My Startup Just Closed a $4.8 Million in Seed Funding. Here’s How We Did It.
Abstract Co-Founder & CEO Pat Utz reflects on the process of closing our latest funding round
Raising Seed capital is harder than ever before. In the U.S., investment dollars are down by a third ($13.2 billion) from their peak of $19 billion in 2022, according to Crunchbase. The number of startups securing Seed capital has also declined— a 23% drop over the last two years.
In summary, the macro-environment has not been friendly to the thousands of startups around the U.S. trying to navigate fundraising. Fortunately, the AI startup I cofounded secured $4.8 million in seed capital Q4 of 2024. Founder prestige, status, and luck is over-rated. It took us 19 months, two pivots, and 494 VC pitches. Here is how we made it happen.
Being in the right sector at the right time. 2024 was a breakthrough year for investments in AI, with the sector attracting nearly a third of all venture dollars. The majority of the remaining two thirds invested went to sectors impacted by AI models including AI infrastructure, healthcare, and financial technology.
Be patient and ready for the long game. Investors invest in lines, not dots. Expect passes at first but be ready to re-pitch that same investor again in two to three months. If you wait until you have the “right traction” it is too late, especially if your startup is an AI company. Take the first call with a VC as soon as possible and share your progress over time.
Work closely with a trusted inner circle. I leaned heavily on a small group of veteran founders and experienced mentors. These relationships were invaluable—they reviewed my outreach messages, helped refine answers to due diligence questions, and provided strategic guidance at critical moments. If you already have a board in place, leverage their connections and expertise too. The right venture lawyer is also worth their weight in gold during this process. I recommend Fenwick, Latham Watkins, Orrick, Gunderson, or DLA Piper.
Pick your communications tools wisely and keep them simple. VCs talk to hundreds of founders a month, so you need to make sure they see your messages. I use Substack for general updates (their deliverability technology is magical) and 1-1 emails for funds in diligence (Superhuman is my email client of choice and shows you deliverability rates). Respect your own time by focusing only on funds that are serious.
Leverage both warm and cold outreach. To start warm outreach, send an email to all the people in your network using Substack and 1-1 emails. Explain the round you are raising and circulate a Google Sheet where people can add notes on which investors they can introduce you to. Make sure the proposed investors from your network match your stage, market, and thesis.
Get a subscription to PitchBook to help with cold outreach. Use PitchBook to find relevant funds based on who they have invested in, what stage, market, and thesis. Leverage AI like Claude to create these lists as well. I used YAMM for cold email outreach with three email sequences. Investors who get back to you will be very qualified compared to your warm outreach (who may be taking the meeting as a “favor” to their buddy).
Meet with at least five investor funds a day, prioritize meetings with Partners. If you are only getting meetings with Principles or Associates, politely ask when they will speak to the Partner about your company and do everything you can to get a meeting scheduled with them. After your third meeting with a VC, push to meet in person. This is a great way to gauge if they are serious. Track your progress in Google Sheets. Here’s a template example*.
Keep communicating with investors. Keep investors updated throughout the entire process. Share progress with revenue, product development, customers, key hires, and insights on your market and technology. Traction updates should be no more than four sentences. Subject should be something like: “Abstract Update: We Signed Y Customer.”
Start fundraising even before you have traction. You can then get a pass and pitch them again when you have traction. Remember, investors invest in lines. It is 95% grit, 5% luck. Pray for direction, but at the end of the day you need to put yourself out there.
STAY ALIVE: you only lose if you run out of money. Be transparent with your team on cash runway. People will step up and hold salaries until wires come in. Do not be afraid of layoffs. Stay alive, keep growing traction, and you will raise venture capital. Be a cockroach :)
This was a solid read, ty!