Venture Capital: The 5 Essential Fundraising Rules

Entrepreneurs are faced daily with so many unknowns, so much chaos and survival pressure.  Adding fundraising into the mix can often feel overwhelming. How do they keep their heads above this murky water and avoid the many obstacles that lurk below the surface? I’ve distilled out five rules that apply to all fundraising activities as a series of guiding principles.

1. Timing is everything.

Sharks can detect a drop of blood from a long way off. Investors can similarly detect fear from a distance and this can negatively impact their view on investing in your company. At worst they will walk away, at best they will command a much lower valuation and more onerous terms.

The worst time is when you have little capital left and a very high burn rate. It would be far better to close a fundraising round ahead of needing to increase your burn rate.

Similarly, putting your product out into an unprimed marketplace that ignores it or does not deliver the level of hockey stick growth you were wanting will send a negative signal to potential investors. It would be far better to raise capital so you can use it to generate the right level of publicity and interest in your product ahead of its release so that there is pent up demand for it.

2. Fundraising is not transactional.

Think of raising capital as a continuous process that starts when you launch your company and ends when you sell it.

Always be raising based on your continuum of growth needs. But never be raising at some juncture when it is critical that the funds come in or your business will falter, as per the point made above.

Also factor in that however long you thought it would take to close a round is probably only about half as long as it will actually take.

3. Funding marketplaces are cyclical.

Be aware that the climate for funding can shift markedly. At one moment there can be a funding frenzy with investors desperate to get into specific opportunity spaces. This will drive up valuations and give you a feeling that funding is easy, that you can demand better terms.

However, just as quickly the market will freeze over and it can become much harder to raise money either for a specific sector or overall.

Currently we are in the middle of a slowdown. The frenzy is over. Investors are taking their time doing due diligence and forming relationships before they ink deals. At this point you need more patience and to be more realistic on valuations than a few years ago.

4. Leverage funding inflection points.

Make sure you raise the right rounds of funding to match your position on the growth continuum.

And raise only enough to progress through the risk reduction you aim to achieve in that round. Too much funding may allow you to skirt through this risk reduction process and continue down a flawed pathway, building a delusional sinkhole that you cannot escape.

Continuously pare back on opportunities that present themselves to focus on core activities that progress you through each round’s inflection point.

Seed funding should be used to build a basic, but demonstrable validator for your hypotheses. Ideally this should be scalable – starting with a bare minimum validation but then progressively adding to it so that your product begins to approximate, but not reach product market fit. Remember to listen carefully to market feedback at this point and don’t power ahead into that delusional sinkhole when all the signs are there that your hypotheses are not being validated.

Series A funding is raised to get you to product market fit and the subsequent market traction that this enables. Investors prefer to come on board when they can see product market fit on the horizon as this allows them a more reasonable valuation than when customers are banging the door down to get to your product.

Series B funding is used to deliver scalable growth. You’ve built the rocket ship, you now need to scramble out of the growth engine room and into find the command console so you can steer your business into directionally correct territory that sets you up for the next round of funding.

Series C funding is perhaps the hardest round to raise as it is the real truth seeker. Up until now you could have relied on buzz to generate growth, but now you need to prove that you have the right unit economics in place to ensure sustained, profitable growth. This is a crucial time to be aware of that delusional sinkhole again. If you’ve raised too much money you could be plowing it into revenue growth and delaying the hard conversation you need to have around the economics of your unit growth. Revenue growth must convert into positive unit growth or you will sink your business as you expand it.

There are always exceptions, but raising outside of these inflection points is exponentially harder.

Coming back to the key point that timing is everything you should factor in about two years between each of these funding rounds. That gives you enough time to focus on growth for a full year before picking your head up for six months to raise the next round, while maintaining a six month contingency as a buffer.

5. Optimise your fundraising for success.

Does the investor or group of investors you are bringing into a round have what it takes to support you, over and above the capital infusion?

If you answer a resounding yes, then find an approximated win win deal and close the round. You could keep negotiating them down on deal terms or look elsewhere for a higher valuation, or a bigger named venture firm. But that would be a distraction. A financing deal is one moment in the growth continuum of your business. Keep your eyes on the prize: business success.

You are taking on a venture capital partner because you want to build a bigger business at an accelerated pace to what you could without their funding and guidance. Don’t over obsess about your equity stake. Think more about how much more you can grow your business with their involvement so that you all win, big. Keep that goal in mind and view each funding round as a mile-post on that journey. It is an important enabler, nothing more, nothing less.

