We work a lot with portfolio companies as they try to find continuous improvement in their businesses. From time to time, we also try to encourage them to challenge their core assumptions and re-think what they are doing and where they are heading. We also go through this process in our own business. What brought success yesterday, will not necessarily bring success tomorrow.
The process of seeking funding is an exhausting one for entrepreneurs. We talk with many, both inside and outside of our own portfolio, who find it a distraction from the execution of their core business. I have a great deal of sympathy for this view. Fundraising is hugely time consuming, and it often takes companies a quarter or so to 'recover' momentum lost in the process.
The idea of using the fundraising process to learn about your business is a less common one, but is a trait that I have seen in some of the best entrepreneurs that I have worked with. You may get 50 rejections before you get a round away and, granted, many of those rejections will come from people who give limited feedback or just didn't 'get' the proposition. But the fact is that every unsuccessful meeting should tell you something that you can do better - qualify better, explain better, persuade better.
As Thomas Edison is credited with saying: "I did not fail. I just found 10,000 ways that do not work.". This state of mind is a key attribute of some of the most effective people I know.
As these expansion stage companies struggle to raise capital, they are forced into a cathartic (and at times painful) process of self reflection. What is their sales process? Is it efficient? What is their unique value proposition? Is it really unique? What kind of company are they building? Will it be large enough to justify all of this investment? And as a result, these companies are coming out of these hard raises with better businesses, better operating models (lower burn rates!!), and bigger visions to go execute against.