Dispelling Startup Fundraising Myths: Tom Blomfield Highlights Reality Over "Cool" Pre-emption

San Francisco, CA – Tom Blomfield, co-founder of Monzo and Group Partner at Y Combinator, recently addressed a prevalent misconception among startup founders regarding fundraising processes. Blomfield highlighted the often-unrealistic perception that "all the cool kids are getting pre-empted," suggesting that founders frequently worry a traditional fundraising process signals a lack of desirability.

In a recent social media post, Blomfield stated, "> I still see this a lot today. Founders assume all the cool kids are getting pre-empted and worry that running a fundraising process somehow means they're not cool." This observation underscores a significant psychological pressure within the startup ecosystem. While pre-emptive offers—where investors make an offer before a full fundraising process begins—can occur, they represent a small fraction of successful rounds.

Blomfield, drawing from his experience raising over $400 million for Monzo and investing in numerous seed deals, emphasizes that most fundraising journeys are a "hard slog." He noted that while some rounds are "hot" and fast, the majority require extensive effort, often involving "190 investors" over several months. This contrasts sharply with the media's focus on blockbuster deals, which can skew founder expectations.

Venture capitalists often extend pre-emptive term sheets to avoid competitive bidding wars, which can drive up valuations. However, Blomfield advises that founders who run a structured process with multiple interested parties tend to secure better terms. Y Combinator, for instance, actively "manufactures" this leverage through its Demo Day, creating an auction-like environment that benefits its startups.

Founders are also cautioned against taking investor feedback at face value, as reasons for passing on a deal are often not fully disclosed. Blomfield stressed the importance of founder resilience, stating that many successful companies faced numerous rejections before finding the right investors. He also highlighted the critical need for founders to conduct thorough due diligence on potential investors, particularly by speaking with companies that have not performed well within an investor's portfolio, to understand their behavior during challenging times.