By investor I refer to the sponsoring partner at a venture capital firm, not the firm itself. Your relationship with them is going to be a lifelong partnership, not a transactional, deal-based one-off interaction. Are you comfortable they would take your call at 3am in the morning or delay their Wednesday afternoon golf game to attend an emergency board meeting? Think of them as talent you are bringing onto your team. Talent you are prepared to take advice from and whose counsel you would trust implicitly.

I hope these rules assist you in your capital raising endeavors and provide you with much needed perspective to view funding as a part of your growth journey.


This post was initially sent as part of the EXOscalr BeFierce newsletter. If you want to receive it directly  you can subscribe here:

A World Leading Entrepreneur Growth Program for Leaders

EXOscalr is proud to launch its world leading Entrepreneur Growth Program, which is designed to provide early to mid stage companies invaluable insights into achieving high growth.

The Program runs over 6 weeks and gives senior executives practical advice, algorithms and methodologies that will significantly boost the velocity of their growth.

Announcing the Program, EXOscalr CEO Rand Leeb-du Toit said, “Growth is the perennial focus for business leaders. Yet it is often misunderstood and mismanaged. The Entrepreneur Growth Program dispels the myths and delivers an unfair competitive advantage.”

“This advantage firstly delivers the impetus for growth through a suite of tools designed to achieve a growth boost and secondly, delivers methods for harnessing the ensuing chaos and ensuring it is directionally correct.”

The Program is available to companies globally and brings cutting edge insights from leading high growth organisations, in Silicon Valley and internationally, directly to entrepreneurs and business executives.

In addition, EXOscalr is releasing its 2016 Growth Report which highlights the 10 facets for driving business growth and how to create a concerted front strategy and business-wide operating system for achieving the levels of growth only seen by leading companies.

“Growth is not all lead generation and pitching. There is a much wider set of activities that must be undertaken by dedicated growth groups working across a business. Anything less is tantamount to stagnation in today’s dynamic business environment,” said Mr Leeb-du Toit.

The Growth Report explores what a dedicated growth group should consist of and also what to look for when hiring the right people for it.

The Report can be downloaded from the EXOscalr website and expressions of interest in the Entrepreneur Growth Program can be made directly to Mr Leeb-du Toit via email:

EXOscalr Announces Support For Early Stage Entrepreneurs

At EXOscalr we want to support the next generation of entrepreneurs and are offering a limited number of slots for early stage entrepreneurs to work with us.

As part of our support, we will significantly reduce our rates for one on one coaching with entrepreneurs and will also work with peer groups made up of a maximum of 3 synergistic entrepreneurs.

To qualify your current business must be pre-Series A funding. You could be anywhere on the spectrum between exiting your current role to do a start up through to being close to raising your Series A venture capital round. Our logic is that Series A is enough of an inflection point for us to have a full business conversation that doesn’t necessarily require EXOscalr subsidising you by reducing our fees.

EXOscalr is a strategy, growth and wisdom coaching company. We help CEOs and their teams deal with the internal entrepreneurship rollercoaster, supporting the growth they need to exponentially improve their performance and their life.

Ping to find out more about the opportunity to work with us.

How to Increase Your Capability for Consistently Achieving Exponential Growth


Think about all the vagaries of running a high-technology venture – as executive leaders you need to be setting the vision, formulating strategies for success and operationally attracting and retaining top-level talent, leading and managing teams, sourcing and deploying scarce resources and negotiating ongoing funding rounds, all while building a sustainable platform and compelling products.

Some CEOs and executive leaders have an innate ability to juggle all these balls, keeping them up in the air and constantly moving their business forward. But for every one such person they are 10 others who become increasingly overwhelmed by the level of chaos that surrounds them.

How can you ensure that across your business, or if you are a venture capitalist across your portfolio, there is a constant capability to harness this chaos and turn it into a proactive force for directionally-correct and exponential growth?

At EXOscalr our mantra is:

No plan, No progress

We have developed a comprehensive Exponential Growth Engine & Operating System designed to support a company and a portfolio of companies in executing and operating at optimal efficiency and performance levels, both individually, as a company and as a portfolio.

The Exponential Growth Engine consists of a set of growth levers, algorithms and methodologies for consistently achieving greater scale. The first step is putting in place a bespoke Exponential Growth Engine for each company and then constantly applying granular methodologies for measuring, monitoring and progressing their rate and direction of growth.

