Structuring Yourself for Fundraising

The Fundraising Chicken and Egg Problem

Fundraising sucks. Plain and simple. Right now most founders are staring down the barrel of a bear market, wading through an incredibly volatile economy and shaking hands with increasingly trigger happy investors. No matter what your circumstances are (yes you have to acknowledge them), fundraising takes more than just a pitch deck and a dream. It’s time to leverage every resource at your disposal.

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Spend Money with No Money to Make Money

Before diving headfirst into the world of fundraising, let’s address a very common, very obvious issue we like to refer to as the chicken and the egg problem. Let’s say you have a cutting-edge software solution. You need investors to fund its creation so that you can sell it to consumers (chicken), but investors need you to show traction before they are willing to fund its creation (egg). As you attempt to figure out which step comes first, your dreamboat of an idea is taking on water. So what do you do? Do you call grandma and have her clear out her 401 K so that you can pour all of it into a pitch-able prototype? No, because now all the money has been funneled into a prototype, and you don’t have enough left to pay for marketing that prototype to the right customers; AKA you have no way of showing traction. This is the hardest part. So let’s do things differently.

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Make Sure You’re Really in a Chicken and Egg

Sometimes it feels this way, that you need the fundraising to get the traction to get fundraising. That you need the prototype to market it and get sales and build the prototype. But actually, you might not be thinking lean enough.

At Lynx, we are very clear that we need to demonstrate Problem-Solution fit before building any technology. We define Problem-Solution Fit as: Real People Paying Real Money for a (Not Real) Product. This is the first way out of your pickle — can you ideate the leanest version of your solution to demonstrate traction? Can you sell a Figma? Can you sell a service version of your Software as a Service? Can you get a purchase order with a long enough lead on delivery to figure it out?

One of our advisors speaks often about the lessons he learned working as a BDR in a call center. He often repeats, that painted in massive letters on the wall overlooking the bullpen were the words:

THERE IS NO DEMO.

Get it?

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Make Sweaty Eggs

Let’s say that you have either achieved some lead validation on fit, or that you really do need some startup capital, to say, survive long enough to get there.

You’re still calling grandma and asking her for money, in fact you’re calling everyone you know and love and asking them for money. This is the most basic first step: reach out to your network. Now you have a little bit of runway, what matters is what you do with it.

Remember the two rules of venture?

Maybe you take your financing and build your prototype, but you are able to sweat your marketing. With a sweat equity agreement, a little goes a long way. Marketing gives you traction, and if not traction, marketing allows you to demonstrate that you will have a product that can sell to people, and demonstrate that there’s an interest to buy. Take the initial support that has fueled your early stages, and turn to angel investors. With an angel investor providing a more substantial financial injection, you have the runway to build a sellable product. Don’t stop here, a sellable product does not make you ready to pitch to a VC.

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Coupling Fundraising with Lynx: Putting the FUN back in Fundraising

This is a hard game. Each step is massive, and can feel impossible. Your most valuable strategy as a founder is to break down massive leaps into small actionable steps. The problem is absolutely not, make and sell an MVP. It is: Get anyone to sign an LOI. And then another. There is no demo.

The problem is not: Raise a seed round. It is, get a deal to get only the legal you absolutely need. The marketing you absolutely need.

Let’s do a little recap here: before you approach VCs—have validation. A robust marketing strategy showcases your brand, builds credibility, and sets the stage for successful fundraising. Remember, a compelling narrative backed by a solid marketing foundation can significantly enhance your fundraising prospects. Secondly, find a lawyer willing to sweat their services—someone who understands the nuances of startup engagements, intellectual property, and trademarks. This not only demonstrates legal savvy but also attracts better terms from investors looking for well-prepared, organized ventures.

Enter Lynx, your ally in the fundraising jungle. We connect you with marketing and legal services willing to sweat for you. We demystify the venture world, solve the chicken and egg problem, and empower you to raise funds by connecting you with resources that not only make your success accessible, but inevitable. Sweat the details, and watch your startup not just survive but thrive in the competitive world of fundraising.

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