Why Your Network Isn't Enough: Demystifying Startup Fundraising in 2024
Weekender #3: Navigate the New Funding Landscape: Insider Tips for Success in 2024
Hey, Matt here! Today, I want to share some insights on a topic that's crucial in the startup world: fundraising. Thank you to the new subscribers, I hope this newsletter can be helpful for you. Make sure to check me out on social media including TikTok and Instagram for more founder, tech, VC, and startup-focused content. Also, check out my first ebook for free here.
Why Fundraising Matters
Whether you're a founder, an investor, an employee, or simply interested in the startup ecosystem, understanding the fundraising process is invaluable. It shapes the trajectory of innovative companies and influences the products and services that eventually reach the market. The last time I raised a significant round of funding for my company ModernTax the world was different. It was 2021, and money seemed to be falling from the sky. In 2021, a good idea and a pitch deck could land you millions. In 2024, even proven founders with revenue and customers are struggling to close rounds. In the three years since then, things have been different, hundreds of companies have shut down, thousands more have made layoffs and very few have gone public.
The Current Fundraising Landscape
I recently had a conversation that perfectly captures the state of venture fundraising in 2024. My friend, who is well-networked with a killer resume, has built and sold another company and now he’s struggling. On paper everything looks good, he’s the second-time founder and the prototypical low-risk bet with a big upside that VCs usually clamor over.
He’s building an AI product, knows all the right people, and gets invited to all the cool parties that you can’t sign up for. It should be easy to clear those wires, right? He’s only going out for $2.5M, which is “nothing” in the Bay Area. But he’s struggling.
The Struggling Founder
Despite a fairly resilient public market for a few public tech companies and a boom in venture investing for large funds, new general partners with track records, and a select few AI startups, fundraising is quite difficult for most startup founders right now. According to PitchBook, venture funding in Q2 2024 was up but $14.6 billion of that capital was concentrated in just two companies—CoreWeave, an AI hyperscaler, and xAI, an Elon Musk company.
This tweet from Greg Isenberg, an internet entrepreneur and content creator, summarizes the experience. I do not know exactly what the next 12-18 months will hold, but it feels like something has to change. Many companies are doing modestly well but can't raise money. There is now a group of founders focused on building profitable companies, yet venture funds that invested in these companies face pressure from LPs to return capital. Today, we found out that Sequoia is offering to buy LP shares in their top company, Stripe. I wonder what will happen if there is a high demand to buy what many consider the most important private company on the market. If Stripe stock is being sold rapidly, what does that mean for companies with much less demand?
Despite the Doom and Gloom
We are living in an amazing time to be a founder. There is more capital on the sidelines than ever. We need more founders to be bold. I told my friend this. He had raised over $10M for his last company, and it was all network-driven. He had no idea that this time it could be the opposite. I hear this so much. It is all about network, blah, blah. Stanford this, YC that, Sequoia this. It is all an excuse. Now more than ever is a time for founders to be diligent, sharpen their pitches, and sell.
The three takeaways that I am applying to my fundraising journey:
Network alone isn't enough in 2024
Even successful founders are struggling
Strategic approaches are more crucial than ever
If you are a founder, entrepreneur, or business owner what's been your biggest fundraising challenge in 2024? Reply to this email and let me know – I read every response.
Want the truth about fundraising? You can’t network your way into enough money to build your company. You need to be strategic and utilize the tools to keep a true pipeline of investors.
Ready to transform your fundraising strategy? Download my free ebook The Founder's Fundraising Blueprint: From Cold Email to $1M in 60 Days and start your journey to successful funding today.' I destill all the tactics and strategies I used to raise my first $3 Million in venture from investors I had no prior working relationship with.