I’ve been keeping tabs on several early-stage founders who are aiming to raise capital before the end of the year. Their funding experiences so far are on the extreme ends of the spectrum (for various reasons). From what I’m hearing so far, it sounds like funding rounds will end up in one of two camps.

• Fundraises will be extremely successful and engender a high degree of interest from several firms. These founders will likely be given offers to raise materially more capital than they set out to raise (which isn’t necessarily a good thing).
• Fundraises will be completely unsuccessful, with zero interest from firms. If these founders are running out of runway, they’ll likely struggle to raise a bridge round.

These initial thoughts are subject to change as the market changes. But if they hold, it sounds like an extreme case of haves and have nots this fundraising season.

Lots of people want to start a business but don’t know where to begin. Their uncertainty prevents them from acting—they never get off square one. It’s more common than you’d think, but it doesn’t have to be that way.

There’s a simple hack aspiring entrepreneurs can use. This hack is helpful if you don’t know what kind of company you want to start or have a list of potential companies you could start.

Find another aspiring entrepreneur (someone who’s serious) and have regular accountability meetings. They don’t have to be super structured or long. Here are a few things they could cover:

• What problems have you evaluated since the last meeting?
• What’s the result of your analysis (i.e., do you kill the idea or move further in your evaluation)?
• What are the next steps in your process?
• What’s the deadline for completion of the next steps?

The goal of the meetings is to initiate momentum, keep the momentum going, and have a sounding board for your ideas and thoughts. Accountability meetings help accomplish all of that, and then some, in a simple format. 

Entrepreneurship is a tough journey that’s full of uncertainty. Founders are constantly trying to figure out what action they should take given the information at hand. You don’t have to travel alone. Find someone going the same way, and you’ll help each other get to the destination faster.

Louis Pasteur once said that “fortune favors the prepared mind.”

This quote is simple but powerful. The greatest outcomes are more likely to belong to those who have put in the work to prepare mentally. You can see it in founders. Those who have obsessed about a problem to the point where they understand it from all angles are more likely to create a superior solution that customers will pay for. Tons of paying customers equals a big company and accelerated value creation. You can see it in investors. Those who have gone deep into a company or sector or into developing a thesis are ready to deploy capital when the right investment opportunity presents itself. Even if it’s non-consensus and unpopular at the time. They can recognize that the opportunity is superior sooner than others and seize it before its window closes.

I’m a big fan of the prepared mind. I try to learn as much as I can about concepts, companies, and topics that interest me. This has helped me uncover unique insights and given me the conviction to do things I otherwise wouldn’t have done. I’ve made it a priority to make time regularly to do this. 

A prepared mind is something everyone can have—but few do. Most don’t make the effort. It’s a great life hack—a way to separate yourself from everyone else.

I recently talked to founders building an AI start-up. They shared with me that they’re raising capital, and I asked the normal questions about metrics, runway, etc. I learned they have a significant amount of capital in the bank from their raise less than 12 months ago. This made me ask, why are you raising again if you have ample runway for executing your strategy?

Their response was simple. They’re getting interest from VC firms looking to invest in AI start-ups, and they figured they should strike while the iron is hot.

It’s so interesting to hear how different the stories of founders raising in the market right now are. Some are grinding it out to get an opportunity to pitch an investor, while others are being sought out by investors. I’m really curious to see which companies successfully complete their fundraising rounds (i.e., have money in the bank) before the end of the year.

Today I had a long conversation with a friend who recently bought a business. After being in corporate America for many years, she took the leap to become an entrepreneur through acquisition. During our chat, she shared a few things I found interesting.

Transitioning from a structured world with established processes, systems, infrastructure, and support staff to the less structured entrepreneurial world has been a challenge. Simple things she never had to think about, such as email domains, cloud storage, and verifying invoice accuracy, she now has to navigate. It’s a bit overwhelming, but also exciting.

Her mindset has shifted from worker to owner. It hadn’t occurred to her that she had a worker mindset, but she realized that she thinks and acts differently now that she’s an owner.

She views entrepreneurship as the best vehicle for elevating her financial life and leaving a legacy for her children. The benefit of business cash flows and value appreciation is hard to find outside entrepreneurship.

She wants more flexibility. She views entrepreneurship as a way of ultimately (after the business is running smoothly) controlling her time. Flexibility is important because she doesn’t want to miss important family moments because of a work schedule she doesn’t control.

Entrepreneurship is powerful. It drastically changes an entrepreneur’s life. My friend realized this and decided it’s the path for her. I’m super happy for her and can’t wait to see her business flourish. 

Recently, a friend shared a quote from Steve Jobs, the legendary founder of Apple:

Picasso had a saying—“good artists copy; great artists steal”—and we have always been shameless about stealing great ideas. 

I hadn’t heard this before and wanted more context about when Jobs said it. So, I did a little digging. I found this video clip.

Jobs’s point was that you don’t need to reinvent the wheel. Instead, get exposure to great ideas that have already been tried. Then incorporate the best of them into what you’re trying to do.