The second step is implementing a companywide, team and individualOperating System (this can be applied consistently across a portfolio as well) that is comprised of three core parts:
1. planning – a cascading set of directionally correct personal and business activities,
2. data – methods for ongoing monitoring and the production of rich data,
3. progress – data-driven refinement designed to keep people, teams, companies and portfolios directionally correct to their overall goals.

Our data points show that such a complex system approach greatly enhances and significantly increases collective capability for achieving high levels of growth.

Chase Your Impossible: An Interview with Rand Leeb-du Toit



Here is my recent podcast interview with Anthony Kirby on his show, Chase Your Impossible.

We discuss near death experiences, venture capital, Silicon Valley, corporate life, listening to your soul voice and a whole lot more.

As Anthony says, “It’s a jam packed 1hr of content filled with nuggets of gold. Listen to the words to live by at the end of the show – they’ll move your soul.”


Should You Become an Angel or Venture Capitalist? Transitioning from Operational Executive to Portfolio Player


Leading executives can become totally focused on their operational role. Yet at some point, a trigger results in them losing their mojo for working in one business. What type of role is better suited to their next phase in life?

I posit that it is a meaningful transition for them to coach entrepreneurs and manage a portfolio of startup investments.

I’d like to illustrate my hypothesis by exploring two case studies.

Finding His Creative Mojo: From Ad Agency to Angel

David is a successful CEO of a world leading advertising agency. He has been focused for the last 12 years on growing the business, its reputation and its people. When he first approached me he felt that something wasn’t quite right. he had used an executive coach for many years, so understood the paradigm. Yet he realized that he needed to work more with a transformational coach. A coach who not only understood the business landscape, but also had firsthand knowledge and understanding of and empathy with people going through a transformational journey.

He loved to sing in the shower, especially on mornings before a big pitch, or when he was traveling on business. But he found himself no longer singing. This was the initial signpost for him to realize that it was time for him to go on a different journey. Many people ignore these early warning signals until it’s too late for them to change.

We spent our initial time together exploring what had excited him before. We delved into what areas he most feared. We explored if there were deep, unresolved issues that could stand in the way of him making a transformational shift. It is always best to work through such issues in the early phases of a transformation. They may cause blockages in your ability to perform. They could also act as blinkers to you discovering what you find purposeful.

We started the process of getting him to hear his inner voice. It had been suppressed for many years by his ego. This voice is always there in every one of us. We may suppress it to the point were it is so faint that we cannot hear it. What we were looking for from his inner voice was a deeper understanding of what resonated for David. What was his true soul work? In his 20s, he had worked with some start up companies on their market positioning. He had also been active in creating a technology spin out from his advertising agency.

He came to the realization that it was time for him to move on from running the operational, day-to-day side of his agency. It was time for him to get back into the world of creating. At his core he was a creative, which is why he had been so successful in the advertising arena. In particular, though, it was time for David to move deeper into the world of startups. Meaning and purpose for him was about building companies that were making a difference in the world.

This was never going to be a binary process, with him being an operational executive one day and a startup portfolio player the next. We had set that expectation early on. He knew it was a significant journey. It would have many moments: some positive, some negative.

A thought leadership position can benefit the move from operational CEO to Non Executive Chairman. David had no interest in writing books, but was keen to do outreach activities. He joined the board of a not-for-profit organization in the medical health arena. He was invited to be be a regular on a well-known, news-related television show. This significantly raised his profile. He took two further board seats of large companies. This positioning helped him make the mindset shift from single focus to portfolio player. It also ensured the right circles noticed when he made the announcement of his transition to Chairman and startups.

The next transition activity was a robust succession plan within the advertising agency. He identified two executives who had the skill set, drive and passion to step up into joint CEO roles. They were both positive about taking over the operational aspects of the agency. They began working with executive coaches to assist them in this process. David also began the discussion with his Chairman about his decision. They mapped out a plan for him to transition into the role of Non Executive Chairman within 24 months. The Chairman volunteered to take a less active board role.

We then began exploring the role that David should play within the start up space. He didn’t want to take on a CEO or other operational role in any one company. Instead he wanted to build a portfolio, working closely with startup CEOs as a coach. He wanted to ask the hard questions. He wanted to accelerate their growth and keep them on track as they scaled up. He preference was to invest into these companies, rather than consult to them. Their upside would be his upside.

