Investor and Founder Strategies

How Startups Are Adapting in Today's Evolving Fundraising Environment

Startups today need to have a different approach to growth. In the past, early-stage investments were easier to come by, and having promising results meant investor attention. Now, startups must operate more like mature businesses to attract investment funds. Challenges vary by stage, but on the whole, market uncertainty is affecting founders' strategies, and technology is playing more of an important role in gaining traction.

Fundraising challenges for early-stage startups

Overall, nearly three-quarters of early-stage founders feel that the market is either more challenging or the same compared to last year. But, AI-based startups are less likely to feel that fundraising has been more challenging this past year.

The most pressing challenges for early-stage founders are related to more conservative VC funding and market uncertainty, competition between startups vying for funding, and access to investors.

"You need to have a CRM or some way to track [fundraising outreach],” suggests Arjun. “For the first three and a half years, I didn't have a CRM, I had spreadsheets and scattered docs. Then, I put everything in HubSpot and saved every single reason why [investors] passed. In fundraising, you only need a market of one."

When looking at challenges by funding stage, pre-seed and seed founders are more likely to have trouble reaching investors, whereas Series A and B founders are more likely to feel that market uncertainty has affected investor sentiment and funding availability.

75% of pre-seed and seed founders cite access to investors as their biggest fundraising challenge this year.

"Cold email has a bad rep in the industry, sadly, because for most cold emails out there nowadays, the bar is on the floor. If you implement some small changes, the return on investment is big,” shares Eva Dobrzanska, Managing Director of Fundraising Playbooks.

Early-stage fundraising strategies

For pre-seed and seed-stage startups, 23% of founders report that warm introductions are the most effective approach to fundraising, and it’s the most popular strategy among earlier-stage founders. “Most founders experience the pathway of relationship building and warming up over time, and reducing the uncertainty by becoming more familiar," Eva adds. And interestingly, startups using AI are much more likely to see success with cold outreach to investors and VC firms than those not using AI — within the startups that say that cold outreach is effective, 68% are AI-based, versus 32% that are not AI-based.

Across pre-seed, seed, Series A, and Series B startups, online platforms, like AngeList, are gaining interest and proving successful for fundraising. Around one in five early-stage startup founders find online platforms to be the best way to connect with investors.

"People told me the only way to get in front of a VC is a warm introduction. The problem with that for somebody like me is I don't come from a wealthy background. I didn't go to an A+ school. I don't have those connections. But I'm a damn good email writer and a good marketer. So I built my list and did my research and crafted emails. And I booked 20 first meetings with VCs from those cold emails."

Josh Garrison

VP of Content Marketing and Product Education, Apollo.io + Founder from Startups Scaling Smarter

"You're not going to build a relationship within one touchpoint of one email. Finish off your first outreach with a cliffhanger, then follow up with relevant updates. Then it becomes a line, not just a point. Be present on LinkedIn, attend conferences, and show up where your ideal investors are. You're going to be speaking to so many people and there are so many things to remember. A good CRM is paramount. People do business with people they like, and people invest in people they like."

Eva Dobrzanska

Managing Director, Fundraising Playbooks

Where are startups getting their funding?

At the pre-seed and seed stage, 56% of startups have received funding from friends and family, followed by around a third who have gotten funding from angel investors and VCs or CVCs (corporate venture capital firms). At Series A and B startups, the most common source of funding is angel investors, followed by friends and family, and VCs or CVCs.For all early-stage startups surveyed, the most useful metric for tracking the success of fundraising efforts is total funds raised. But while dollars raised is important, startups are also looking at other indicators of scalability and success. 72% of pre-seed or seed founders look at the percentage of total fundraising goal received, and 50% of Series A and B founders look at the average investment amount per investor.

A founder's fundraising journey from 2020 to 2024

"YC was our pre-seed, plus a couple of other micro funds and angels. We ended up raising about half a million over the course of that journey. Post YC was our seed round — we raised $3.5M. Following our seed round, our next milestone was to pass $1M ARR. We hit that milestone and raised our Series A led by Nexus Venture Partners, with participation from the YC Continuity Fund and some other incredible angels. Last year, we had the chance to collaborate more deeply with HubSpot and HubSpot Ventures provided a strategic check between rounds," shared Arjun.

How are startups measuring the success of fundraising efforts?

For all early-stage startups surveyed, the most useful metric for tracking the success of fundraising efforts is total funds raised. But while dollars raised is important, startups are also looking at other indicators of scalability and success. 72% of pre-seed or seed founders look at the percentage of total fundraising goal received; and 50% of Series A and B founders look at the average investment amount per investor.