The Secret Founder: Why does Midwest fundraising feel like applying for a job?

The Secret Founder is our way of sharing stories from the frontline of entrepreneurship: the reality of building in the Midwest. Each time, a different founder gives their opinion to ensure we find all perspectives.

I read The Secret VC's piece on exit math a couple of months back. The one about how the size of a fund determines what kind of company they can back. It was something along the lines of a ‘fund returner’ for a $100 million fund means the company needs to sell for a billion dollars, while smaller funds can work with smaller outcomes. It's a fair argument. Nothing in it is wrong. But I want to respond, because reading it as a founder out here, it didn’t actually help me. Because if we're on the same team - and that's how I’d like to think of this and the Secret VC also likes to mention how important relationships are -  then I need to be straight and say what's actually broken.

Whatever the math says, the public version of what local funds want and the actual decisions they make are just not the same thing.

Look at the website of any fund in this region. “We’re Industry agnostic”, “We love local founders,” “Pre-revenue is fine, you just need to be mission-driven and with a chip on your shoulder.” This is all great. Music to my ears. So I show up, and I already have paying customers. I check every box on the front page. And yet the answer I get is "it’s too early for us."

Too early for what, exactly? 

Your front page says pre-revenue and I'm post-revenue, but it’s still too early? 

Is something else going on, and you're just not telling me what it is?

I've figured out enough of it now. The actual filter isn't on the website. It's actually this: did you go through the right accelerator, did you get pulled in by the right local manager, did you get signed off by the small-business folks, did the right person walk your deck around for you. And none of that is on the front page of their site. So I and my fellow founders waste months, maybe more, playing a game where the rules I'm shown aren't actually the rules that are being played.

Now, let’s consider trying to target specific funds based on the best match, something that everyone advises and which makes logical sense. If I'm building my investor CRM, I want to find local funds whose thesis lines up with what I'm building. If I open their portfolio, I see a consumer product, right next to biotech, right next to a Series C something something, right next to a social app, right next to a women's health app. No matter what you tell me, if you can find a thesis in that… I’ll probably invest in YOU. How does any of that info help me focus my attention? In Silicon Valley, I can find ten funds that specifically back what I’m building, look at their portfolio companies, and network through to founders who've already been backed by them. Out here, the local fund has done seven things in seven sectors, and the person pulling the strings has never even built a startup anyways. It’s bullsh*t.

So when The Secret VC says that founders in our region will take any meeting and accept any check… yeah, of course we do. We have no other way to find a match.

I’ll contrast this with some other experiences I’ve had, that finally crystalized everything for me.

A while back I emailed a well-known coastal investor whose name I'd come across. I introduced myself, asked about a specific area of investment. He wrote back: "We don't do anything in that space right now." More than a year later I came back to him with a different angle, saying I'd done a few things since, and was looking at this new direction. He replied: "I love the hustle. Keep at it. I don't have that person right now." Same investor. Two no's. BUT. Both of those no's were actionable. The first one told me where the line was. The second told me he remembered me, the door wasn't closed, and roughly what I'd need to come back with. That’s something I can still work with.

Now, let’s run the local version of this. I sat down with a local fund manager. As I mentioned, I already have paying customers. They told me "it’s too early." That was it. No more specifics. No "your value prop to one of your two customer types is weak.’ This, in reality, was the actual thing I needed to fix and what I eventually figured out on my own. But instead they just told me "too early," and followed that up with "You should apply to this accelerator."

So I did my ‘good ecosystem supporter’ job and applied to that accelerator. I was told they had a great pool of applicants that year and gave me a local contact that may be able to help. Nothing came of either of them. That isn't feedback. That's “go away.” Politely. Please.

The Secret VC's framing of fund math assumes the people allocating capital out here are accountable to the same incentives as coastal VCs. But a lot of these local funds just aren’t. When most of your money comes from the taxpayer, then the question your fund manager has to answer at audit time isn't "did you generate a return." It's: did you check the right boxes? Did the founder go through the approved accelerator? Did they fit the priorities of this particular grant cycle?

These aren’t growth incentives, they’re bureaucratic. They’re red tape on purpose. 

Bureaucratic incentives produce slow no's. Because if the real reason for the no is "you don't fit our mandated criteria," they can't actually say that out loud. It would be bad PR. It would also discourage the wrong people from applying; by "wrong" I mean founders they have no intention of backing, even though public messaging says they do. So instead you get "too early." You get "let's stay in touch." You get the silence after the third email.

I’m not saying the local fund managers I've met are bad people. Some have given me genuinely useful feedback. The one who pushed me on my customer value prop was right, and I owe them for it. But the system they're working inside doesn't actually reward honesty. It rewards box-checking. And founders, who don't see the boxes? Well, we just get strung along.

Let me say something I'd never share openly, and I know I’m not the only one: I’ve been on a two-to-three-month runway for over two years. I’ve done everything that’s been asked, been at every event and never called this stuff out publicly. But the thing I most regret is that nobody told me, eighteen months ago, that I should just leave, although many of them probably knew it. They didn't say it, because doing so would mean admitting that the system they sit inside doesn't actually work for someone like me.

Listen, nobody owes me a check and I'm not asking for one. But I am asking for the truth. The coastal investors I've talked to gave me the truth in a single sentence: “Story's not tight enough,” “Not in our space,” “Come back to me when you have X.” But our local version is a five-month exercise LARPing as an investor and ending in silence.

So, if we're on the same team and everything is all about relationships, then here's what I'd say to the people writing checks out here: stop pretending you're running a venture fund if you're actually running a state grant program. Just tell us. Put it on your front page: “We back founders who came through these three accelerators and meet these criteria.” You'll lose nothing. The people who fit will still find you. But the people who don't fit will save a year of their lives, and that's a gift for us.

To the founders reading this who are on the same perpetual runway as me, who keep getting the "too early" response from funds who say being pre-revenue is fine, and who are being told to apply to one more accelerator and connect with one more person up the road: the game out here usually has very little to do with your business. So I advise you to learn that as fast as you can and then decide, with clear eyes, whether you want to keep playing it or whether you want to go somewhere else where the rules are clearer. Not fairer, just clearer.

No successful sports team has never won anything by lying to its players. Locker-room honesty is what wins championships. We're all on the same team. So get your s*** together. Tell us the truth. Play this game like you want to win.

Because working your ass off doesn't matter, if you actually have no chance at all to play the game.