RAISING VENTURE CAPITAL: honest insights from UNICO’s experience

Raising Risk Capital for the first time and feeling like you don’t know what you’re doing?

Relax. Nobody really knows what they’re doing, even if they claim otherwise. Even doing it once doesn’t mean you suddenly understand it all. You don’t. If advisors tell you they do, they usually don’t either. Every case is different. The most important thing is understanding the founder’s story, and every story is unique.

Do you think at least venture capital funds know what they’re doing? Some do, but the majority, especially in less VC-mature regions like CEE, don’t. And the VC world is often fake and full of clichés. That doesn’t mean you have to play along. Authenticity still pays off, even if it sometimes feels like it doesn’t. Keep an open mind but stay true to yourself. It’s tempting to pitch your company the way investors and advisors nudge you to, but authenticity still matters.

We have assisted many startups with fundraising and many VCs with due diligence & startup assessments and even though every startup and founder is very much different, there are recurring issues and patterns. In this article, we try to go through the most common ones. However, there are two flaws with this article: we are simplifying a lot, and we are simplifying a lot. Technically, that’s the same flaw, but it felt important enough to mention it twice.

Business angel, VC or Private equity?

First, ask yourself whether you actually need an investor. Sometimes bootstrapping is better. When? When you don’t mind going slower and can fund growth from revenue. Or from public funding. But be careful: use public funding only when you already have product-market fit. Otherwise, you risk falling into the product–grant fit trap. You don’t want to become a grant zombie.

If you really need money, think about what you expect from the investor. Is it just capital? Or a partner? Or strategic value?

If you are looking for partnership and don’t need much cash (hundreds of thousands EUR), business angels can be a great option. But choose carefully. Hands-on does not mean a monthly strategy call. It means real work. And as with doctors or lawyers, there are good and bad business angels. Always check their track record and talk to founders they have worked with.

If you need more money (say around €1M) and are still early, you will likely look at venture capital (VC). Most VCs claim to be hands-on and strategic. Most are not. Expect money. If you get more, treat it as a bonus. And yes, there are exceptions, but hands-on VCs are like unicorns.

Remember that statistics are brutal. A typical #VC reviews around 2,000 pitch decks per year. That gives you seconds to make an impression. Warm introductions help. Meeting in person helps even more. Also, don’t forget: they are selecting you, but you are also selecting them. If they ghost you or repeatedly show up late, think carefully whether you want them in your cap table.

If you already have traction and are scaling, private equity (PE) might be an option. Bigger tickets, more willingness for partial cash-out (mostly impossible with VCs), and often real strategic value. But they expect maturity and scale. Or god-like charisma and exceptional potential.

Is the team ready?

Founders love talking about #technology. Investors care about the team first, especially in early stage. A charismatic and committed founder is a must. Two fully committed founders are better. Founders (co-owners) who are not committed are a major red flag. That’s dead equity. On contrary, the core team needs to be motivated (ESOP helps) and secured (in some cases, non-competes matter).

An overloaded or overprotective founder is also a red flag. Work must be distributed. And please don’t fake team members. It is always obvious. If some competence is missing, admit it and show how you will fix it.

One more thing that founders often underestimate: who actually employs and controls the team matters. If your key people are not directly tied to the company, or can be reassigned elsewhere, that is a serious risk for investors.

The key question is simple: does the investor believe that this team will really deliver?

Do we solve a real problem? And how big is it?

You know this one. Or at least you should. Still, many founders talk more about technology than about the problem. Love the problem and the solution, not the tech. When benchmarking, compare features that matter for solving the problem. Don’t say faster/cheaper/better without context. And validate the problem and solution with your potential clients, the earlier the better!

Explain your unfair advantage. Ideally, this is protected IP, unique know-how, or something very difficult to replicate. If your advantage is speed and execution, say it. It’s not ideal, but honesty is better than pretending you have a moat you don’t.

There are two key questions in this context investors care about:

·       How big is the problem you are solving (your real SOM)?

·       Where exactly (be specific!) are you positioned against competition?

A big market on a slide is not enough. Investors want to see where you realistically fit and why you can win.

How much are we raising and what is the valuation?

This ties directly to the type of investor. Don’t expect millions from angels or small tickets from private equity. You need a financial model, even if it’s imperfect. Keep it simple and in one place. Investors don’t want to hunt for numbers. Revenue growth is great. But investors also need to understand costs. If key expenses are hidden in external invoices or mixed with related-party transactions, it becomes very difficult to assess the real performance of the company. Clear cost structure and transparency are critical, especially when #scaling.

Valuations are not precise. They are expectations. There is not a right method how to calculate them. They depend on what you need, what you are willing to give up, and what investors can accept. You can estimate valuation using revenue projections and multiples, then adjust for risks (due-diligence-like analysis). Be honest about those risks. External, unbiased views help a lot. Ask for the valuation your investors first.

Also think ahead. If you expect another round in future, an inflated valuation now can kill your next deal. Investors need their multiples to work.

How important is intellectual property (IP)?

With deep-tech projects, you usually have some form of IP. Formally protected #IP (patents, trademarks, designs) is often an advantage, but not always. Even patents can be tricky. A national #patent (e.g. Czech) that cannot be extended internationally may become a disadvantage. It protects you locally, but since patents are public, anyone can copy you elsewhere. At least no one else can patent it, but that’s small comfort.

IP is not only about patents. It often includes know-how and trade secrets. If your business relies on unique know-how, how it is protected and shared matters. Having everything in the founder’s head is a risk, but sharing everything freely is not ideal either.

Most importantly, IP must be clearly owned by the company. If it sits with founders or third parties, it is a red flag. It may look the same, but it is not.

You should also be sure you are not infringing others’ rights. A proper Freedom-to-Operate analysis is essential. You don’t want to discover problems when your sales start scaling.

How does our cap table look like and what we promised to previous investors?

There is no perfect cap table. However, founders actively working in the company should hold meaningful shares. Too little ownership reduces motivation and makes further dilution difficult.

Institutional investors in the cap table can be a positive signal. But governance matters. The SHA should allow future investors to join without unnecessary complications. Convertible notes can complicate follow-up rounds, especially if multiple are outstanding. Sometimes the SHA needs renegotiation. Sometimes that alone kills the deal.

We need the money yesterday.

Too bad. You won’t get it yesterday. Not tomorrow. Not next week. Fundraising takes months. Even when everything looks agreed, it can still take a lot of time before money hits your account.

And especially in CEE, people often avoid saying “no” directly. You will hear a lot of positive feedback that does not lead to investment. A “great project with potential” does not mean a deal.

In the end, #fundraising is messy, imperfect, and often frustrating. There are patterns and common mistakes, but every case is different. The best you can do is be prepared, be honest with yourself, and fix the obvious red flags before someone else points them out.