Raise on Milestones Before Anything Else

Hey Shifter!

I took last week off as I had hip surgery on Tuesday (not a replacement, just a procedure to fix a ligament), but it feels good to be back in your inboxes this week.

After raising nearly $1M in VC funding, $275K in grants, and $125K in loans for Chezie, I've discovered a throughline that works across ALL types of funding: milestone-based fundraising.

If you demonstrate that funding is the only thing standing between you and your next significant milestone, you dramatically increase your odds of getting the check.

Think about it: Would you give $100K to someone with just a great idea? Or to someone who convincingly shows you that your money is the missing piece that will take them from point A to a clearly defined point B (who also has a great idea)?

I learned this lesson the hard way during our pre-seed round. While we had impressive early traction ($100K ARR bootstrapped!), the first 30 investor meetings went nowhere. That was partially because I wasn't effectively communicating how their funding would translate to our next milestone.

In today's newsletter, I'll explain why milestone-based fundraising works and how you can apply this approach regardless of what you raise for.

Playing on Investor Psychology

Milestone-based fundraising works because funders must know their money will drive meaningful progress. When you frame your request around reaching a specific milestone, you transform the conversation from funding a company with the financing a clear, measurable outcome.

The most powerful aspect of this approach is that it builds confidence by leveraging what you've already accomplished. If you've bootstrapped to milestone A, your funder can be confident you can execute. Their investment becomes the bridge to milestone B - something you've proven you can achieve with the right resources.

You want the funder to walk away thinking: "If they did that with nothing, what could they do with my money?"

This approach works across any funding type:

• Grants want to see measurable impact.

• Loans need assurance of growth and repayment.

• VCs require clear paths to valuation increases.

Milestone-based framing addresses these concerns by showing exactly what their money enables.

The psychology is subtle but powerful. You're essentially telling funders that success is inevitable - the only question is how quickly you'll get there. With their funding, you'll reach the next milestone in a fraction of the time instead of years.

Using $100k ARR as Evidence, not Achievement

When I started fundraising for Chezie, we had already bootstrapped to $100K ARR with five enterprise customers, including Chegg and Airtable.

Sounds impressive? I thought so, too, so I spent most of my early pitches highlighting that traction. While every investor acknowledged this was impressive, the conversations still went nowhere.

The breakthrough came when I changed my approach. Instead of positioning our $100K ARR as the main achievement, I almost downplayed it.

I shifted to leading with our vision – repositioning employee resource groups as business assets that could drive product development, marketing, and sales. Then I would casually mention, "Oh, and we've already bootstrapped to $100K ARR with customers like Chegg and Airtable, just with our initial offering."

That tweak meant that the $100K wasn't the end goal – it was just the beginning. It was proof that we could execute, but more importantly, it was evidence that we were scratching the surface of something much bigger.

This approach worked because it transformed how investors viewed our traction. Instead of seeing a company that had reached $100K ARR and might struggle to scale further, they saw a company with a massive vision that had already proven it could execute by reaching $100K without help.

Examples Based on Common Fundraising Goals

Let's get practical. Most founders raise money for two primary reasons: building product or growing their team. Here's how to apply milestone-based fundraising to each scenario.

Building Product: From MVP to Market-Ready

The Situation

You've built an MVP that is getting traction, but you need to rebuild it to address limitations before scaling.

Simply saying, "I need money to build my product," won't excite investors.

The Milestone-Based Approach

Instead, frame your product development in terms of what it unlocks:

"We've validated our MVP with five early customers who are already paying us despite the product's limitations. We have 50 more potential customers who've expressed interest but need these key features before committing. With $500K, we can rebuild the core platform in 4 months, unlocking these waiting customers and taking us from $25K to $250K in ARR."

The Outcome

"This traction will position us for our seed round at a significantly higher valuation."

This works because it connects product development directly to revenue milestones. You're not just building features – you're unlocking revenue.

Hiring a Team: From Founder-Led to Scalable

The Current State

You've reached $500K in ARR through founder-led sales, leveraging conferences, and content marketing. Your conversion rate from demo to customer is 35%, but you're limited by how many leads you can generate.

The Growth Plan

"With $1M in funding, we'll hire two SDRs and a content marketer to take over our top-of-funnel GTM motion fully. Based on our conversion metrics, this team will generate an additional $1.5M in ARR in 12 months."

The Next Milestone

"This will get us to $2M+ ARR – the threshold for our Series A."

This framing clarifies that you're not hiring to grow headcount – you're investing in specific roles that will drive measurable growth toward a clear milestone.

Money as a Multiplier

Notice how the funding is positioned as a multiplier on your current traction in both examples. This is the core of milestone-based fundraising.

Whether you're raising $200K or $2M, investors need to see how that funding translates to growth. Will $1M in funding help you 2x your revenue? 5x? 10x?

The specific multiplier varies by stage and industry, but the principle remains: Show investors that their money is a catalyst that accelerates your journey to the next significant milestone.

When investors see this clear path from funding to milestone achievement, the conversation shifts from "Should I invest?" to "How can I help you get there faster?"

The Bottom Line

Milestone-based fundraising transforms how funders view your request. Instead of bankrolling an idea, they catalyze specific, measurable growth.

This approach works universally across VC, grants, and loans. The most compelling pitches make it seem like your business will succeed regardless, but funding accelerates your journey.

Remember, people controlling money want to know what return their dollar will generate. Your job is to show them that every dollar invested will have a multiplier effect on your traction.

If you’re fundraising, start by mapping out your key milestones for the year. What specific achievements would unlock your next growth level? Work backward to determine precisely what funding you need.

See you next week,

Toby