How founders can prepare for their late-stage fundraises from the start

While raising a $250 million Series D may seem far off for startup founders focused on securing their initial $1 million in seed funding, experts argue that this mindset can hinder future success. Founders are encouraged to develop a clear strategy for subsequent fundraising rounds from the very beginning. Sadi Khan, the co-founder and CEO of Aven, emphasized the importance of planning for later rounds during his appearance at TechCrunch Disrupt. He explained that understanding the capital requirements for growth is crucial from day one. "We’re a very capital-intensive company; we provide asset-backed credit cards to consumers," Khan noted, stressing the need for substantial funding to scale operations effectively. By grasping their long-term financial needs, founders can not only focus on attracting suitable early-stage investors but also lay the groundwork for relationships with later-stage backers. Lila Preston, head of growth equity at Generation Investment Management, recommended that startups initiate these connections at least two years prior to needing significant capital. This early engagement allows investors to familiarize themselves with the business model and market dynamics. Preston pointed out that some investors can provide valuable insights even before they commit funds, enhancing the relationship-building process. "When we show up, even at Series A or B, we’ve done our homework so that we can engage meaningfully," she remarked. By articulating clear milestones and success metrics, entrepreneurs can demonstrate their progress and potential to these early stakeholders. Zeya Yang, a partner at IVP, echoed these sentiments, highlighting the accelerated pace of later-stage funding rounds. Establishing connections with potential investors ahead of time not only enriches the dialogue but also fosters a more supportive environment during actual fundraising. Yang advised that early-stage companies need not disclose all their financial specifics right away; instead, sharing the overarching vision and trajectory can suffice as a starting point for discussions. Khan also suggested leveraging existing investor relationships to access new venture capital networks. He shared how his initial investors facilitated introductions to Khosla Ventures, which ultimately contributed to Aven’s Series E round. "At every fundraising stage, we always considered who the next set of investors would be," Khan concluded, emphasizing the importance of nurturing these connections during earlier rounds to pave the way for future opportunities.