Failure to Execute vs Failure to Raise

14 for 14. Homebrew’s first fund (2013–2015) has 20 core investments of which 14 went market for a Series A. All 14 successfully completed this fundraise. The six who didn’t go out for a Series A either (a) shutdown/acquihired prior to this milestone [founder disagreement; lack of product traction], (b) exited due to an early M&A opportunity or © in one case, is currently an ongoing concern that hasn’t needed to raise additional capital.

I was thinking about this stat last month while preparing a slide deck for our annual LP meeting. As an industry we often say a startup “failed to raise” when a funding round doesn’t come together and while it’s factually correct, in some ways it strikes me as a downstream implication of a core issue: they didn’t fail to raise, they failed to execute. The company most likely did not accomplish the milestones required to move their business forward. The lack of a funding event was merely the endcap, not the cause.

Why do I raise this distinction? Because as an early stage lead investor one of our responsibilities is to help a company think through its strategy and provide feedback on the pace and quality of execution. If you’re executing well against the right strategy, funding will follow. Yes there’s a funding process and helping founders navigate that successfully is a key part of a venture investor’s value, but a CEO shouldn’t rely on “failing to execute but successfully raising” (even though this happens too).

So it makes me happy to look back and see so many Fund I companies who successfully executed in their early years. On the flip side, we had one team which “successfully executed but failed to raise” during a post-Series A fundraise. I still think about this one a lot because they did their job and the market just turned on them in ways they couldn’t fully control. While their execution wasn’t flawless it felt more than sufficient to get a round done. They “failed to raise” but we’d back that CEO again and again and again.

If you’re worried about fundraising, first worry about executing — and feedback on whether you’re executing on the right things. For the most part that’s under your control and it’s, in my experience, rare for a company that’s executing well to fail to raise a Series A.