The "We're Not Really Raising" Preemptive Round Is a Lie. Here's What Actually Works.

If you're a startup CEO, you've probably been told how preemptive rounds work: an investor comes to you with a term sheet before you go out to raise. You haven't put in the hundreds of hours of a full process. You save time, get a great valuation, and share your vision with fewer people.

The reality is messier. Few firms will present a term sheet before you've done any work. A preemptive round is still a fundraising process — just roughly 30% of the effort of a full one. And the standard advice for how to run it is wrong.

I know because I followed it for our Series B and hated the result.

What went wrong at the B round

The advice I got before our Series B was standard: talk to a few investors, tell them you plan to fundraise in the future but would raise now for the right price, and don't have your materials ready because you're "not really fundraising."

So I flew to the Valley, met seven investors, sent messy materials, and told everyone we weren't officially raising. We got our B round done in three weeks.

One term sheet. From a process where we'd raised five at our A.

One term sheet means no competition. No competition means no leverage. We closed the round, but we negotiated from weakness instead of strength. Looking back, it felt like showing up half-prepared to one of the most important moments in the company's life.

When it was time for our Series C, I decided to do it differently.

How we rebuilt the process for the C round

The approach that actually worked has four steps.

Step one: Set milestones and validate them with investors early.

After closing our Series B in 2020, the board and I defined the exact milestones that would justify raising again. We wrote them down, aligned on them, and used them to stay focused on execution rather than getting distracted by fundraising conversations.

Then we made a list of 20 investors we thought would be a good fit for the C round and set up meetings with them in early 2021 — not to raise, but to validate. We shared where we were and where we wanted to be, and asked a simple question: if we hit these three milestones, would that be sufficient for you to invest?

They all said yes. That alignment was crucial — it meant we'd spend the next year working toward goals that investors had already validated, not goals we assumed they'd care about.

We agreed to reconnect in Q4 when we expected to hit the milestones. Most wanted to stay in touch throughout the year. We pushed them to wait until early Q4. That discipline matters, as you'll see.

Step two: Get everything ready like a real fundraise.

Not having materials ready is the single biggest mistake founders make in preemptive rounds. A robust deck, financial models, customer references, technology overview — all of it needs to be ready before a single investor conversation happens.

My lesson from the B round: thinking of it as "not really fundraising" made me underprepared. It affected the quality of my pitch and the quality of the process. For the C, we treated it like a full fundraise from a preparation standpoint — we just hadn't officially launched it yet.

Show up with your A-game even when nobody's keeping score.

Step three: When one investor leans in, create a process immediately.

We didn't plan to raise in Q4 2021. We needed a few more months to hit our milestones and had planned to officially kick off in Q1 2022. In August, we started getting materials ready just in case. In October, we started reconnect calls.

On one of the first calls, an investor was so impressed with our progress that they said they were willing to accept the remaining milestone risk and wanted to move now. That was the moment the preemptive round started.

We immediately went back to our list and selected nine more investors to bring into a mini-process. We didn't reach out to the full list — we weren't certain the Q4 round would work and didn't want to burn the Q1 process if it didn't. We reached out with this message:

"Hi [name], I hope all is well. Things have accelerated over the last few days. We are very close to hitting our yearly milestones. In addition, a company in our space is going public, which made investors even more bullish about the market. I had catch-up calls with a few investors this week, and even though we are not fundraising right now, they are very interested in investing now to preempt the C round. I am expecting to get a term sheet soon. I really enjoyed our conversations this year and would love to work together. I wanted to reach out and see how we can potentially make that happen."

Step four: Be honest about what it actually is.

When we got on calls with those nine investors, we didn't say "we're not really raising." We said: while we're not running a full-blown process, we're open to raising now for the right price with the right investor — and we're only talking to a small group of people we specifically want to work with.

That framing is honest. It's also more compelling than the fiction of "not really raising." It creates exclusivity. It creates urgency. And it doesn't require anyone to pretend they haven't seen your data room.

The outcome

Two weeks from the catch-up calls to a term sheet. Multiple term sheets. All tier-one. We used the competition to negotiate a valuation 25% higher than the first offer. The round closed within four weeks of signing.

That's what happens when you combine the efficiency of a preemptive round with the discipline of a real process.

The "we're not really raising" narrative is BS. Everyone knows it's BS — including the investors you're saying it to. What you're actually doing is fundraising, but opening it to a small, select group first to see if they want to move fast before you open it to everyone else.

Just say that. It works better.

The four-step preemptive process

1. Set milestones and validate them with a target list of investors — well before you plan to raise.
2. Schedule reconnect calls with those investors for just before you expect to hit the milestones.
3. Get all materials ready before those meetings — deck, models, customer references. Everything.
4. When one investor leans in, immediately create a mini-process with nine to ten others.