Beyond the term sheet
Raising capital is often seen as a critical milestone for any startup. The success or failure of fundraising rounds can determine the trajectory of a business, its ability to scale, and ultimately, its survival. Yet, behind the numbers, term sheets, and investor meetings lies a world of intense emotional pressure that is often experienced and frequently ignored or overlooked, despite it’s impact of the fundraising process and the organisational dynamics that may unfold as a result.
This article then is my attempt to try to make sense of these dynamics and perhaps start to mitigate some of these more challenging aspects of this all to common process.
One of the most critical elements of fundraising is the relationship between founders and investors. In these high-stakes environments, investors often project their anxieties and expectations onto founders. These projections can take many forms: fears of losing capital, unmet expectations from previous investments, or even desires to be seen as visionaries who backed the “next big thing.”
In the pressure-filled space of investment negotiations, investors may unconsciously transfer their fears and frustrations onto founders. As Wilfred Bion notes in his work on group dynamics, projection is an unconscious defence mechanism where individuals place unwanted emotions or thoughts onto others. Investors, dealing with their own anxieties about financial returns, may push these emotions onto the founders, creating an additional layer of stress.
“Projection is often a way of managing unbearable anxiety,” writes Bion in Experiences in Groups. “By projecting unwanted feelings onto others, we make them carry the burden of our anxieties.”
This process places founders in a precarious position. Not only are they responsible for delivering results, but they also carry the weight of their investors’ projected fears, which can distort their decision-making processes. Instead of acting purely in the best interest of the company, founders may find themselves reacting to investor pressures, leading to rushed decisions, overpromising, or taking unnecessary risks.
For founders, the emotional toll of raising capital is deeply rooted in their own fears of failure. The fundraising process often feels like a test, with the implicit assumption that success in securing capital equates to validation, while failure suggests a fundamental flaw in the business — or even the founder themselves. This anxiety is amplified by the public nature of fundraising rounds, where success stories are lauded, and failures are often met with harsh scrutiny.
It’s not uncommon for founders to conflate the company’s value with their own self-worth. As a result, the pressure to succeed in raising capital can feel deeply personal. The idea that the business will fail, or that investors might walk away, can stir up profound feelings of inadequacy and vulnerability. As Manfred Kets de Vries suggests “Many entrepreneurs equate their self-esteem with the success of their venture. When the company is thriving, they feel powerful and competent. But when things go wrong, they are flooded with feelings of impotence, shame, and fear.”
This fear can lead to a variety of defensive behaviours. Founders may engage in perfectionism, obsessing over every detail to avoid any possibility of failure. Alternatively, they might isolate themselves, shutting down emotionally and distancing themselves from their teams. In the most extreme cases, some founders may even begin to sabotage their own efforts, unconsciously setting the stage for failure as a way to relieve themselves of the overwhelming pressure.
These psychological dynamics — investors’ projections and founders’ fear of failure — create a volatile emotional environment. When left unexamined, these dynamics can seep into the culture of the organisation, affecting everything from strategic decisions to interpersonal relationships within the team.
Decision-making becomes clouded when founders are caught between their own anxieties and those of their investors. Instead of making decisions based on clear business rationale, they may begin to cater to investor expectations, fearing the repercussions of disappointing those who have placed their trust (and capital) in the company. This can lead to misaligned priorities, where short-term gains are prioritized over long-term sustainability, or where founders agree to terms that are not in the best interest of the company just to secure the next round of funding.
Moreover, the high-pressure environment can have a trickle-down effect on the company’s culture. Employees, aware of the financial stakes, may feel the same sense of urgency and stress. The culture can quickly shift from one of innovation and collaboration to one of anxiety and fear, where risk-taking is minimised, and burnout becomes rampant.
As Peter Senge writes in The Fifth Discipline, “When leaders are driven by fear, that fear is transmitted to everyone in the organisation, creating a toxic environment that stifles creativity and reduces collaboration.” The emotional pressures surrounding capital raises can infect the very core of the company’s culture, turning what should be a dynamic, agile team into a fearful, reactive one.
So, how can founders and leadership teams manage these emotional pressures? The first and perhaps hardest step maybe to simply acknowledge a set of phenomonia which can’t be easily observed of measured. To be open to the possibility that these projections, fears, and unconscious defenses may be as much a driver of behaviour as our conscious mind. As Myles Downey once suggested such awareness may be curative. Here in that is might begin to break the cycle of reactivity and grounded understanding and decisions in a broader data set. In addition such awareness may also help founders avoid internalising investor anxieties and allowing them to create healthier boundaries in their relationships.
By normalising failure as part of the entrepreneurial journey, founders can reduce the overwhelming fear that often accompanies the fundraising process. Failure does not define a founder’s worth, and creating an open dialogue around mistakes can foster a culture of resilience rather than fear. It can be helpful to cultivate a network of advisors, mentors, and peers who can provide objective feedback and emotional support. These trusted relationships can offer perspective when founders are feeling overwhelmed by the pressures of fundraising and help them stay grounded in the company’s long-term vision.
Leadership teams also can play a role actively defending the organisation’s culture during times of raising stress. This includes fostering psychological health, encouraging open communication, and ensuring that employees feel supported, even when external pressures are high.
Raising capital is an emotionally charged process that goes far beyond financial metrics. Investors’ projections, founders’ fear of failure, and the emotional pressures of high-stakes decision-making can distort both the personal dynamics and the organisational culture of a company. By adopting a broader psychologically informed perspective, founders can navigate these challenges with greater emotional intelligence, creating a healthier environment for both themselves and their teams.
As Wilfred Bion reminds us, “It is only by recognising and understanding our unconscious motivations that we can free ourselves from their destructive effects.” For founders, this means not only mastering the art of raising capital but also mastering the emotional dynamics that come with it.
