Why You Keep Losing Investors

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Welcome to Cutting Through The Fog.

Each week I share the thinking and frameworks I’ve used (and learned the hard way) to help you build with more clarity, more momentum, and fewer avoidable mistakes.

The newsletter is about how to handle risk when raising investment. Specifically:
1. How to surface the risks in your business before an investor does (the pre-mortem)
2. Understanding what kind of risk each funding round is designed to remove
3. How to talk about unresolved risks in the room without scaring investors off

Founders assume rounds stall because of valuation, market conditions, or one investor passing.

Most of the time, that’s not it.

Rounds stall because the founder walked into the room with one version of the business in their head and the investor was looking at a different version entirely.

The founder is thinking about the product, the team, the vision, the opportunity.

The investor is thinking about the risks.

That mismatch is fatal.

I've invested in over fifteen businesses, both as an angel and through my VC fund. I've also raised money for three of my own. The pattern is the same every time.

Founders prepare to sell the upside and investors are mostly buying the downside.

Founder Note:
Investors aren't backing you because everything's going to plan. They're backing you because they trust the business will hold together when things don't go to plan (because they always don't).

A pre-mortem is the simplest and most uncomfortable exercise a founder can do.

You assume the business has failed. Then you work backwards to figure out why.

It surfaces the risks you've been avoiding and exposes the assumptions you've been treating as facts.

When I run this with founders, I split the risks into three categories:

1. Risks already identified and proven. The ones you know about and have started to address. Easy to talk about because you're already on top of them.

2. Risks identified but unproven. The ones you suspect are real but haven't validated yet. These are where investors press hardest, because the answer affects whether the business is fundable at all.

3. Risks not yet identified. The hardest category, because by definition you don't know what they are. The pre-mortem is how you surface them.

Sit down with your co-founder, your most honest advisor, your toughest mentor. Spend two hours assuming you've failed. Write down every possible cause.

One warning: A lot of founders do this exercise once, write it down, and never look at it again. That's the wrong way to use it. The pre-mortem only works as a living document. Revisit it every quarter and use it as the spine of every board meeting and every investor update.

Every funding round is designed to retire a specific category of risk.

Pre-seed retires belief risk.
➡ You don't have data. You have a hypothesis. The investor is buying you, your insight, and your ability to figure it out. The question they're asking: "is this person credible enough to make this work and I believe in the team?"

Seed retires evidence risk.
➡ Now you need traction. Real customers, real signals, real proof the assumptions you have made are playing out. The question they're asking: "is this thing actually working?"

Series A retires scaling risk.
➡ The question is no longer whether the business works but whether it can scale. Repeatable customer acquisition, defensible margin, a clear path to category leadership. The question they're asking: "can this become a £50m, £100m, £500m business?"

The mistake I see all the time is pitching the right story yo the wrong room.

Pre-seed founders trying to demonstrate Series A traction look amateurish.
Series A founders trying to sell pre-seed vision look unfundable.
Each round has its own currency.

If you're about to raise, ask yourself: which category of risk is this round retiring? If you can answer that clearly, you're already ahead of most.

Even after the pre-mortem, even after you've worked out which round retires which risk, you will still walk into the meeting with risks you cannot yet eliminate.

A lot of founders either hide the risks (investors smell it within minutes) or they over-disclose (investors panic and the room turns).

There's a middle ground. It looks like this:

"Here is the risk. Here is why it exists. Here is what we are doing about it. Here is what would have to be true for it to actually kill us."

Four sentences. They tell the investor:

Compare that to the founder who says "we don't really see that as a risk."

That founder has just told the investor two things. They haven't thought about it. And they won't be able to react when it happens.

Both are deal-killers.

The fastest way to lose investor interest is certainty. You can never really have certainty.
And all investors know this.

Walking into a raise isn't about looking impressive.
You have to earn the investor’s trust.

And trust is built on the willingness to look at your own business honestly enough to talk about its weaknesses with the same clarity you talk about its strengths.

Do that and you stop having to convince anyone of anything.

The work convinces them for you.

See you next week.

John