There is a very common narrative I hear when I speak with founders raising a seed round. "The only thing standing between them and greatness is money." Now I get that some of that is just founders trying to make their case for funding and playing up a bit of FOMO but in most of these conversations the founder is truly unaware of what day 1 post funding actually looks like.
The typical story is that the company started out by raising a pre-seed round, most likely from friends and family, or if they're well connected, from some angels as well. They basically raised that round on pure vision and idea. Then if they're successful they'll get some early market validation most likely from warm intros to customers and some word of mouth.
Now the founders decide to raise a seed round. They greatly over value their early traction as an indicator of market validation and immediately start developing a huge "go-to-market plan" based entirely on theoretical rather than proven strategies. They'll also create list of feature updates they want to make to their product. They have everything figured out and feel that money is the only thing standing in their way.
Here's the reality check, all of those things are interesting but none of them are strong validation of a scalable business. Don't get me wrong, closing that first round of capital and signing on the early customers is no small feat. 90% of other businesses have already failed to do that. The point here is, when you start raising larger rounds from more sophisticated investors, a "great idea" is just table stakes.
The questions running through the investor's mind are: "How many of their early customers are representative of their target market? Do they know how to find more customers just like them? How many more are they going to close next month? And can they show me a proven predictable sales model and how they will use my money to make this company more valuable?"
Sophisticated investors are not just looking for companies that are acquiring a lot of customers, they're looking for founders who have built a predictable model to make that happen. Word of mouth is great but it isn't predictable. Sophisticated investors will think "that's great they're getting a lot of referrals but unless this thing is going viral like Baby Shark, that could end at any moment. How is my money going to be leveraged for sales and marketing to take this company to the next level? Have they proven that model works?"
If you don't have proven answers to those questions, most sophisticated investors will continue to be "interested" but never write you the check. Even if you are able to find enough people to write you checks without answering those questions then only thing you've done is make it much harder to figure them out.
Every day that goes by after you've taken investors money and are trying to figure out those answers, you're playing catch-up. The clock is ticking, the money starts burning, and you're no closer to figuring out how to take what might be the last money you ever raise, and use it to hit Series A level metrics.