Large rounds at high valuations are sometimes followed by silence or a sharp correction. A common reason is that the effort went into getting the money and very little into how the company would carry it.
Anticipation starts before the round. Five points decide whether a closed deal turns into a sustainable company.
1. A plan tested against reality
Before investor outreach starts, the plan has to hold up in a downside scenario, including the effect of the terms the company is about to sign. A valuation aligned with what the business can deliver avoids the overhang that makes the next round harder, a point we develop in What makes a valuation defensible in diligence.
2. Adaptive capital structuring
The format follows the business. Pure equity can dilute some models too fast and debt can strain the cash flow of others.
Depending on the model, the answer combines equity, non-dilutive funding and, where the business has an operating reason for one, a token. A token tied to revenue or profits does what shares already do, so it has to be read together with the cap table, as we set out in When the token table and the cap table tell different stories.
3. Milestones investors can measure
The round funds milestones and the company’s reporting should follow them. Tying spend to milestones investors recognise, such as Technology Readiness Levels in DeepTech, gives the founders the evidence they’ll need for the next round.
4. Investor communication between rounds
Investors who hear nothing between rounds tend to assume the worst. Regular reporting that translates technical progress into the financial indicators a board follows keeps them informed, including when the plan changes.
5. Protecting the vision
Financial structure should serve the industrial ambition. Clauses such as liquidation preferences and board composition shape who decides what for years after the round, and each one deserves to be negotiated with that in mind.
Frequently asked
Why do many well-funded startups struggle after a large round?
Often because the effort went into getting the money rather than into how the company would carry it. Without aligning valuation, governance and milestones, companies face valuation overhang and governance mismatches that make the next round harder.
How can fundraising be linked to technology milestones?
By tying the round’s spending to milestones investors recognise, such as Technology Readiness Levels, the standard 1 to 9 scale of technology maturity. Financing then follows demonstrable progress.
What role does governance play in sustainable fundraising?
Clauses such as board composition, liquidation preferences and protective provisions shape long-term decision-making. Each one is negotiated so it stays aligned with the project’s industrial ambition.
Sources and references
- Technology Readiness Levels: a 1 to 9 scale assessing technology maturity, originally developed by NASA and adopted by the European Commission as the reference framework for Horizon Europe programmes.
- Governance: standard venture term sheets include provisions on board composition, liquidation preferences and protective rights, which shape long-term control of the company.
- AYAKO Partners internal analysis.