A fascinating aspect of our work at Duet is the opportunity to observe founder behaviour. One of our recent studies compared the ‘state of investment readiness’ of first-time founders to serial founders, as they prepared for funding rounds. Perhaps unsurprisingly - given their additional experience - serial founders consistently scored higher. But the real insights came from discovering WHY they scored more highly.

Over the past 14 years we have advised almost 60 founders across a range of funding stages, from pre-Seed to Series B. Two thirds of this portfolio have been first-time founders, the balance being made up of serial founders with one or more startups already behind them.

One of our core services at Duet is 'Investment Analysis'. This is an investment preparation project that examines, amongst other things, the calibre of the investment proposition. One of the main outputs is a scorecard, very similar to what VC funds use in Investment Committee meetings when making their final investment decision. This grades 12 critical elements of the investment proposition.

In our study, undertaken to inform the development of our new founder/CEO coaching service, 'Founder to Funder', serial founders consistently delivered higher ranking scorecards during Investment Analysis. They were in a more advanced state of readiness for each funding round. We were keen to discover if serial founders possessed any common attributes that gave them this edge. If so, could these insights help first-time founders looking for a leg-up on the fundraising ladder?


How serial founders leverage their experience

By undertaking a qualitative review of dozens of Investment Analysis projects, we discovered 3 areas where serial founders most effectively leverage their experience throughout each fundraising cycle:

1. CLEAR VISION
   • They possess a strong vision of the economic outcome they are seeking. For example, they often have a figure in their head for what economic success will look like. First time founders rarely have this.
   • They often have a clear mental roadmap of the major milestones that will get them there. This is less of a voyage of discovery, more of a mission to get to a destination.
   • They know what to narrow in on to achieve the outcomes they are striving for, and what to ignore. They are imbued with a clearer understanding of not just what to do, but what NOT to do in the pursuit of enterprise value creation.

[Note that the anticipated outcome and associated roadmap evolves over time. It can change considerably during the early life of the startup. But at any given point in time, serial founders usually have an unequivocal view of both.]

2. VALUE CREATION
   • Serial founders focus relentlessly on how the business model will maximise enterprise value creation, not just how it will delight customers. They are more decisive when the big moments come and trust their gut as much as the data.
   • They align the business model with the major milestones of value creation to create irresistible funding propositions at intervals along the way.
   • Crucially, they understand where startups can unwittingly destroy value and even make themselves unfundable.
     
     
3. INVESTOR RELATIONSHIPS
   • They have a deeper understanding of what investors truly care about, the shape of deals they seek, and how this varies by investor type, industry, and market conditions.
   • They are more cognisant of how these relationships play out over time, especially when things don't go according to plan.
   • As a result, they are more savvy in managing these relationships, especially in the context of the board and the rights they are willing to give to investors at each round.

An overall observation is that serial founders think of funding not as an event but as a continuum. They are not just contemplating the forthcoming round but also the one after that. They are anticipating all the reasons someone might not invest - as well as why they would - and they are doing this from the earliest moments.

As a result, they arrive at each funding preparation step at a more advanced stage of readiness. This speeds up the process of finalising the funding strategy, progressing to the campaign, and then executing the campaign itself.

In summary, serial founders use their experience to buy time. They use this time to focus on their primary mission: growing enterprise value.

The reason more than 80% of startups fail is not because they run out of money, but because they run out of time.


Supporting first-time founders

In contrast to their serial founder peers, first-time founders are still learning about the funding landscape. This often puts them at a disadvantage when they begin the process of raising capital.

This is most noticeable during investment preparation. They often arrive at this point in a less advanced state of readiness. As a result, they take longer to resolve shortcomings identified during Investment Analysis. There is just more to do. This can delay the campaign start, sometimes by months. If the cash runway then gets squeezed, this can put the company in peril - or at the very least put it at the mercy of current investors.

In addition, we notice that post investment, first-time founder/investor relationships often tend to progress with greater uncertainty. There might appear to be a close alignment of interests at the outset but when problems start to occur (which they always do) and the value creation plan falters, these interests can quickly diverge. Relationships become strained, the Board starts to resemble a bear pit, and the founder starts to lose control.

All of this increases founder anxiety and raises the fear of failure. In a recent study, the main source of stress cited by startup founders was the ability to fundraise.

These insights have enabled us to think differently about how we support first-time founders. To boost their all-round capability as a startup fundraiser we have introduced a new coaching program: 'Founder to Funder'.

Founder to Funder is specifically designed to accelerate the effectiveness of first-time founder/CEOs as they move through the early phases of the capital-raising journey. The program is centred around 3 core topics, based on the key attributes of experienced founders, highlighted above:

1. Clear Vision
2. Value Creation
3. Investor Relationships

By focusing on these 3 topics, our aim is to enable first-time founders to:

• Be just as savvy in the art of capital raising and investor management as their serial founder counterparts.
  
• Be at a more advanced stage of readiness when starting the preparation work for early funding rounds (pre Seed, Seed, Series A). This will help accelerate investment preparation and enable them to move swiftly into the funding campaign with a higher degree of confidence that they will attract investment.
  
• Be more effective at managing the board and key investor relationships through each milestone on the startup to scaleup journey, by better understanding the investor mindset.
  
• Reduce their overall stress levels.

Coaching Framework

Founder to Funder distils the best habits of serial founders into a framework based on the 3 core topics. We have bottled years of experience and know-how so this framework provides a solid structure for both learning and application.

In particular, each topic or module contains a wealth of insight that helps founders see the world from an investor's - not just a customer's - perspective:

Clear Vision - How to develop a strong vision of the economic outcome and a mental roadmap of the key milestones to get there.

Value Creation - How to develop the business model for value creation and funding alignment. This is in the context of how the company goes to market in its entirety (not just the transaction type) and how it builds enterprise value with each funding round.

Investor Relationships - How to better understand the investor mindset and the management of expectations. This covers: Capital-raising strategies. Managing the transition from private to institutional investment. Selecting the right type of investor and negotiating equitable terms. Managing the board and key investor relationships, from the first investment round to exit.

Each coaching project is customised around one or more of these modules depending on individual needs and the investment stage (pre Seed, Seed, Series A). We help founders develop an approach for their own unique circumstances.

We provide 1:1 support to founder/CEOs to guide this process and provide an experienced sounding board as they apply this framework in their own startup.

Delivery

The Founder to Funder coaching program incorporates regular online coaching sessions plus add-hoc support on any matters arising. The ideal frequency of these sessions is weekly. Coaching engagements run for an initial period of 3 months, after which they can be extended for as long as required.

The program is based on the framework and modules described above and is customised to cover areas that will be of greatest individual value. The program is intended as a precursor to each funding cycle.

Founder to Funder complements the two other primary services we offer to ALL founders. These are:

• Investment Analysis, where we help founders prepare for an investment campaign by developing a winning funding strategy. This includes identifying well-matched investors and then creating the most compelling investment proposition, and
  
• Guided Fundraise, where we help founders execute live funding campaigns. This includes advising on all aspects of investor short-list creation, materials development (including the investor pitch deck), investor outreach, soliciting offers, and closing.

Founder to Funder enables first-time founders to accelerate their effectiveness across critical aspects of the capital-raising journey, a core capability for founder/CEOs.

Like all our other offerings, Founder to Funder  is available as standalone service, but when followed by Investment Analysis and Guided Fundraise for each funding cycle, it is one of the most powerful support packages available to first-time founders.