972a6?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/8c410d87c0337a4aa0257cacb8cf5e4d766caa8438f59ade93b49cc9681972a6?s=96&d=mm&r=g","caption":"David Ehrenberg"},"url":"https:\/\/www.wework.com\/ideas\/author\/david-ehrenberg"}]}},"jetpack_featured_media_url":"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2014\/09\/20140311-Golden-Gate-49.jpg?fit=3960%2C2640","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/posts\/8861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/users\/1107"}],"replies":[{"embeddable":true,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/comments?post=8861"}],"version-history":[{"count":2,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/posts\/8861\/revisions"}],"predecessor-version":[{"id":48259,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/posts\/8861\/revisions\/48259"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/media\/8863"}],"wp:attachment":[{"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/media?parent=8861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/categories?post=8861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.wework.com\/ideas\/wp-json\/wp\/v2\/tags?post=8861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}