He was comfortable working as an independent agent, as a lone wolf. Although he could see the benefit of teaming up with other investors when it made sense. He was suited to becoming an angel investor. He had significant net wealth at that point. His financial investment portfolio was diversified and included properties and blue-chip stocks. He could afford to allocate a few million dollars towards his initial startup portfolio. He was also of the mind that this was risk capital. He wanted to deploy his capital into companies taking bigger risks that had above average goals. He was mentally prepared for the fact that he may not receive a positive return on investment from this activity. It was to be a learning experience.

We worked closely on how to place him within the entrepreneurial ecosystem. He began to get a feel for how he could determine whether a startup was worth looking at closer. He crystallized his Investment Charter. This set out his strategy for the kinds of companies, types of technologies, geographical preferences, stages of development and many other factors that assisted him make investment decisions. The aim was to ensure he was targeting the right kinds of businesses that could deliver him significant return on investment.

As he started doing meetings and due diligence on potential investee companies, we continued with his education in this area. The aim was to make sure that he was not making emotional investment decisions. It was also to ensure that he was able to draw on his significant business experience. He became comfortable that he could add significant value to the companies that he chose to invest in. He wasn’t keen to join a formal angel group. Nor did he want to become part of the herd that chased investments at pitch competitions.

Some of the companies that he was targeting already had angels circling them. In some cases he had a meeting of the minds with these investors. This was one way he was able to start growing a network of angels he was comfortable to invest with. He also reached out to senior executives were either already active, or wanted to get active, as angel investors. Within a matter of months he had four different informal networks that he was teaming up with.

David went on a three year journey from operational CEO to having a portfolio of board seats and angel investments. He has not only found his inner voice but is also singing in the shower again.

Adventure Capital: A Venture Guy’s Journey

Tom was the CEO of a large communications service provider. He had been in this role for six years, having worked his way there from inside the organization.

Similar to David, he reached a point where he no longer saw colors. Tom’s world became black and white. He approached me with the realization that he needed to make some significant changes in his life. He had worked with an executive coach for a number of years and so understood the power of coaching.

He wanted to explore how best he could get excitement back into his life. He had also become enamored with the entrepreneurial fervor that was sweeping the world. He initially sat on the investment committee of his company’s corporate venture capital group. He found that he enjoyed spending time with their investee companies.

His company had already created a succession plan and there was no need for us to revisit that. He was also well known in the business arena. He had a high profile thought leadership position that we could leverage. We could move forward at a fast pace.

Tom decided to make a clean break from his company. We explored the best positioning for him within the entrepreneurial ecosystem. He didn’t want to operate as a lone wolf. He was more comfortable being part of a formal group that had significant track record and a brand name. He preferred to work with a group of partners from whom he could learn the ropes.

Through his corporate venture capital exposure he realized that he didn’t want to work with very early stage companies. He found this time in a company’s development frustrating. He was well suited to work with companies that had already reached product market fit and were experiencing rocket ship growth. For example, startup companies that were about to receive a significant Series A investment.

It became evident that the best place for him to play would be as a partner in a venture capital firm. He had discussions with venture firms that his company had done deals with. He got on well with some partners of these firms. He started receiving offers from VC firms. He chose to join a well-known firm. They were raising a new fund. This meant he could both participate as a limited partner in the fund and as one of the general partners deploying the capital they raised.

I continue to coach him in his position as a VC. There are many VC nuances he is finding a deeper understanding of – for example,

* the healthy tension between being an individual VC and a partner within a partnership;

* the potential for conflict between a venture guy and their investment companies.

* how best to coach portfolio CEOs – what kinds of questions he should be asking, what signs he should be looking for that they are on target and on track both operationally and emotionally.

Both David and Tom have not only stepped up through their transformations. They have also proven the power of having a virtuous circle by referring some of their portfolio CEOs to me and some of their former colleagues have also expressed interest in coaching.


1. Be aware of trigger signs that a transition is imminent. You may miss the signs and find yourself in a trough – it is significantly harder to catalyse a transformation the deeper you fall into a trough. Heeding the signs earlier is better. This ensures there is no urgency to your transformation journey.

2. Be prepared for significant change. Transformation is never linear and this organic journey may take you places you didn’t initially imagine. Go with that flow.

3. Be prepared to listen to your inner voice. You may have a tussle with your ego not wanting to let go. Eventually your inner voice will win out.

