Fundraising Facts
Fundraising Facts: A No-Nonsense Guide to Startup Fundraising Without the Jargon (or the Suits)
Welcome to the ultimate, straight-talking guide on startup fundraising. This guide is packed with real stories, practical tips, and enough myth-busting to keep you sane no matter how many pitch decks you’ve seen. No MBA required. Only clear advice (and a few laughs) from Virtual Ron and a lineup of friends with the battle scars to prove they've been there. Whether you're just getting started or scaling your next big thing, grab a coffee and let’s talk money, VCs, angels, and everything between.
Meet the Usual Suspects: Who Actually Invests in Startups?
Let's start at the very beginning: who really puts money into startups? Think it's just VCs in suits and dark glasses? Think again.
Here's a quick breakdown without the jargon and with plenty of attitude:
Angel Investors: Early believers, sometimes your friends, or even your dad’s dentist. Usually “rich nerds with time.”
Venture Capitalists (VCs): Professional investors, but they’re playing with someone else’s money and have their own bosses to answer to.
Growth Equity: Folks looking for tangible traction and big scaling potential.
Private Equity: They want cash flow. Full stop. And often more control than you're ready to give up.
Strategics: Big companies who either want your tech or want to make sure you don't compete with theirs.
"But it's never that simple, is it?"
Nope, it’s really not. Every investor comes with their own rules, expectations, and stories. And every founder learns differently—sometimes the hard way.
Wild Rides: Raising Money, Startup Stories, and That Dentist Turned Angel
Let’s make things real with a story from K Quozon, a serial entrepreneur who’s seen it all:
“My first startup, the Pocket Probe, raised $50k from an angel. He was also my dad’s dentist. Friendly terms, no drama. My second startup, Philtronic, we got $3 million from a VC from one of the moons of Uranus, mind you.”
Easy money? Think again. As K says, things were great “until we missed the quarter and the board meeting became an intervention.” Suddenly, the power dynamic shifts and you realize:
VCs are awesome when they help. Scary when they’re on your cap table too early and you feel like you’re working for them. And trust us—every founder has this moment.
Understanding SAFEs: Not So “Safe” for Founders?
You’ve probably heard about SAFEs (Simple Agreement for Future Equity). Let’s cut through the noise.
What is a SAFE?
Think of a SAFE as a “love letter” (jokingly) from an investor saying:
"Here’s some cash now. We’ll figure out what I own later, when you raise a proper round."
But don't be fooled—while a SAFE is quick and (mostly) founder-friendly, it matters how you set up the terms.
The Basics
No board seats: Investors don’t have a say—yet.
No maturity date or interest: It’s not a debt loan.
Valuation caps and discounts: Here's where things get sneaky complicated.
Real-World SAFE Story: Marcus’s Journey
Marcus raised $250k from three angels using SAFEs capped at a $5 million valuation. Let’s break that down:
If his next round (Series A) is valued at $10 million, those angels get to convert as if they’d come in at $5 million.
In other words, they’re rewarded with a discount for taking a risk early.
Pretty slick for the investor—until you have to explain how much of the company everyone owns (hello, dilution nightmares).
The Good and the Bad
Good: Speed. SAFEs can get done over coffee, no big lawyering required.
Bad: If you don’t understand caps and discounts, it’s easy to end up giving away more than you meant to.
Priced Rounds Unpacked: Clarity, Power, and a Lot of Paperwork
So what happens when your startup is ready for the “real” deal? Enter the priced round.
What’s a Priced Round?
You agree on a company valuation, issue shares, and add investors—officially—to your cap table. It’s more paperwork, higher legal fees, and often slower…but also less chaos down the road.
Here’s Ava’s take:
“We raised $1 million at a $4 million pre-money. That gave the investor 20% of the company. We had to clean up our legal docs, add a board seat, and issue stock certificates, but it gave us clarity.”
The Perks
Transparency: You know exactly how much you gave up.
Negotiating Power: Now you have a precedent for future rounds.
Legitimacy: Essential if you want “follow on” funding.
The Pain Points
Slower and more expensive to close.
More legal work.
More complex terms (board seats, stock rights, etc.).
But when done right, you walk away knowing where everyone—and every dollar—stands.
Cap Tables and Dilution, Demystified (With Simple Math!)
The phrase "cap table" tends to make founders sweat, but it doesn't have to be rocket science. Let's do the math, step-by-step.
The Classic Example
Say you’re two founders, split 50/50, each owning 10,000 shares. The company is valued at $1/share, so the business is worth $20,000 to start.
Now, an investor wants to buy 10% of your company. How does that play out?
The Wrong Way
You might think the investor should just buy 2,000 of the existing 20,000 shares. But then the cash goes to the founders, not to the company.
The Right Way
The company issues new stock for the investor to buy, so the cash goes to the company (good for growth).
But this means everyone else’s slice of the pie gets smaller: dilution.
Crunching the Numbers
Let’s say you issue 2,222 new shares to the investor:
Old total: 20,000 shares
New shares: 2,222
Total after: 22,222 shares
Investor gets 2,222 / 22,222 = 10%
If the shares are priced at $10/each, the investor pays $22,222. Now the company is valued at $222,222 and each founder (now owning a bit less than 45% each) is “worth” about $100,000 on paper.
