Is raising VC funding as glamorous as it seems?

Here’s the picture: Raising money for your health tech startup sounds amazing.

You’re out there networking, speaking to rich people, wining and dining. You feel like Harvey Specter from Suits. And let’s be honest, the startup world makes it look even better.

Every day, you hear about startups raising millions.

TechCrunch is packed with headlines announcing big funding rounds. People boast on their LinkedIn profiles about how much they’ve raised, as though the bigger the pay check, the greater the entrepreneur they are.

If you’re struggling to raise, it’s easy to feel like a failure. And if you’re the CEO, the pressure can be intense. You might even hear from your co-founders, “Why aren’t you raising like them?”

The pressure is real, but the reality of fundraising? It’s not nearly as glamorous as it seems.

The reality of fundraising

The truth is, raising money is hard.

And the reasons health tech startups raise funds aren’t always as impressive as they’re made out to be. Here’s what fundraising often boils down to:

1. Building your product or service

Most startups raise money because they need it to build their product or service. Maybe you have development costs, manufacturing costs, or research expenses. Perhaps you need to hire smart people (doctors or scientists) to help you because you can’t do it all yourself.

All of this is happening, while you have no customers. No customers means no revenue. So you’ll need to raise while you build the product that you’ll eventually sell.

2. You aren’t profitable

Imagine you already have a product, and things are starting to move. You have some customers who are paying, but you’re not profitable yet. Maybe you’re spending too much on marketing, or perhaps you’ve made too many hires.

I’ve been here. When I built a pair of EEG monitoring sleep headphones our unit economics were tough to crack because after gross margins, we had costs for packaging, delivery and marketing costs. All of which were increasing over time.

If your business doesn’t generate profit, especially over the long term, you haven’t created a business. You’ve created a way to lose money, which is pretty counterintuitive to the whole concept of business. In this case you will need to raise because you need time to figure out profitability.

3. Speed to market

Maybe you’ve figured it all out. Your product is great, you’re profitable, but now you need a million pounds for a TV campaign or other growth initiatives.

The problem? You don’t necessarily have that cash in the bank. So, you raise money to grow faster.

4. Reducing personal risk

If you have deep pockets, you might invest your own money into the business. This is common for second time founders who’ve had a successful exit.

But even then, you might not want all the risk to rest solely on your shoulders. Bringing in external investors shares that risk with others.

5. Expert support

Sometimes, startups raise money not just for the capital but for the expertise that comes with it.

For example, if you’re running a digital health records startup, having a former CEO of a hospital as an investor could be invaluable. They can connect you with hospitals, sit on your advisory board, and provide strategic guidance, all while having skin in the game.

Let's stop glamourizing fundraising

Look, I have nothing against health tech startups raising big money. I’ve raised money too.

But the industry needs to stop glamourizing fundraising. Raising a large amount of money doesn’t mean you sail into the sunset, live happily ever after and the job is done.

Startups only raise money because they haven’t got it all figured out yet. In most cases, raising money is actually a liability. It’s a sign that you need to figure out your startup fast because otherwise, you’re in deep trouble. It’s a sign that something is holding you back from creating a profitable, scalable business.

But let’s be clear: raising money doesn’t make you an acclaimed entrepreneur. It means you've convinced someone to give you money, thereby buying you some time.

Don’t kid yourself into thinking otherwise.

Also, Cut Yourself Some Slack

For founders, it’s easy to feel stressed when you see startups raising millions on TechCrunch while you’re struggling to bring in that £100k investment. But cut yourself some slack.

If you are still managing to build your product and get customers to pay you AND you haven’t raised any money, maybe the rest of us can learn a thing or two from you.

After all, creating a sustainable business without outside funding is the ultimate validation of your entrepreneurial skills. And that’s something worth celebrating.