For early-stage founders gearing up to raise their next (or first) institutional round of funding, understanding the nuances of the venture capital (VC) landscape is crucial. The process can be daunting, with many founders often rushing to secure funding without fully exploring their options or understanding the intricacies involved. 

This month, we spoke with Ronny Chatterjee, Head of Capital Markets at Companyon Ventures. A seasoned expert in the field, Ronny shares essential insights and strategies for founders to consider as they embark on their fundraising journey. 

Companyon Ventures has a proven track record, having supported several successful portfolio companies—Flex, Ziflow, and POSH—in their Series A rounds. Read on for our team’s tips to help founders achieve their funding goals. 

Q: What should every founder know before raising their first institutional round of funding? 

Ronny Chatterjee: I really encourage every founder to try and create a competitive process. A lot of times, early-stage founders are trying to secure funding quickly, and don’t have a lot of experience—so they might talk to one or two Venture Capital (VC) firms, and if they’re lucky, get one offer and take it. By casting a wider net and engaging with closer to 20 firms for example, you can find the best cultural match & secure more favorable terms. 

It’s also crucially important to get to know the VCs. Spend time developing relationships to get a feel for their investment style as people, determine whether or not they have the right expertise for you, and engage in the process early on. I’ve noticed across the portfolio that by taking the time to be methodical and thoughtful about developing relationships ahead of time, you can actually shorten the timeline it takes to raise the funds you need. 

If you do those things, you’ll be able to find a strategic partner with relevant expertise who really understands your business. 

Q: What does the typical process of raising funds look like, from start to finish? How long does it take? 

Ronny: Once you have that initial intro conversation with a VC, you typically want to have a few touchpoints and additional meetings to qualify whether or not there is a good mutual fit and assess the value each VC can offer. Only after this relationship-building phase, do I recommend founders share company metrics, forecasts, and preliminary customer intros VCs need to dive deeper in due diligence.

After this point and a formal pitch to the VC partnership, you’ll be in a position to receive a term sheet from VCs outlining the terms of the deal—round size, valuation, equity stake, board seats, anti-dilution provisions, major investor rights, etc. Once the term sheet is signed, the VC will want to complete post-term sheet confirmatory diligence such as the financials, product, tech, more customer calls, etc. All that’s left then is for your lawyers to draft the deal documents and close the deal.

The true end-to-end process—from meeting a VC and getting the deal done—often takes 6 months or more.

Companies should plan, on average, for a six-month process. Three of those months are really busy and hands-on, but again the other three are equally as important as that’s where you can spend the time really developing the right VC relationships. 

Q: Can you talk about the current state of VC funding, how it’s changed, and how you think it will look in the next few years? 

Ronny: The environment has certainly changed since the 2021 madness. Thanks to FOMO (Fear Of Missing Out), we saw rapid decision-making and unsustainable valuation multiples. 

Now, it’s really becoming a market of the haves and the have-nots. Your Tier One companies may still be able to raise really nice rounds of premium valuations, but the median companies are having a much harder time. Things are a lot more sober now in terms of the pricing environment. We’re seeing valuation multiples around 14x or 15x (of revenue run rate) at the high end and an average of 8-10x for good companies. Those days when you could talk to a founder and turn around an investment decision in a week or two for a 20x+ multiple are rare. 

I think the environment will be fairly consistent over the next twelve months. The emphasis on developing relationships, unit economics, and being more capital efficient is not going away. Previously, we saw investors revert to growth at all costs, with companies burning as much as was needed to produce the top-line revenue—I don’t believe that mentality is coming back. 

Before, it was all about growth, high growth. Now, I’m really using this term called high-quality growth because the way you grow matters a lot more than just the fact that you’re growing fast. 

Q: What support can Companyon offer to early-stage founders trying to reach their VC funding goals? 

Ronny: The founders that we work with at Companyon are typically blown away by the fact that my primary role at the firm is to be their fundraising concierge and help quarterback their efforts. As a founder, it can be really difficult—not to mention time-consuming—to sift through a flurry of VC outreach to find investors that are really worth the time. Companyon has a hefty Rolodex of 400 VC relationships that we engage with on a regular basis. Well before our CEOs are ready to raise their next round, we’ve already curated a qualified group of 15-20 VC or PE firms who are actively tracking the company and have expressed interest in competing for the next financing round. When you need access to capital, you can rely on us to set you up with not just intros, but the right kind of intros to streamline your process leading to better results. 

In terms of experience, we can help you ask VCs the right questions and keep a pulse on the market. We can keep our companies informed as the process’s criteria and goalposts are ever-moving. You would be hard-pressed to find another fund of our scale with an in-house Capital Markets capability. 

Key Takeaways:

1. Create a Competitive Process: Instead of quickly settling for the first offer, take the time to cast a wider net by engaging with multiple VC firms to secure more favorable terms.
2. Develop Relationships Early: Build relationships with VCs well in advance of your formal fundraising to understand their investment style and ensure they have the right expertise for your business.
3. Understand the Funding Timeline: Plan for a longer process, generally 6+, from start to finish. 
4. Adapt to Market Changes: Focus on “high-quality growth”—strong unit economics and capital efficiency.
5. Leverage Expert Support: Companyon acts as an extension of your team, providing valuable introductions and market insights. 

If you found this post informative, check out our blog for more insights into the fundraising landscape. Our team members have been there and lived to tell the tale—now we’re here to provide advice, guidance, and insider knowledge to the next generation of startup founders.