Foundamental | Power Play Principles | Master The Art Of Fundraising In Construction Tech

Power Play Principles | Master The Art Of Fundraising In Construction Tech

November 1, 2024

A VC insider reveals the exact fundraising formula for 2024: what actually moves investors, how to control the process, and why most founders get it wrong

Patric Hellermann

Power Play Principles | Master The Art Of Fundraising In Construction Tech

tl;dr

Founders must demonstrate 100x potential to align with VC fund economics

Information asymmetry and controlled disclosure are key tactical advantages

Market size matters less than market uniformity and repeatable execution

Social validation accelerates deals but relationship-building takes precedence

Team excellence trumps all other factors in early-stage investing

Speed and deadlines drive deal closure but shouldn't compromise partner selection

VCs lose money when they make too many assumptions. That's why we love market, team, and execution track record - the things we can control. Everything else is hope.

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Founders must demonstrate 100x potential to align with VC fund economics

We need to understand the fundamental economics driving venture capital before diving into fundraising tactics. VCs promise their investors massive returns, which means they can only invest in companies with genuine 100x potential. This isn't just about having a big exit - founders need to account for dilution along the way.

When evaluating if your startup has 100x potential, we consider three key variables: the eventual exit value, current valuation, and expected dilution through future rounds. Hardware-intensive businesses often struggle with VC fit because high dilution from capital requirements can make achieving 100x returns challenging.

This brings us to an essential metaphor: VC money is rocket fuel. We shouldn't put expensive rocket fuel in a Fiat 500. Some business models are better suited for alternative financing, and that's perfectly fine. The key is being honest about whether your venture truly needs and can effectively use venture capital.

Information asymmetry and controlled disclosure are key tactical advantages

We've discovered that information asymmetry is a founder's most powerful tool during fundraising. Counter-intuitively, limiting information flow often increases investor interest. VCs need to stay informed about deals in their space - they can literally get fired for missing important opportunities. By controlling information strategically, founders can maintain leverage.

This doesn't mean being secretive or playing games. We recommend freely sharing information that's publicly available or not easily replicable - team backgrounds, market perspectives, and high-level vision. But protect sensitive details about product, traction, and go-to-market strategy between fundraising rounds.

The exception? Your existing investors. They're already your partners and will be crucial validators for your next round. Keeping them fully informed and excited is essential. External investors will look to their signals as a key indicator.

Market size matters less than market uniformity and repeatable execution

We see many construction tech founders make a common mistake: citing massive but non-uniform market sizes. Claiming you're addressing a "$500 billion building materials market" isn't compelling. What matters is demonstrating a uniform market you can attack with consistent product and go-to-market motions.

A uniform market means you can use the same product and sales approach repeatedly without significant customization. We'd rather see a focused $5 billion opportunity you can systematically capture than a scattered $500 billion space requiring constant adaptation.

The ideal scenario? Own a billion-dollar niche initially as the dominant player, then expand from that strong foundation. Show investors how you'll execute methodically in your core market before discussing expansion opportunities.

Social validation accelerates deals but relationship-building takes precedence

We've learned that social validation significantly influences investment decisions, especially with less experienced investors. When multiple respected players show interest in a deal, it creates powerful momentum. However, this effect varies by investor seniority - more experienced partners require higher-quality validation from more prestigious sources.

Early-stage founders often make the mistake of constantly talking to investors between rounds. This rarely helps unless you're building something highly technical that requires deep investor education. Even then, maintain information asymmetry while focusing on relationship building.

The approach differs for growth-stage companies, who should maintain ongoing investor dialogue. But early-stage founders should concentrate on execution and save fundraising energy for concentrated periods. Quality of relationships matters more than quantity of conversations.

Team excellence trumps all other factors in early-stage investing

We can't overstate this: you cannot have too many rockstars on your team. Exceptional talent is the single most reliable predictor of fundraising success. A stellar team might raise at suboptimal terms if other factors are missing, but they'll always get funded.

What defines a rockstar varies by investor and context. Some focus on prestigious backgrounds, while others value demonstrated technical excellence and leadership experience. The key is authenticity - don't try to game the system by collecting resume logos. Focus on finding genuinely exceptional people who are the best at what you need.

Top talent often takes longer to recruit because they do more thorough diligence than VCs. They're betting their careers, not just money. We've seen the best hires take six months, with half that time spent on candidate diligence. First-time founders often rush to fill roles with average talent - resist this temptation.

Speed and deadlines drive deal closure but shouldn't compromise partner selection

We've observed that fundraising timelines have accelerated significantly. Strong seed rounds in Europe now close in two weeks versus four weeks in 2022. US rounds are similarly quick, while growth rounds, especially in Asia, can stretch for months.

Remember this fundamental truth: deadlines get deals done. They remove optionality and force decisions. But speed shouldn't come at the expense of finding the right partner. If optimizing for terms, speed works in your favor. If optimizing for partnership fit, which we strongly recommend for early stages, rushing can be counterproductive.

A failed fundraise doesn't mean keep pushing - that rarely works. Take yourself off the market, extend runway through other means if needed, and return in 6-12 months with improvements. The formula for success is simple but powerful: potential × validation × forced decision.