Love To Build? Maybe Don’t Raise Capital.

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I love building. I am a builder at heart, and would rather spend time on product development and selling customers than pitching investors for money. Unfortunately, this attitude severely limited the potential of my company, Seedscout. I started Seedscout a little over four years ago after leaving my job at YC-backed Prenda. I left with little savings in my bank account, so I instantly needed to get revenue to support myself. Within a month or two, I had a few thousand in monthly revenue, and because of that, I attracted my first two investors; one who cut a $15k check and the other who cut $25k one.

Both of these investors were notable. One was a famous author and founder who raised hundreds of millions, and the other had spent 10 years at Facebook. This gave Seedscout some signal, but as a natural builder, I saw $40k in my bank account and went right back to building to grow revenue. As revenue grew slowly, the $40k dwindled while I was paying myself and running growth experiments. Within half a year, I found myself with a bank account that was under $8k or so. At this point, I thought, “better go out and refill the tank!” So I worked my network and got another $50k-$75k in. Then went back to building.

This pattern repeated over 2.5 years, raising a total of $400k. Sure, it sounds like a lot of money, but our bank account probably had an average of $20k in it the entire time. Don’t get me wrong, Seedscout was eventually a high-flying company with great revenue growth prior to the tech market crash in mid 2022. We got up to $14k MRR. Due to this, I thought that I didn’t need to follow the traditional fundraise path. I thought we were different. With that said, there came a point when the market turned, and when I went back to the investor market to fill up the tank, there was no gas to spare.

In hindsight, $400k in a lump sum would actually have been a ton of money we could have worked with. We probably could have hired 1-3 FTEs and a couple of contractors. We could have run some growth experiments. And we could have used the cap table as leverage to prime seed investors for the next round. However, since we raised money in $25k-$75k increments, we never had sufficient capital to execute a long-term plan. We were reactive to our business success/failures, and didn’t take matters into our own hands, which is what raising capital allows you to do.

Raising capital in a planned and coordinated way allows you to make some guesses about where the world is going and helps you aim for key milestones. In the early days, revenue doesn’t always need to be part of that equation. But I just took what was available and got back to work, instead of planning to raise a certain amount and following through. Sure, I told investors we were trying to raise XYZ when pitching them, but when I got money in I often just stopped the raise and went back to operating, because I naturally had an affinity to it.

Some Takeaways From My Experience Raising For Seedscout

1. When you say you are raising $XXX,XXX, stick to the number. If you get a check in, leverage it to secure more checks rather than returning to building too soon and cutting your raise short. This shows investors you are serious about raising capital, which will grow their confidence in you as a founder, meaning they may make more intros for you or double down in the next round.

2. Every time you get a new check, get five intros from that investor to more potential funders. Tell all the investors you’ve been talking to that you have another commitment. Build FOMO. Checks don’t give you permission to go back to building; they give you leverage to raise your round FASTER, so THEN you can go back to building.

3. If you just love building, maybe don’t raise capital. Raising money from angels and VCs is cool and helps you grow, but there are massive trade offs. If you naturally just aren’t interested in spending 20% of your time pitching and managing investors, just don’t raise anything to begin with.

4. If you like building AND truly want to build a massive company within 7-10 years, simply suck it up. Don’t follow the urge to take a check and return immediately to building. If you want to go big, look yourself in the mirror and tell yourself that you are going to hate the next 3-6 months of your working life, then talk to 20-60+ investors to get your round done anyway. Business shouldn’t be all fun. And I promise you, raising isn’t.

I write all of this because I wish I had this knowledge before starting Seedscout. I wish I knew the impact of taking checks as they come, and not being deliberate about it. Seedscout is still going but I made the decision to pause raising capital altogether until our momentum is so attractive that I can take my own advice and raise the next round all at once. Only time will tell if I actually follow my own advice, but this lesson has definitely reshaped my approach to fundraising.

You made it to the end! Not sure what to do now? May as well check out the LinkedIn Guild. At best, you learn LinkedIn growth skills and make friends who will dramatically change your business and professional life. At worst, you discover a cool new community platform and maybe find other groups on there that interest you.