I recently read in my startup newsletter the following excerpt: “Acme Inc., a startup developing a wearable hydration sensor for athletes, is seeking $3M in funding. So far, it has raised just $150K according to a Form D filing” (names have been changed so as not to embarrass the innocent).

I immediately clicked the link to their Form D filing. It told the same story as the headline. This startup had raised just 5% of their “Total Offering Amount.”  

Offering and Sales Amounts

Total Offering Amount



Total Amount Sold



Total Remaining to be Sold



This startup is not alone. Lots of startups wonder, what does one do when one falls significantly short of fundraising goals?

To Take the Money or Not to Take the Money

If you find yourself in a similar situation, the most important decision you’ll need to make is whether or not to proceed with the investment. Given all the effort likely put into your fundraising, it would be natural to think, “I’ll take what money I can and try to build my company the best I’m able. Why would I leave money on the table?” But, before you do that, carefully weigh your options and consider the implications.

Recalibrating Your Plans

When you made your pitch, you probably laid out your vision of the future and had a plan for how $3 million would get you there. You were willing to dilute your company ownership in exchange for the capital necessary to do something  that would put you on a growth trajectory that would make it worthwhile for you and your investor. Your investor would have understood they were investing just 5% of what you needed and assumed other investors would give you the other $2,850,000. Without the full $3 million, will you be able to reach the milestones you’ve set out to hit?

Investor Perceptions

You’ll want to think about how your investor will view this round of fundraising and the impact it will have on their relationship with your company in the future. Given that you said your goal was $3 million, this will not be seen as a successful fundraise. They’ll have questions about why you weren’t able to meet your goal, and the next time you try to raise money they’ll be less likely to reinvest.

The broader investment community is also watching, including the people who said no. They follow company raises in the Form Ds, and they’ll know that you did not reach your fundraising goal—and they’ll remember the next time you reach out.

Saying Thanks, But No Thanks

Unfortunately, you can’t go back in time and undo this fundraising effort, but you can use it to set yourself up for a better result next time. Consider admitting to yourself that you fundraised too early or didn’t have the right plan in place, and tell the investor, “Thank you for offering me that $150,000 but I think we've got some more work to do—I’ll come back for it later.”

That might seem crazy since the investor offering the money now has no obligation to invest later. While there’s no guarantee, they’ll probably respect you for recognizing a problem, having a plan to address it, and taking action to improve the business for a better outcome for all.

Taking the $150,000 now might be short-sighted if instead you can use it as the first committed money in your future round of $3 million. And next time, you can take time to build relationships with potential investors, incorporate all the feedback you received, and position yourself for success.

The Technicalities

You might also wonder whether the terms of your agreement with you investor are even still valid if you haven’t met your target. Are you even able to proceed with the investment? In all likelihood, yes. For example, if you’re raising money via convertible debt, the bridge note term sheet will have a statement regarding what the maximum amount of money raised from all investors can be, but not what the minimum must be. Knowing that you probably can take the money still leaves you with the question of whether you should.

If you revise your plans and determine that there is a path forward for you, your company, and your investor that includes taking the $150,000, you might consider revising the target amount and drawing up new documents before you proceed with the investment to avoid signaling the shortfall.

Learn the Lessons

The lack of investor interest is an indicator that something is out of alignment. If you are having fundraising difficulty now, you’ll continue to face challenges until you figure out what part of your product, business model, or pitch isn’t working and address it. You will be stronger for it.

Learn more about how Fidelity can help with your equity financing needs.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

 Tags: Fundraising