पाठशाला Pathshala · धन Dhan, Money · Lesson 22 · Build

Fundraising mistakes founders keep making

Most rounds that fail, or close on bad terms, fail for reasons that were visible months earlier. Fifteen of them recur, in three families: when and in what order founders raise, what they signal, and which terms they accept.

Pathshala, The Founder Library · 11 October 2026 · 7 min read

Coiled and tangled marine rope lies on a weathered wooden deck. — Photograph: Atypeek Dgn · Pexels

Founders rarely lose a round to a competitor. They lose it to timing, to a signal they did not know they were sending, or to a term that looked harmless when it was signed and decided the next round two years later. The same fifteen mistakes account for most of it.

This lesson lists them in three families (sequencing, signalling and terms), works through the most expensive one with a figure, and ends with the fifteen as an audit to run before the first meeting.

Why the same mistakes recur

A founder raises a round every eighteen months or so; the investor across the table sees hundreds of rounds a year. The asymmetry means a first-time founder learns most of the rules by breaking them. Paul Graham’s Fundraising Survival Guide calls fundraising the second biggest cause of death for startups and observes that the process of raising money can itself kill a company. Most of what follows is a way to keep the process from doing that.

Sequencing: raising at the wrong moment, in the wrong order

1. Raising before the evidence. Each round buys a specific kind of proof: a team and an insight at seed, a repeatable engine at Series A, efficient scale after. A company that starts raising before it has the evidence for the round it wants either fails or raises the previous round at a higher price. Write the milestone the round depends on, and start when it is met; [the Series A lesson](/library/series-a-what-changes-what-investors-want) shows how to time it.

A row of domino blocks stands on a reflective surface. — A raise is a sequence. The order in which funds are met decides which offers arrive together and which never arrive at all. Photograph: Ron Lach · Pexels

2. Starting with too little runway. Below six months of cash, every investor can do the arithmetic, and the founder’s best alternative to a bad term sheet becomes no alternative at all. Start with nine months or more, measured as [real runway](/library/runway-how-many-months-you-really-have).

3. Pitching the most-wanted fund first. The first five pitches are rehearsals whether the founder admits it or not. Put the funds you want most in the middle of the schedule, after the story has been tested and while other conversations are live.

4. Meeting investors one at a time. A serial process means the first interested fund sets the pace and no other offer arrives to compare. Compress the first meetings into two or three weeks so that interest, and term sheets, arrive together. [The six-week process](/library/fundraising-process-six-weeks-not-six-months) lays out the calendar.

5. Letting the raise stop the company. Graham’s guide warns that raising money has a mysterious capacity to suck up all a founder’s attention. The numbers that stall during a raise are the numbers the investors are watching. One founder raises; the others run the company, and the weekly metrics keep moving.

Signalling: what investors read between the lines

6. Announcing the raise months early. Telling every investor in town that a round is coming in the spring turns each later coffee into an informal first meeting with no deck and no momentum. Keep relationships warm with [a quarterly update](/library/investor-updates-that-get-you-next-round) and say the raise has started only when it has.

7. A small seed cheque from a large fund. A multi-stage fund that puts a small amount into a seed round holds an option on the company. If it then declines to lead or join the next round, every other investor asks why the people with the most information passed. Take such money with eyes open, and ask before signing what the fund’s policy on follow-ons is.

8. Letting the round drag. A round that has been open for four months is read as a round that others have looked at and declined. Set a close date, tell investors what it is, and close what is committed when it arrives.

9. Mistaking interest for commitment. Graham’s rule is that deals fall through, and he names the most dangerous outcome as the long no: months of meetings, enthusiasm and new requests that end in nothing. Treat nothing as committed until terms are signed, and push every fund for a decision by a date.

10. Numbers that change between deck and data room. Revenue that turns out to include one-off fees, a growth rate computed from a favourable month or a customer count that includes pilots will all be found in diligence, and the discovery costs more trust than the flattering number ever earned. Use the same definitions in the deck, the updates and the management accounts.

Terms: the price is not the number on the term sheet

11. Maximising today’s valuation. Every rupee of post-money valuation is a rupee the next round must beat. A high price raised on a thin story turns a normal next round into a flat or down round. The figure below works it through.

12. The option pool shuffle. When the term sheet asks for the employee option pool to be created or enlarged before the money comes in, the pool comes entirely out of the existing shareholders. Venture Hacks’ worked example shows a headline pre-money valuation of $8 million with a pool of 20 per cent of the post-money that is worth $6 million to the founders. In rupees: a ₹40 crore pre-money with a ₹10 crore investment and a 20 per cent post-money pool leaves the founders an effective pre-money of ₹30 crore. Negotiate the pool from a hiring plan, not a percentage.

13. Unusual investor protections. Broad-based weighted average anti-dilution is, in the words of the Holloway guide, absolutely customary; a full ratchet is very atypical. The same is true of participating preferences and preferences above one times. Each looks small in a good year and becomes the largest number in the room in a bad one. [The term sheet lesson](/library/term-sheet-clause-by-clause) shows how much.

14. Too many small cheques. Forty angels at ₹10 lakh each means forty signatures for every later consent, forty people to update and forty opinions. Graham also warns that inexperienced investors are the ones most likely to make a deal fall apart. Prefer fewer, more experienced investors, or pool the small cheques into one vehicle.

15. Raising the wrong amount. Too little and the round ends before its milestone; too much at the wrong price and the dilution is permanent. Graham suggests presenting investors with several routes depending on how much is raised, which also lets the round grow if demand is strong.

The overpriced round, worked through

Take a company with ₹6 crore of annualised revenue growing five per cent a month, offered a round at an ₹80 crore post-money valuation. Suppose the next round will be priced at ten times annualised revenue and the founders want to double the valuation. They then need ₹16 crore of annualised revenue, which at five per cent a month takes about twenty months. If the round buys eighteen months before the next raise must start, the price leaves them two months short. The highest price that leaves time is about ₹72 crore; at ₹60 crore the same company needs only fourteen months of growth and has four to spare.

Three things to read off it. The curve rises steeply at low growth rates and flattens at high ones, so a company growing slowly has much less room to overprice than one growing fast. A fall in the multiple the market pays, which founders do not control, moves the whole curve up; leave room for it. And the gap between the price offered and the highest safe price is the cost of insurance: the dilution given up today to make the next round a normal one rather than a [bridge](/library/bridge-rounds-and-extensions).

The valuation of this round is the hurdle of the next one. Take the price the company can beat, not the price it can get.

The fifteen, as an audit before the first meeting

A month before the first investor meeting, sit down with the co-founders and answer fifteen questions in writing. Is the milestone this round depends on met, and can we show it? Do we have nine months of cash on the day we start? Who are the first five funds, and are our first choices in the middle? Can every first meeting happen within three weeks? Who runs the company while one of us raises? Have we kept quiet about the raise until now? Does any existing investor hold an option on this round, and what will it do? What is the close date? How will we track commitments, and what counts as one? Do the deck, the updates and the accounts use the same definitions? What is the highest price we can beat, from the figure above? What does the hiring plan say the pool should be? Which protections will we refuse? How many cheques do we want, and how small is too small? What are our two or three routes by amount raised? Keep the answers and read them again on the day the first term sheet arrives.

Nothing here is legal, tax or investment advice.