Fundraising red flags

There are so many mistakes I made as a first-time founder that could have been avoided with a little bit of guidance. Here’s the list of fundraising red flags I wish someone had shared with me:

🚩  Obsessing over confidentiality during Due Diligence
Many founders don’t realize that Due Diligence is simply the process of looking for all the reasons to say “No”. While some founders might withhold a few details during the initial pitch, the Due Diligence process requires you to reveal absolutely everything.

✅ DO: Assume that whatever materials you send will be passed around and write those documents accordingly. It’s going to happen whether you like it or not.
❌ DON’T: Act secretive during the DD process. Investors will assume that you’re hiding something negative that might impact the deal.

🚩  Asking for an NDA before pitching
This happens more often than you might think. Unless you’re breaking the law by sharing your company’s information without an NDA, don’t ask for one. 90% of investors will walk away from the deal right there.

✅ DO: Identify which information (if any) is confidential or sensitive in your pitch.
❌ DON’T: Cold email an investor to pitch them with the expectation that they sign an NDA. And God help you if you’re pre-product.

🚩  Name-dropping too much
This tells investors that you’re relying too heavily on the reputation of others to elevate the perception of your own company.

✅ DO: Share the names of people who referred you, investors, people on your board, advisors, or (if applicable) customers.
❌ DON’T: Name drop the B-List celebrity that Quote Tweeted you once 4 months ago.

🚩  Creating urgency where none exists
If no one feels a sense of urgency, the deal won’t get done. But the act of encouraging urgency is an art. If you push investors to move at an unreasonable pace, it will seem like you’re trying to force the deal through. Plus it’s just bad form.

✅ DO: Share the target close date for the round and communicate consistently with investors to get to a decision quickly.
❌ DON’T: Attempt to push them to a decision quickly and early.