In the first article in this series, I suggested that fundraising is often misunderstood. It looks like selling, but it isn’t. Selling is about building relationships to generate transactions. Fundraising is about executing a transaction that creates a long-term relationship. Confusing the two leads founders to optimize the wrong things.
This installment moves one step deeper. It focuses on asymmetry. By which I mean that in many negotiations, investors tend to enjoy some systemic advantages that compromise a founder’s ability to negotiate from a strong position. In other words, these fundamental asymmetries can rob founders of their leverage before real discussions even get started.
What’s interesting is that most founders actually don’t describe fundraising as unbalanced. They assume the imbalance is normal. Investors ask the questions. Investors set the pace. Investors decide when the next step happens. Founders respond. They prepare. They adjust.
That structure feels familiar. It resembles every environment in which founders have previously been evaluated—academic defenses, job interviews, performance reviews. You present your case. Someone else decides.
But the fact is that a funding round is NOT an exam. It is not a process in which one party evaluates the other. It is a negotiation in search of the formation of a partnership. And when founders unconsciously approach it as a performance rather than a negotiation, asymmetry doesn’t feel imposed. It feels appropriate.
Over time, that mindset produces real consequences. Small concessions early—tone, pacing, information flow, language—shape the balance of power long before a term sheet appears. By the time leverage becomes visible, much of it has already been shaped by patterns established at the beginning.
This article looks at how that asymmetry creeps in—quietly and incrementally—through habits that feel entirely reasonable at the time. In the next installment, I’ll turn to the practical question of leverage itself: where it actually lives in a fundraising process, and how founders can retain it without turning negotiation into confrontation.
For now, the goal is simply to make the invisible visible.
As I said, most founders, especially early in their careers, are used to being evaluated.
They have defended theses. Interviewed for jobs. Applied for promotions. Sat across from panels of people who held authority and rendered judgment. In those environments, the structure is clear. You present your work. You answer questions. You hope to pass.
Fundraising looks similar on the surface. There is a room. There is an audience. There are questions. There is judgment.
So founders slip into a familiar posture: perform well enough to be approved.
The problem is that a funding negotiation is not an exam. It is not an audition. It is not a promotion review. It is the formation of a partnership between two parties who BOTH have something at stake.
When founders unconsciously treat fundraising as performance rather than negotiation, asymmetry begins before anyone discusses terms. They over-prepare slides and under-prepare questions. They focus on being impressive rather than being discerning. They answer thoroughly, often offering more information than is really necessary (or wise) but they rarely interrogate assumptions in return.
And so, the tone shifts. The playing field begins to tilt.
Investors don’t have to impose imbalance. Founders often introduce it by assuming they are being evaluated rather than engaged.
This performance posture is reinforced by another assumption. Namely, that capital is uniquely scarce.
From a founder’s perspective, it often is. Runway shortens. Payroll dates approach. Customers delay decisions. Capital feels like oxygen. Without it, the company suffocates.
But capital is not the only scarce resource in the room.
Many founders don’t know, or don’t really appreciate that investors are entrusted with capital that must be deployed within defined timeframes. They have portfolio construction targets. They have limited partners who expect disciplined placement and eventual returns. An investor who fails to deploy capital effectively does not raise another fund.
That reality introduces a second scarcity: credible opportunities that fit a fund’s thesis, timing, and risk profile.
But founders tend to see only one side of this equation. They feel the scarcity of capital and internalize it. They rarely consider the scarcity of well-matched opportunities on the investor’s side. That perception shapes behavior. If capital feels rare and opportunity feels abundant, the founder behaves like a candidate competing for admission. Deference replaces discernment. Attention feels like validation rather than mutual exploration.
Once that tone is set, asymmetry deepens and the playing field tilts even more.
Another way in which founders unconsciously give away their leverage is to assume that every investor meeting must begin with a pitch. Slides go up. The story is delivered cleanly. Questions are answered thoroughly.
The reverse, on the other hand, hardly ever happens. Investors don’t expect to come with a presentation promoting their fund and founders rarely begin by asking the investor questions. How does this opportunity fit your current fund? What stage are you underwriting here? What typically prevents you from investing at this point? Who else internally needs to be convinced? What does your decision timeline realistically look like?
