A Raise Is Not a Win: How to Keep the Next Door Open
I have a confession to make. I’ve been wrestling with a problem I did not see clearly when I first started this work.
At first, I thought the issue was financial storytelling. Many technical founders had serious ideas but struggled to explain why they could become fundable businesses. So I taught them to translate the technical story into capital language.
That helped. But it was not enough. A better story does not fix the wrong funding path.
The deeper issue is that fundraising is not one big ask. It is a sequence of bets. Each check pays to answer one question: does the technology work, will customers pay, is this the right market, can the product be delivered at the right cost, can this become large enough for the next investor?
But each check also changes the next one.
Ambri, a battery company spun out of MIT, shows what happens when this sequence goes awry. After a $144 million Series E in 2021, it leased a former retail space in Massachusetts in June 2022, expecting a Series F, and put about $18 million into retrofitting it to make batteries. The $300 million round fell through when its lead investor backed out at the last minute. Its attempt to raise a $50 million bridge loan from existing investors came up short when Reliance declined its share of about $8 million. In May 2024 Ambri filed for Chapter 11, in large part to get out of the lease. The bridge lenders then set the price floor for the sale.
Ambri didn’t only miss the round. The factory commitment it made ahead of the round left bankruptcy as the way out, leaving aside factors like changes in technology.
That’s the part about funding that founders and investors often see too late.
This week: why every check funds one bet and changes the next, and how to see what a funding choice opens or closes before the decision is made.
Enjoy!
Most founders treat fundraising as one task: raise a round. They pay a lot of attention to the story, with the ask as the goal. Their big question on the source is around availability and price(i.e., terms)
But the Ambri story shows us what can go wrong with this point-in-time approach to fundraising. A round of funding from whatever source, can also open (and often close) other options in the future.
I think this keeps happening because of three reasons:
A specific source of capital can only fund a specific type of bet
A venture fund can lose on most of its bets and still come out ahead if a few win very big, so it can take a lot of uncertainty when the upside is large enough, but it cannot bet on small outcomes.
An angel group often brings expertise and writes smaller checks, so a good result for it can look very different from a good result for a fund, but it cannot fund massive bets.
A lender earns interest and nothing more. If the borrower defaults, the lender loses the full amount plus all future interest. A lender cannot afford much uncertainty, because nothing pays it for taking any.
A grant maker such as the NSF may be making a different bet altogether: “is this technical or public-purpose question worth answering?. But it will not fund a bet on whether there is a market.
That means a pitch is good or bad only for a specific kind of capital.
The outcome from funding a bet should be what the next bet needs to see:
An NSF SBIR grant, for example, is funding a bet that the technology works, that it has the potential to be developed further, and that there’s a good chance that an outside investor will fund future commercialization.
Every check also closes things.
NSF’s page, for example, says that it won’t fund majority VC-owned companies. So a startup that chooses VC money too early is closing the door on the cheapest money for the earliest and riskiest bets.
The bottom line is that every check is shaped by what it counts as a “win” (e.g., technical proof, potential to scale) and in turn shapes changes what options are still open, and not, for your startup’s future.
The Unlock
Every check pays for one bet, and changes which bets and which investors are still available.
A bet is an unknown you pay to resolve: with this much money over this much time, we will find out whether this thing is true.
A startup’s path is a list of these unknowns, and its fundraising path is a list of who could pay to resolve which one, how much, and when and on what terms.
What this means for startups is:
Funding is not just runway. It commits the company to a direction.
A check, or the expectation of one, can commit you to spending you can’t undo. If the money doesn’t arrive, the commitment still exists, and the next check has to cover it. See the Ambri story for details.
You can’t know which path wins. You can only know which paths stay fundable. This is why your fundraising path and plan is not just about “Will they fund us.” It is also about “And will that increase or decrease our probability of success in future”
The question to ask of any money is not “how much?” but “what does this do to my options?”
From the Capital Playbook
If you’re the founder
Identify your unknowns and put them in order.
Identify every question that has to be answered before the next funder says yes, then rank them by which “no” would end the company.
Example: A founder with a new material has three unknowns: does it work, can it be made cheaply, and will anyone buy it. Cheap manufacturing doesn’t matter if it doesn’t work, and a customer won’t test it until it does. So “does it work” comes first, and the money for it comes from someone who only needs that question answered, e.g., an NSF grant
Fund first the bet that leaves you the most choices afterward.
Put off any bet that commits you to one path before you need to.
Example: NSF’s rules exclude companies majority owned by venture capital operating companies, hedge funds or private-equity firms, so the order you take money can decide whether you can apply for a grant at all.
Before you take any money, understand what it pays for and what it closes.
Check terms, ownership, promises to customers or backers, and which investors your choice rules out.
Example: When Ambri’s Series F fell through, it tried a $50 million bridge loan from existing investors, which came up short when Reliance declined its roughly $8 million share. In bankruptcy, the investors who signed the bridge note set a $38 million price floor for the sale with that debt. [1]
Don’t commit to spending that depends on a check you haven’t received.
If you must, know what it costs to undo: a lease, a hire, a supplier contract, a price promised to customers.
Example: Ambri leased a factory and put about $18 million into retrofitting it, expecting a Series F. The round fell through, and it filed for bankruptcy in large part to get out of the lease.
If you’re the investor or program
Understand which bets you will and will not pay for
Find out what other funding is in play and what it commits the company to.
When your case stops working, say why and what else might fit.
Some Cautions
Rules differ and change. Ownership and eligibility rules vary by agency and have changed over time.
Investors differ. Some would stay interested through a change of path, and some would welcome it.
Many founders have only one offer. For them this is about knowing what they’re agreeing to.
Plan two bets ahead, not five. Paths change, so revisit after each result. And every raise has a fixed cost, so a bet too small to matter to the next investor may not be worth a separate raise.
The One Thing
Ask yourself:
My next bet is: with $______ over ______ months, we will find out whether ______. The right money for that bet is ______. Taking it would open ______ and close ______.
If you can’t fill in the last two blanks, that is the work for this week: find out what the money requires of you before you take it.
Try this once and tell me what happened. Did it change what you raised or who you talked to?
Build wisely!