YC Founders Made These Fundraising Mistakes

A YC founder contrasts a startup that was not growing, where 140 investor conversations produced two angel checks, with a growing startup that raised its seed round in one week. Michael says having a demo, product, or MVP with customers usually gives founders more leverage. Dalton argues that fundraising before testing a product can come from fear that customers will reject it.

Dalton says founders can mistakenly treat investors like teachers whose approval they need to earn. He suggests directing that energy toward customers and their problems instead. As a practical check, he recommends tracking time spent talking with customers and building product: 80 to 90 percent of waking work time suggests a healthy focus, while 20 percent suggests a problem.

A founder advises raising only the amount needed and staying lean. Dalton compares money to food rather than oxygen: companies need resources, but too much can cause problems. He says customer revenue and demand can sustain growth, while having fewer resources can push a company to innovate.

Dalton points to Facebook’s early advertising revenue and Google’s popularity before its first funding as examples of companies that were not desperate for cash. He argues that strong traction can lead to better fundraising terms and greater founder ownership. He also encourages founders to learn from companies with substantial revenue, rather than comparing themselves only with startups that have high valuations.