Raising money as a first-time founder can feel overwhelming, even for the most ambitious entrepreneurs. Scot Chisholm founded an $1+ Bn software company, Classy, a SaaS platform for 10+K Non-profit organizations. He grew the company from $0 to $1+ Bn valuation, led a 300-person team, and raised over $200 Mn from investors across Seed to Series D rounds.
Fundraising Mistakes: First-time Founders Often Make
In this article, I cover 7 key mistakes that Scot made along the way in fundraising, which he shared as a thread on his X account.
And, how you can avoid each of them, and will help you pitch smarter, negotiate better, and close funding faster. Here, they go:
1. Meeting Investors in the Wrong Order
I started by pitching to my most exciting prospects first - and that was a mistake. Like most often with first-time founders early on, I was underprepared, less confident, and didn’t have my pitch fully refined. What to do instead:
Rank potential investors from least interesting to most interesting. Use this template to better organize your investors' list.
Begin with the least interesting investors to test your pitch, gather feedback, and improve your delivery.
Gradually work your way to the top prospects with a stronger, polished pitch.
2. Focusing on the Wrong Things at Each Stage
Each stage of fundraising requires a tailored approach because investors prioritize different criteria. Early on, I wasted time highlighting details irrelevant to my company’s current stage. Here’s what to emphasize by stage:
Pre-seed/Seed: Focus on the market opportunity and your team.
Series A: Demonstrate Product-Market Fit, along with break even (ideally).
Series B: Prove you have a repeatable sales process and a strong Go-to-Market (GTM) strategy.
Series C: Showcase your command over unit economics.
Series D: Highlight profitability or a clear path to it.
No matter the stage, the market opportunity is always key.
3. Not Presenting the Market Well
Early on, I overwhelmed investors with too much information about the market.
➡ In reality, they care more about how you plan to capture it (GTM strategy).
How to structure your market story:
➡ Start with your initial market (Serviceable Obtainable Market, or SOM).
Explain how you’ll move to adjacent markets (Serviceable Addressable Market, or SAM) and eventually tackle the broader market (Total Addressable Market, or TAM).
Focus heavily (almost entirely) on your "unfair advantage" i.e. what makes you uniquely positioned to succeed. Keep it simple and strategic.
4. Timing the Raise Poorly
One of my biggest missteps was not aligning my fundraise with a strong moment of momentum. Investors need to see why now is the perfect time to invest. The ideal time to raise - Right after achieving a major milestone or breakthrough. This could be:
Launching a new product.
Signing a large, high-profile customer.
Reaching profitability or breakeven.
Use these moments to demonstrate momentum ("Why Now" slide) and set the stage for (accelerate) your pitch.
5. Chasing Valuation Over Terms
At times, I became too fixated on maximizing valuation, leading to deals with poor terms or misaligned investors. Once, this nearly drove my company into bankruptcy. What I learned:
A slightly lower valuation is okay if the other terms are favorable.
Avoid inflated valuations with high liquidation preferences (prefer 1X Non-participating).
Choose investors who align with your vision and add strategic value beyond capital.
A great partner is worth far more than a few extra valuation points.
6. Not Negotiating the Term Sheet Thoroughly
Receiving a term sheet feels like a win, but I made the mistake of overlooking vague or incomplete details. This left too much open to interpretation during due diligence. How to avoid this:
Ensure all key terms (board composition, liquidation preferences, etc.,) are clearly spelt out.
Never sign anything with "TBD" (To Be Discussed) terms - get everything nailed down upfront before due diligence.
Work with an experienced advisor or lawyer to review the term sheet.
Check out our "Funding Toolkit" for expert assistance.
Getting it right here saves you headaches (and heartaches) later.
7. Being Unprepared for Due Diligence
After signing a term sheet, you enter the due diligence phase. This is where investors thoroughly evaluate your business - also your most vulnerable moment. How to stay ready:
Have a robust 3–5-year financial model, detailed customer metrics, and a clean cap table. Ensure all legal documents are in order.
Use our "Due Diligence Toolkit" to negotiate better terms; retain equity & control.
If prepared, you can close your round within 30 days, unpreparedness mostly leads to delays i.e 90+ days or no deal.
The smoother the diligence process, easier securing the capital, and faster you’ll get back to building your business.
Conclusion: Lessons Learned
Fundraising is an essential part of growing a successful startup, but it doesn’t have to be riddled with mistakes. By learning from the above experiences, you can avoid costly errors, build stronger investor relationships, and secure the funding you need to scale. Remember: preparation, timing, and alignment with the right investors are everything. With the right approach, you’ll not only raise capital but also set your company up for long-term success.
Happy Fundraising!
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