Fundraising remains one of the toughest challenges for early-stage founders, yet many jump in without proper preparation. Knowing when you’re truly ready to raise, how to approach investors, and which signals matter most can be the difference between securing capital and facing rejection. Joel Guerrero, a VC investor with deep expertise across U.S. and European markets, shares practical insights on how to navigate the fundraising landscape successfully.
The pervasive misunderstanding of raising capital comes at a substantial cost that the vast majority of founders aren’t equipped to handle (or simply aren’t expecting). What founders expect to take only weeks ends up taking 6-9 months. All the while, runway is depleting, investors aren’t responding, and term sheets aren’t being presented. You finally get interest, but the terms don’t work. Joel Guerrero has watched this cycle repeat countless times from the investor side, and he’s got some straightforward thoughts on how founders can avoid the most common mistakes.
Deciding When Fundraising Truly Fits
“It depends on the vertical and what’s trending,” Guerrero says. “But the first question is: do people actually want what you’re building?” Real validation isn’t just having a product; it’s market behavior: sign-ups, waitlists, and prospective users asking when it launches. What doesn’t count is friends and family saying it’s a good idea.
But here’s where founders mess up. They think proof of concept alone means they should fundraise. “If raising now won’t move the needle, say a few hundred thousand, that doesn’t get you far. You’re better off building more traction first, then raising at a higher valuation to achieve something more significant.” he warns. The math has to work. Raising too little money actually hurts you. “A lot of startups actually succeed in raising capital, but too little, and then they don’t. Nine or ten months down the road, they’ve spent all the money, and haven’t developed much progress.”
Getting Investors to Pay Attention
Joel, like many other investors, uses a scorecard to evaluate potential opportunities. Knowing what investors are really looking for can make a huge difference. “It’s basically 12 metrics I’ve developed over my years investing, factors that explain why not just I, but most investors, would choose to back what you’re building.” The scorecard covers product status, team, market potential, and a defensible “secret sauce.” At the earliest stages,team quality and dynamics dominate: “If I believe in you, I know you can pivot when necessary and still succeed.”
Guerrero points out that execution always beats ideas. “Plenty of people have great ideas, but what matters is action. Some just sit and think, while others act.” He uses Uber and Lyft as an example: “Lyft actually existed before Uber under a different name, but Uber executed better. Even today, people say they’re ‘calling an Uber,’ even if they’re actually using Lyft.
Focusing on Realistic Valuations
Most founders stress about valuations too much. “When it comes to valuation, it really depends on market potential. I’m not someone who argues too much over the number—I believe in a ‘put your money where your mouth is’ approach. If you hit the goals in your business plan, great. If not, I usually work in a kicker on the deal to balance the downside.” Guerrero says. “Valuation is ultimately just a perception of what you think your company is worth. Instead of getting stuck fighting over numbers, do your homework. Look at comparable companies and see what they raised. You can use a traditional multiple or even a DCF approach-but the math has to line up with your funding needs,” Guerrero explains. “If you’re raising $5 million, a $10 million valuation doesn’t work, because investors aren’t going to take 50% of your company. At the early stage, most investors look for 7–12%, maybe up to 15% in the first round.”
Seeing How Investors Think
Here’s something most founders don’t realize. “Most of the time, fund managers are putting money into the fund, but the bulk of the money is coming from our investors. So yes, I have discretion over that capital, but I have someone I also need to report to,” Guerrero reveals. This changes how investors think about deals. “It’s not a good feeling when you pour a few million dollars into one company and it ends up dead in the water. I’ve done it. We’ve all done it. It happens.” His approach is hands-on. “I love being on the front lines. If you need a sales guy, I’m a sales guy. You need me to be your finance guy, I’ll jump in. If you need a lawyer, I know who to speak to.” Not all investors work this way, but the good ones do.
“The first thing that they should do is to understand that it’s actually difficult. Understand that the more NOs they get, the closer they are to a Yes,” Guerrero tells first-time founders. “If it was easy, everybody would raise money.” The approach matters more than most founders realize. “A lot of times people just go, hey, I have X, Y and Z give me $500,000 dollars.” That doesn’t work. “If it’s Monday morning and you send me some long email and I’m buried in emails, it’s unlikely I’m going to respond properly to your deal.” Think from the investor’s perspective. “Say, I’m building XYZ with super strong exit potential. I already have 1,000 users. This is a perfect fit for your portfolio because X, Y and Z, make it personal.”
Sometimes the best approach is asking for advice instead of money. “Hey, I’m doing this. We’re planning to raise some money. What do you think about our idea? Can you give me some advice?” This often leads to introductions even when the investor passes. Guerrero’s final piece of advice might be the most important: “If you get excited about the NOs, the YeSes will come naturally.” Most founders give up too early. The ones who succeed treat rejection as part of the process, not the end of it.
Connect with Joel Guerrero on LinkedIn to learn more about his insights on fundraising and the work he’s doing with Noch Ventures.
