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).