4. The world of startups is not for everyone. Nor is being an entrepreneurial investor. Go there for the right reasons – it resonates deeply with you, you enjoy creativity, you have the right risk appetite and profile. Don’t go there because you’ve read in a business or in-flight magazine how hot startups are or how much money you could make in the space.

5. Don’t burn bridges. Once you’ve made your mind up to transition, do so gracefully. Ensure the right succession plan is in place. Leverage your current position to create your thought leadership position. This will ensure you optimize your transformation trajectory. You already have a solid network in place, they want to help.

[Note: Names and situations have been altered for confidentiality reasons]

Finding Your Soul Work: A Journey from Near Death to Nirvana

EXO1Rewind back to early 2014 and I was enjoying working for the world’s leading research and advisory firm as an executive leadership and innovation analyst. I spent my days flying around the world advising Fortune 500 Boards, CEOs and CxOs on growth, leadership and disruptive innovation.

On a Sunday night, mid-February, I’d prepped for an international flight in the morning and then…I dropped dead from a sudden cardiac arrest. I was able to revive myself, but was in a state of conscious ventricular tachycardia, a severely life threatening condition in which the heart beats at an extremely rapid rate.  I was rushed to hospital and spent several weeks undergoing a number of surgeries and also had a mini stroke, which was terrifying. I’ve detailed my health journey over this time (here and here), but in summary after an initially positive response my health deteriorated from mid 2014 leading to a further operation in December. Since then my health has improved dramatically.

Coming out of hospital for the first time in March 2014, I felt extremely grateful for being alive, for breathing fresh air and I saw the world through fresh eyes. I felt at the time that I had to make use of this opportunity to do something world changing. How could resuming the status quo be sufficient?

As Joseph Campbell puts it, “Only birth can conquer death – the birth, not of the old thing again, but of something new.

But what was it that I would do that was new? As the months passed, I spoke with many people, considered diving into a few opportunities and also went back to my work as an analyst. I realized that I’d been given a very rare second chance at life and to honour that I needed to do more than what I had been doing. I also realised that what I did had to resonate within me, deeply.

Steve Jobs explains this so eloquently, “Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.”

Even though I had some very trying times over the course of 2014, I was enthused by the journey I’d embarked on to search for my soul work, my calling. I came to realise that during my time as a VC and previously as a coach, I found most joy in helping great people transform themselves into being extraordinarily great – asking the right questions, guiding them to make the right decisions and acting as a trusted advisor. In this regard the role of a VC and a coach are very similar. As Roelof Botha of Sequoia Capital points out, the role of a VC is to help entrepreneurs navigate and solve problems on their own, to provide perspective and ask the right questions, and to provide frameworks for decision-making.

And so I’m super excited to announce that I’ve left my high flying analyst role and set up EXOscalr, the elite performance and transformational coaching and advisory firm. Our moonshot is to help create $1 trillion in value over the next ten years while also positively impacting 2 billion people. To achieve this goal we are working with entrepreneurs and leaders who have the capability to build exponentially scalable or exoscale companies, leaders who we can guide through a transformation into elite performers.

I invite you to join me on this journey.

Raising Capital: How To Prepare The Perfect Pitch

I’ve sat on both sides of the table countless times in the fundraising process. I’ve seen some great pitches and I’ve seen some terrible ones. My highlight was doing a pitch to a venture firm in Steve Jobs old boardroom in Cupertino. One thing is constant in the world of pitching – everyone has an opinion on what makes the perfect pitch.

The guys at Incubate are hard at work preparing for their Demo Day later this month and my recommendation to them and to anyone else getting ready to pitch is to watch this video by Nathan Gold. He walks through a solid, yet simple deck of slides and gives great advice on how to pitch as well:



Here is the deck of slides Nathan refers to:



Incubate: Driving Campus-wide Entrepreneurship

I’ve been advising the Student Union at The University of Sydney on the setup of Incubate, a campus-wide startup development program. This initiative is designed to assist students get their ventures off the ground and will commence over the summer.

The launch event for Incubate is taking place at 5h30pm on the 20th September  in the foyer of the New Law Building on the Darlington campus. I’ll be chairing a panel on the innovation shift from Silicon Valley to other global centres. Panelists include Matt Barrie (Freelancer), Nikki Durkin (99dresses) and Matt Byrne (Curicon).

Come on over – it will be a fun event.