Key takeaway:
You’re giving up some ownership, but if you’ve priced things right and brought in smart, helpful investors, you’re actually building more value for everyone.
SAFE Notes in Action: What Happens at the Next Round?
Wondering how those early SAFE investors get their shares? Here’s a walkthrough:
Say an early investor gave $5,000 using a SAFE, with a 20% discount and 5% interest.
A year later, your priced round is at $10/share.
The early investor gets both the accrued interest and the discount:
$5,000 + $250 (5% interest) = $5,250
At $8/share (20% discount off $10), they get 656 shares.
But now, WATCH OUT:
Before figuring out how many shares your new lead investor can buy, you have to include all shares due to SAFE note holders, meaning a slightly smaller slice for everyone else.
And sometimes accountants will split shares so you have whole numbers—which can add extra confusion to your cap table.
Bottom Line:
Early SAFE investors win with discounts, but everyone else (including founders) gets diluted a bit more. It's always a trade-off.
Bridge Rounds, Down Rounds, and the Reality of Startup Cash Flow
What’s a Bridge Round?
If your company needs more cash to get to the next big milestone—but isn’t quite ready for another big priced round—you might raise a short-term note or SAFE in between. That’s a bridge round.
What’s a Down Round?
Sometimes, things don’t go as planned in startup land. Maybe growth stalls, the market shifts, or the competition eats your lunch. You might have to raise at a lower valuation than before. That’s a down round.
It’s not the death sentence everyone fears, but it’s usually rough: more dilution, less founder control, sometimes a bit of drama.
Fundraising Myths That Need to Die Yesterday
You’ve heard these a thousand times. Here’s why they’re mostly wrong:
Myth 1: You Have to Have a Pitch Deck to Raise Money
"Nope. If someone trusts you, they'll wire money without a slide deck. It happens more than you think." — Real founder, real story
First $50k? Closed over coffee and screenshots.
Some investors don’t need a deck; they need to believe you’ll execute.
Myth 2: VCs Want to Replace You
Not always. What they do want? Coachability.
Most VCs would rather you grow into a better leader than replace you with an outsider.
They only push for a change once you’ve proven unable to scale (“company-limiting CEO”).
“The myth that we want your job is false. We already have stressful jobs. I want our portfolio CEOs to grow into great leaders. I like to say we are available but not responsible. Ultimately it’s your call.”
Myth 3: You Need a Warm Intro
That used to be true, but now? Not really.
Get creative. Some founders DM investors directly, record a quick video, or use LinkedIn/X.
Spray and pray sometimes works (if your outreach is high quality and respectful).
“I called and DMed 40 investors with a Loom video, and 3 responded. One invested $500k. I never had an intro.”
Myth 4: VCs Are the Enemy
Maybe you’re both playing on different teams, but you’re not at war.
Most VCs want you to succeed—they get paid when you do.
That said, their first loyalty is to their LPs (the people who gave them the money to invest).
They do have superpowers: sometimes special rights over mergers, investments, or board seats.
“When the ink dries, the company’s still yours. Founders forget VCs are fiduciaries. Their loyalty is to LPs. When you understand their incentive structure, you stop seeing them as enemies and start treating them as business partners—with boundaries.”
VCs Are People Too: The Real Relationship Between Founders & Investors
Don’t forget, VCs have their own ride:
They answer to their LPs.
They invest in lots of companies—not just you.
Every portfolio is a blend of frustration, returns, and chaos.
Most founders never know where they stand in the grand scheme of a VC’s other investments, so don’t take things personally when feedback feels abrupt or detached. Usually, they’ve just seen enough success and failure to know that advice is valuable if you use it.
Cap Tables, Liquidation Preferences, and Why Your Terms Matter
There are two things that trip up founders (and even seasoned operators):
The Cap Table: Who owns what, and how much?
Liquidation Preferences: Who gets paid first if the company is sold or liquidates?
Some hard truths:
A “friendly” term sheet with bad terms is worse than no money at all.
Liquidation preferences can erase your payday—even if you “own” a nice chunk of the company.
“Your cap table is insignificant next to the power of liquidation preferences. But I am not your enemy unless you cross my term sheet.”
Final Thoughts: Fundraising Is a Tool, Not a Badge of Honor
Raising money doesn’t make you a hero. Or a failure. It’s just a tool.
Like any tool, fundraising requires skill and understanding:
Are you picking the right investors for your stage and goals?
Do you know exactly what you’re promising (and giving up) in each agreement?
Have you really thought about the cost—dilution, control, future headaches—of that next round?
Take your time. Talk to people who’ve lived through every “VC horror story” (and “miracle save”).
When in doubt, don’t just grab the first check you’re offered—ask for founder references, get a lawyer who works with startups, and always double-check your terms.
Want to Get in Touch?
Got a five-slide pitch deck ready or just want to chat about cybersecurity, startup advice, or surviving your next board meeting?
Send your deck to: investor@Gula.Tech
Hit up Ron Gula on LinkedIn: Connect with Ron on LinkedIn
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