For startup founders seeking their initial $1 million in seed funding, the idea of securing a $250 million Series D round might feel irrelevant or far off. However, several entrepreneurs and venture capitalists argue that founders should be planning for these larger, later-stage rounds right from the outset.
According to Aven’s co-founder and CEO Sadi Khan, who spoke at TechCrunch Disrupt, entrepreneurs should consider their future fundraising needs even before closing their first round. This approach helps them estimate the total capital required as their business expands.
“Our company is heavily reliant on capital; we offer asset-backed credit cards to individuals,” Khan explained. “To scale, we need significant funding, and continued growth will demand even more. From the very beginning, we recognized the importance of building a strong network of investors we could collaborate with over the long term.”
By understanding their capital needs early, founders can target suitable investors for their initial rounds while simultaneously nurturing connections with those who invest at later stages.
Lila Preston, who leads growth equity at Generation Investment Management, recommends that startups begin cultivating these relationships at least two years before they anticipate needing the funds.
Preston noted that starting these conversations early allows investors to become familiar with both the company and its industry, as well as observe its progress over time.
Some investors who focus on later rounds—such as Generation Investment Management, according to Preston—can contribute value to a startup well before making a formal investment, provided they see potential in the business.
“When we engage, even at Series A or B, we’ve already done our research so we can have a meaningful and productive discussion,” Preston said. “‘What are your key objectives?’ ‘How do you define success?’ If you, as the founder, can clearly communicate this, you’ll be able to demonstrate progress against your stated goals.”
Zeya Yang, a partner at IVP, agreed and pointed out that later-stage funding rounds are being completed faster than ever. Giving investors time to understand your business in advance is beneficial for everyone, Yang said.
“It’s definitely advantageous to connect with these investors earlier than you might think is necessary,” Yang commented. “When you’re actively fundraising, you’re already speaking with people you know, who are familiar with your business, and who you’re likely to work well with. So, planning ahead is certainly worthwhile.”
Yang also mentioned that when early-stage startups approach later-stage investors, they don’t need to disclose all their metrics right away. Instead, they can share their broader vision and the direction in which the company is heading.
Khan suggested that startups seeking late-stage investors should begin by leveraging their current cap table. Existing investors can introduce founders to other venture capitalists—his own early backers connected him with Khosla Ventures, who later led their Series E—who may be a good match or have previously collaborated successfully with those already on the cap table.
“At every stage of fundraising, we always considered who the next group of investors might be,” Khan shared. “We aimed to establish relationships in the previous round with investors who specialize in the next stage. Sometimes, we’d even let them participate with a small investment to start building that connection early.”