These are not only clarifying questions. The act of asking them establishes that the room is a two-way conversation. When founders don’t ask them, the interaction defaults to performance. The investor gathers information. The founder provides it. The investor questions it. The flow is unidirectional.
Over time, that pattern reinforces itself. The investor controls the agenda. The founder reacts to it. And again, the playing field tilts in favour of the investor.
Typically, the dynamic only continues if an investor expresses interest. At that point, the founder responds with a revised financial model. A deeper market analysis. Customer references. Technical documentation. Access to a data room—sometimes very early in the process.
Now, it is true that transparency builds trust. So, there is nothing inherently wrong with disclosure per se.
The issue is reciprocity and timing.
In a balanced negotiation, information and commitment tend to escalate together. As one side increases disclosure, the other increases clarity of intent. Signals strengthen on both sides. In an unbalanced process, disclosure escalates while commitment remains optional. Every time a founder discloses more proprietary information the investor learns more, but the founder merely commits more time – which tends to increase their commitment to the process even though the decision timeline remains undefined.
I once knew a lawyer—an excellent one—who specialized in dispute resolution. He had a simple maxim: he never gave anything up without asking for something in return. As he liked to say, even if it was just a bottle of water.
The point wasn’t pettiness. It was signaling.
If you asked him for something—an extension, a concession, a document—you were expected to offer something in exchange. Not because the negotiation was hostile, but because negotiation is built on exchange.
Fundraising rarely feels that way to founders.
An investor asks for deeper analysis. It’s delivered over the weekend. An investor asks for data room access. Access is granted. An investor asks for another call. The founder adjusts their schedule. The founder feels like this means the deal is advancing they begin to place more importance on it, they start to question whether they should be making compromises.
In fact, the investor has made no commitment and has offered not additional information upon which to help the founder calibrate their expectations. When asked to provide all of this information, founders do not typically ask for anything in return: What does this request indicate about your level of conviction? Who internally is sponsoring this? What would need to be true for you to move toward terms? How does this diligence step fit into your decision process?
When founders give information, time, and access without asking for clarity or commitment in return, they reinforce asymmetry. They teach the counterparty that escalation is unilateral and they convince themselves that a commitment has been implied – when it has not. And thus, more leverage is lost.
It is vital at this point to point out that small imbalances at the beginning of a negotiation rarely correct themselves later. Once leverage has been lost it is very hard to recover.
Finally, another subtle way founders concede leverage is by accepting investor language as objective. “Pre-seed”, “Seed”, “Series A”, “Market terms”, “Standard” clauses, terms and conditions. These phrases are used as though their meaning is universally understood. In practice, they often mean different things to different people.
When founders accept terminology without probing it, they accept the framing provided by the investor. And framing shapes negotiation. Founders often do this because they assume that the investor’s process is immutable.
They assume that it is normal and natural that the investor sets the timeline. That the investor dictates the next step and that the founder’s role is to wait for updates.
Now, some structures is unavoidable. Investors do have internal processes. But process itself is part of negotiation. But, when founders don’t probe the process, they lose insight, they lose agency and they lose leverage. Time stretches. Momentum becomes ambiguous. Optionality shifts quietly to the investor.
The irony is that founders often feel least powerful at the exact moment they have the most leverage—before a term sheet is signed.
Before commitment, both sides are deciding. After commitment, most structural decisions are locked in.
If founders enter fundraising in performance mode, convinced that capital is uniquely scarce and that they are being examined rather than engaged, they will behave accordingly. They will overshare. They will over-commit. They will accept framing. They will drift inside someone else’s process.
And asymmetry will not feel imposed. It will feel natural.
Thus, without even knowing it founders have lost much of their leverage before they ever enter what feels like “the negotiation” phase of the discussion. Their leverage has been conceded, quietly and incrementally, long before they need it – and as a result founders often feel that final terms are not actually negotiated – the are simply offered as a take it or leave it proposition.
This playing field is very difficult to level. The process and expectations are not only set by investors but by many of the founders own advisors at incubators and accelerators. But it does not have to work this way. Overcoming the systemic bias in the process is not for the faint of heart, but it can be done.
In the next installment we will talk about how to avoid making concessions before the negotiation even gets started.