Discrepancies of startup fundraising

So I’ve been working with the VC funds, accelerators and business angels networks in Eastern Europe, but also monitoring the deals around the world — thanks to AngelList, Crunchbase and other newsletters.

I’ve figured out some absolutely inconsistent specifics on the fundraising for the early to seed-stage startups. They just underpin the fact that the venture capital world has no rules and alignment, especially when it comes to the comparison of investing in the US, Europe, Eastern Europe and Asia. Plus, the difference between the domains of the startups — like, fintech, e-commerce, enterprise software, health tech etc.

As I’m now on the path to finding the angel for my edtech startup, I’ve decided to put together all my observations and open a discussion for my fellows in a try to warn other founders if they are just starting their funding marathon, and to open the discussion with the investors.

1/ Early stage startup - how early it should actually be?

When any organisation (VC fund, angel, accelerator, incubator…) talks about “early-stage founders”, they might mean at least 5 different stages of the company development or situations around it.

First - idea, like, really just an idea. When students or corporate company’s workers just come up with some idea and think “hey, many people can actually love this, so I will build it”. Then they create a presentation with plenty of assumptions, and submit it to a business incubator, or try to sell it to someone with money. The most ridiculous thing here is that sometimes the “brilliant” idea founders talk much more than those who’ve already done something to realise their ideas. They create so much buzz, get the media’s attention and then disappear as soon as they have to start working on something.

Second - idea which is supported by market validation. Comes from the expert in a particular field that seeks a solution to a real problem. They know it has potential, they might have created a prototype and people voted for it with their money. Yet still, it’s not a ready product and there’s no actual traction to show off. This is where the connection to people with money is most important. Or otherwise, it’s a no-go.

Third - idea that is supported by founders-seasonal entrepreneurs. It’s when nobody cares about the validity of the idea itself, and investors/clients blindly believe in the success of the experienced founder. Pretty disputable situation.

Fourth - not idea anymore, it’s a working product with first sales. A lot of work has been done on market validation, product development and customer acquisition. From here, founders know how to grow the company but don’t really have fantastic traction to demonstrate and make the investors chasing them.

Fifth - not just first sales but sales in 2–5 countries/regions. Or MRR of $10,000 and more. It’s when the founders don’t really need to fundraise, they are good without extra money. Most of the VC funds when talking about “early stage” startups are expecting the company to have this big progress. So it’s not really an “early stage” anymore, guys, it’s a working sellable product which you just want to get in and split the revenue, share the success. Why is this called “venture capital” I don’t understand. Any bank could give a credit to such a company because it can prove its profitability and mitigate any risks by itself.

Still, I don’t get, why calling it early if it doesn’t even need an investor?!

2/ Trends and hypes

When I received applications for the startup competition some time ago, I noticed a big number of companies saying they are “AI-based”. It’s a myth because they are usually based on a usual code, nothing related to computer vision, neural networks or NLP. For the next competition, I got decks stating they develop blockchain technology. OK.

Please, founders, stop confusing the terms, you’re either building a disruptive new technology (another ML algorithm or more transparent blockchain, or plant-based milk I don’t know), or you’re making a business using the existing technology, just a brand-new approach to make money, that’s it.

They say now that the biotech investment rounds are creating a bubble. I have the same question about tones of money poured into delivery apps. The venture world is shattering. Maybe because it’s not following the real problems.

On the other hand, when everybody is speaking about how important is now access to quality education for people to survive the pandemic, it’s hard to find any international program, accelerator, funding, or angels that are investing in edtech. Though I don’t think I have time to wait, so I’m building my edtech company right now, no matter what.

Trends, you know, they have 2 sides: either they are a hype which you can use for marketing purpose, or they are a good moment to do a specific business. Like, selling ice on a hot summer day. Currently, many companies build something based on the pandemic situation. Will they survive afterwards?

My startup will.

3. Competition

The favourite question now - why are you better than competitors?

Well, I’m just better :)

Is Nike better than Adidas?

If there’s SpaceX, why building Blue Origin and Virgin Galactic?

Or, OK, let’s move to my sphere, education. Is there only one university per city? Or one language school? Or one box section? No, there is a market for it, there are competitors, and the success of this or that business only depends on the deliverability, commitment and execution of the founders plus a team they hired.

I’ve been seeing leaders of various kinds, with ambitions and stamina, or just hollow ambitions. But any success demands hard work. This statement is more understandable for the founders from emerging markets. But, at the same time, they are the least trustable by investors. Why?

4. Founders

They say, if the startup is at its early stage, investors are investing in the founders. Is that so?

Yes but no. Usually, they also want to see market validation, working product, and first traction. Of course, founders still matter, but without a big showcase, you won’t sell it.

5. Bound with other platforms

This might be just a different approach from different investors.

If you’re building on a particular platform and are dependent on it (Shopify, Instagram, TikTop, Salesforce, Slack etc), some investors won’t like it and refuse to make a deal, while others will see the potential and shake hands with you right away.

Same with the niche markets, some of the funds are obsessed with specific niches and scout only for these types of solutions.

6. Execution

This point is big.

How can you prove you’re good at executing your job well?

I’ve been thinking about this a lot. I can only do this when I’m speaking about it, live. Until that, people should firstly see and read something. Only then comes the call or meeting.

The company metrics and traction might serve as a demonstration of the team execution. But! What if that is not really impossible for them to deliver the best possible results before they have secured the funding?

One can say, hey, but they are entrepreneurs and should just figure it out if they want to lead the business. Yes, true.

The worst part of this is when the founders that have more capacity (passive income, initial capital, family support etc) are using the situation at their benefit, and work at a laid-back pace because they can afford it. Not good.

7. Budget allocation

Product development or advertising?

I’m not going to the VC funds now. Not only because we’re too early for them. But because I know that if they put their big ticket into our business, they will control, demand, require and expect too much.

It’s better for my business to get just enough money to finetune the product, launch it, and pull clients in. I don’t want to spend a million dollars on Facebook advertising or email marketing (thank you, Masterclass, please, stop spamming me, I know that you closed a big round recently, better make your product outstanding, and I might consider buying it).

Bonus: Gender (well, of course)

Is it true that some founders are getting investment (quite big sums) even before they built a prototype, even if they are just graduates?

It will be true for male founders only. Yes, yes.

Because they don’t need to prove they’re worth it. They don’t have to go through these 9 circles of hell proving to everyone at every step that yes, you can. Gosh, just let me do it, I’m not even wearing a skirt!


There won’t be a summary here, and I might have been missed some other weird nuances of the venture world. Just drop in the comments what are they? And how do you think we could try to align the investment process between all the stakeholders?



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Alina Rozanova

Alina Rozanova

Founding Partner @ Titans Playground (TitansPlayground.com). Brand strategist, workflow designer, lecturer. Cofounder of an edtech platform.