Repeating (sometimes with a tweak) what’s already been proven to work is a great recipe for success.

One of the founders I work with recently kicked off his fundraise. He decided he wanted a well-run, tight process to boost his chances of completing his fundraise before the holidays. One of the things he’s doing is sending a weekly recap of the week’s activities to all his existing investors.

I really like this. My favorite part of the recap is that his fundraise process is displayed as a funnel, and he quantifies how many venture capital firms are in each stage. As an investor, I can quickly understand, looking at the funnel, where he is in his process and gauge the likelihood of it being successful as it progresses.

In addition to the funnel, he includes in his recap a few bulleted highlights and planned activities for the upcoming week. 

In a minute or two every week, I get a good idea of where he is, what he’s planning to do, and how I can help (if I know some of the investors he’s about to pitch or already has pitched).

I’m a fan of this fundraise update email. It’s a great tool to help founders focus, run a tight process, and keep stakeholders informed throughout the fundraise process.

This week I received an email from Carta, the equity management platform, about a report called State of Startup Compensation, H1 2023. It’s a great report with lots of data on start-up compensation and hiring trends. As expected, the pace of hiring in the first half of 2023 was significantly below the first half of 2022. Anyone who’s interested in the report can find it here. 

What I found more interesting was information Carta shared in the email, with charts, about start-up shutdowns. (I’m assuming a report on this is in the works.) I’ll summarize my big takeaway.

Through the first nine months of 2023, 543 companies using Carta for cap table management shut down. For context, Carta recorded 467 companies shuttering during the entire year of 2022. For the first nine months of 2022, 342 companies shut down, according to Carta.

That means that Carta is seeing a nearly 60% increase in shutdowns in the first nine months of 2023 as compared to the same period in 2022. And in 2023 Carta has recorded more shutdowns in nine months than it recorded for the entire calendar year of 2022.

In light of this shutdown data, many of the downward trends in the compensation report make more sense.

While all this data paints a somewhat gloomy picture, I’m a bit more optimistic. I think these trends will decrease the number of alternatives for aspiring entrepreneurs and spur the passionate ones in this group to bet on themselves. Said differently, these trends could lead to more people starting companies. It’s counterintuitive, but I think there’s a decent probability of that happening.

I recently had the chance to have a long meeting with an emerging venture capital fund manager. He launched his fund less than two years ago. He’s been able to secure early investment from a few limited partners (LPs). Enough to assemble a team and begin investing—but nowhere near his target amount. The fundraising environment for emerging venture fund managers has been tough in 2022 and 2023. I was curious how things were going for this manager.

He shared that his journey has been full of highs and lows. Fundraising has been extremely hard. The interest-rate environment has soured many potential LPs on venture capital as an asset class, especially for new fund managers. Some potential LPs who like his thesis have shown interest, but their internal rules won’t allow them to invest because this is his firm’s first fund. (Some LPs consider investing only if it’s the second fund or later.)

The fundraise is behind target, which has created a cash flow issue. He took a pay cut to less than what recent college graduates make, which has made things less than ideal at home. And he’s made other adjustments in the firm to conserve cash.

He doesn’t think he’ll raise the amount he targeted when he launched the fund. It will likely be materially less. He’s traveling every week for the next few months to meet with LPs across the country. His focus now is to get enough capital commitments from LPs to safely execute his strategy with his current team before he legally must end his fundraising process. If he can raise the minimum needed for the fund to remain viable, he’ll have enough runway to build a track record that he hopes will help when he raises for a second fund.

On the positive side, the team he assembled is extremely talented. They’ve refined their approach and have a solid process to discover, evaluate, and win investments into promising start-ups that fit their thesis. They’ve completed investments in several companies, all of which are doing well and have ample cash. One early investment is doing exceedingly well and has raised again from a well-known VC firm. That investment is his firm’s first markup in its portfolio and validation from a later-stage investor.

This fund manager is smart and determined. I have no doubt he’ll ultimately achieve success. It may look different and happen slower than he originally envisioned. But I believe it will happen for him. 

His story is a reminder that the journey of an emerging fund manager can be the same as that of a start-up founder: one of sacrifice and extreme peaks and valleys. Market conditions are making the journey particularly tough. If current conditions persist, they could lead to fewer people launching new venture funds.

A few days ago I shared my big takeaway from an article about Andrew Bialecki, founder of Klaviyo: he bootstrapped his company at first and advises founders to raise the least amount of capital needed to get traction in the early days.

Andrew owned 38% of his company when it went public, which is a bigger share than you normally see. I usually consider 10% to 15% a big win for the founder.

Digging into Klaviyo’s early fundraising, I learned that the company was founded in 2012 and didn’t raise capital until 2015. In that three-year period, it surpassed $1 million in revenue and became profitable, per Forbes. The company then received a $1.5 million investment from Accomplice and a few angel investors, according to a press release.

Andrew’s advice about raising minimal capital early on sprang from his own experience in doing so, which likely was a material factor in his ability to maintain a large ownership stake. Andrew’s advice and his outcome are useful things for early-stage founders to consider when they’re thinking about their fundraising.