Why
‘Flat Is the New Up’ Is the Best Fundraising Advice for Startups Right Now
In these tight financial times,
management’s job is to get whatever dollars are needed to keep the doors open.
EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V
AND CHICAGO HIGH TECH INVESTORS @TULLMAN
Jun 16, 2026
It’s great to live and
work in Chicago where we build businesses, not bubbles. Here, bootstrapping is
seen as a virtue to be proud of, raising too much money too soon is regarded as
foolish, and people largely keep score not by hyped and highly theoretical
valuation numbers but by revenues and results. This approach and attitude are
especially critical now when smaller and mid-sized startups that survived COVID and are starting to move
forward again, grudgingly determined that they’re going to need some additional
funding to get the ball really rolling.
To be clear, in these
tight financial times, management’s job is to get whatever dollars are offered
and needed to keep the doors open and to help the business keep growing.
They’ve typically got two primary choices: going back to their existing
investors who are often tired and disappointed, especially with the delays
caused by the pandemic or finding new funders interested in the going-forward
story. But there’s usually one unfortunate hurdle that can get in the way of
attracting and securing new money, and that’s the reluctance of the existing
shareholders to recognize: (a) that the prior valuations of the business are
ancient history; (b) that the pricing of their last as well as the most recent
rounds of funding are also largely irrelevant: and (c) that whatever legal and
technical rights they may have to stand in the way of new investments at
realistic valuations aren’t really applicable when the future of the company as
a going concern is at stake.
That’s why I tell people
these days to tell their boards and their long time and more recent investors
that “flat is the new up,” which basically means that there’s no shame in
taking in additional capital and bolstering your war chest when the opportunity
presents itself, regardless of whether you’re also able to secure an immediate
step-up in the putative value of your early-stage business, especially when
everyone with a brain knows that many businesses just like yours have had to
carefully dodge several bullets in the recent past just to stay alive. It’s
important to always remember, as Harold Geneen used to say, that the only truly
fatal mistake for a startup is to run out of cash. When you do that, they send
you to the showers. Everything else is fixable. As I used to say, anything that
you can fix with a check isn’t a problem, it’s just another choice. But when
you run out of cash, they pretty much run you out of town.
So let’s take stock of
the current moment where, regardless of the crazy and relatively inexplicable
behavior of the stock market, there’s virtually no IPO market for any business
apart from the insane AI offerings. The M&A
actors are also largely scared stiff of making any wrong moves and frozen in
place as Trump does some bizarre rant or threat to someone every other day and
the idea of market consistency and economy stability is just a pipe dream.Code: 102006)
I’ll start with a word
of caution: The worst mistakes in business are made in good times, not in bad
times. It’s a remarkable fact of life that a small (and shrinking) bank account
does a great deal to focus your attention on the things that are mission critical
and existential. You stop taking limos to the airport pretty quickly when
you’re starting to worry about next week’s lunch money. I’ve been in that
position several times and, although it’s good for your waistline, it’s a lousy
way to live.
So when funds are being
offered even less enthusiastically than you might wish, it’s very tempting to
grab the gold. But just don’t lose your way or lose sight of the most important
goals for your business. That’s why an emphasis or undue focus on the mainly
artificial bogies of interim valuations is woefully misplaced when what only
really matters is getting the investment made and closed.
Until you sell your
business or take it public, interim valuations are just chatter and cheap
talk—not worth the time to talk about and temporary fantasies at best. It’s a
lot like wetting your pants in a dark suit: It gives you a nice warm feeling
for a moment, and no one else really notices or cares, but you end up with
dirty clothes and, as Trump’s minions would attest, stinking up the place.
So, when the opportunity
presents itself to boost your bankroll, strike while the iron is hot, but
remember these three basic rules of early-stage fundraising:
1.
Getting money is just
like eating appetizers. You do it when they are being served. Don’t be reticent
or late to the buffet.
2.
Don’t be a hog on
valuation. There are a million other deals competing for those same funds; many
are just as attractive as yours, and some will be much better priced than
yours. Pigs get fat; hogs get slaughtered. Just like on Wall Street, easy money
is what everyone else raises: Getting yours will always be hard until it’s done
and in the bank.
3.
Take more money than you
need, because you will need it, maybe for good reasons (radical growth or
expansion) or for bad reasons (disappointing or delayed results) but need it
you will.
Ultimately, if you can’t
entirely resist being a bit of a hog on valuation, at least be the practical
one, just like in the storybooks. Take all the money you can get, say “thank
you” (and not another word), and run like the wind.
