I have written before, often, about the relationship between founders of small space companies and the investment community. The short version of my standard soapbox is that a lot of venture capital operates the way a trader operates in the public markets. The question that actually drives the decision isn’t “what is this company worth today, based on what it does and who trusts it?” It’s “what will the next buyer believe this company is worth, and how soon can I find that buyer?”
That’s a perfectly coherent way to make money.
But I have made the point repeatedly that it is also a model that is not at all well adapted to the space sector.
I’ve also written about how that model influences founders who take it on faith as the only model there is. I’ve sat in rooms where investors expressed open disappointment in a founder who was landing flight heritage opportunities and real customer traction — actual progress, by any sane measure — because that founder wasn’t spending enough time raising capital. Because in the world of venture capital, continuously raising capital is the established way to inflate a valuation. And an inflated valuation is what matters to venture fund’s limited partners.
I have also heard the term “lifestyle business” used as an insult to describe companies that were durable, profitable, and good to the people who worked there. But which were beneath the notice of VCs. Dismissed as being “not venture backable.”
I ran one of those companies myself, for the better part of a decade, and I’ve never been prouder of anything. So you can guess how I feel about the insult.
All of that is context, establishing my “reviewer’s tilt” as the saying goes. But what I want to spend this column on is something more hopeful, because I’ve started to believe there’s another way to raise capital that does not force a founder to accept bad odds and pitch harder.
And that is precisely because the standard venture fund is not the only source of capital available to startup companies. There is another kind of investor. There are fewer of them than the serial fund raisers, and they are not always easy to find. But they exist, and once you know what you’re looking for, you can find them — and more importantly, you can stop wasting your time trying to sell a product that VCs simply don’t want to buy.
If you want to know if you are talking to the right kind of investor, someone who is interested in what you do and not simply how much you can say you are worth, there is a simple test. It’s a single question, which is part of why I like it. The question is: is this person investing their own money? Or are they deploying capital that ultimately belongs to limited partners the founder will never meet, never talk to, and who are uninterested in what the founders are passionate about?
I would characterize the first group as “buyers.” They are the investors to find and to have detailed discussions with. When an investor is putting their own capital at risk or working alongside a tight group of people, they’ve built a track record with, their judgment is their own to exercise. They can afford to think in years. They can afford to be persuaded by flight heritage and customer trust rather than a valuation trajectory, and they can afford to seek investments that make an impact beyond financial return, because nobody above them is demanding a specific return by a specific date.
In short, they can choose to buy part of your company because they want to own part of it and to be part of the journey that you are on. You still must convince them that it makes financial sense to place their capital in your hands. But you don’t need to prove that you will make a billion dollars someday.
On the other hand, when an investor is a conduit for someone else’s money — especially when that someone else is a diffuse pool of LPs the founder will never have a relationship with — the transaction changes character. It stops being a conversation between two people trying to figure out if they should build something together, and it becomes a purely financial instrument. The founder isn’t really pitching the person across the table. They’re pitching a spreadsheet that person must justify to someone else, someone whose only stated interest is an internal rate of return.
Serial fundraisers are the clearest version of this problem. Someone who is constantly out raising, who doesn’t seem particular about whose money they take, is managing other people’s capital at a distance, under pressure to deploy it and show returns on a clock they didn’t set. That’s not a moral failing on their part. It’s just the structure. But it’s a structure founders should learn to see coming.
Because understand this. These investors do not want to own anything. They just want to trade what they have. Their entire business model is structurally incompatible with a space company that wants and needs to build reputation and trust and heritage to grow into a business in which employees, founders an shareholders are committed to the enterprise for the long term because they care much more about the difference they make than the money they earn.
I didn’t arrive at this from theory. I’ve watched dozens of founders raise money over the last several years, up close, and the pattern is about as clean as patterns in this business ever get. The founders who succeeded — who closed rounds with investors who stayed engaged, stayed patient, and turned into real partners — succeeded almost without exception because they’d found the right investor, or the right small community of investors
And it was not because they had a sharper pitch than everyone else. They spent more time, eventually, finding the right investors and pitching them on an opportunity that was attractive to both parties. They did not spend their time refining a single “pitch deck” that was supposed to be as attractive as possible to the broad mass of venture investors.
If you are a founder – or someone who advises them – this should change how you think about the fundraising process itself, and this is really the practical point I want to leave you with. The instinct, especially for a first-time founder, is to treat fundraising as a volume game — pitch everyone, take every meeting, assume that the law of large numbers will eventually produce a yes.
I understand the instinct. It feels like progress, and doing something always feels better than doing nothing. But if the discriminator I’ve just described is real — and I’ve become convinced that it is — then most of those pitches are wasted before they start.
You cannot out-pitch a structural mismatch. If the person across the table is managing someone else’s money at a distance, no version of your story is going to turn them into a patient, curiosity-driven partner. You’re solving the wrong problem, and solving it harder doesn’t help.
The better use of that same time and energy is to spend it finding out, before you ever get to a pitch, whether the investor or fund in front of you passes the test. Is this their own money? Is this a small group of partners with a history of investing together, who actually talk to each other about what they’re seeing? Those questions are answerable, often with a bit of research or a single well-placed conversation, well before you’re standing in front of them with a deck.
Once you know that an investor is genuinely interested in what they are buying, you have a chance to find out what excites them about owning a portion of a business. What kinds of opportunities are they really interested in? Can you offer them a chance to make a difference that is meaningful to them – while also making a decent return on their investment.
Don’t ask the question, – will you fund me? Ask the question – how can I help you accomplish something of value to you – with your capital and my talent, innovation and drive?
This isn’t going to make fundraising easy. The right investors are still a minority, and minorities take longer to find than majorities do. But “harder to find” is not the same as “not worth finding,” and every hour you spend chasing the wrong room is an hour you don’t spend finding the right one.
Find the buyers. Build something worthwhile together.
Let the traders trade with each other.