“AI Platform Raises $200M Series C to Revolutionize Software Development!”
“European Battery Giant Secures $2.75B in Funding to Power Green Future!”
“Israeli Analytics Unicorn Closes $110M Round Led by Top VCs!”
Sound familiar? These aren’t made-up headlines—they’re the kind of breathless funding announcements that dominate tech news every week. I publish a weekly newsletter, #FIRGUN, celebrating these milestones precisely, but what often gets less publicity is the painful closures or disappointing outcomes that sometimes follow a few months or years after. Also, in my recent post on Nano Unicorns in the making, I covered the new wave of AI native startups that are able to scale revenues with much less employees/funding.
Since it can be daunting as a founder to hear every day about peers and competitors raising flashy rounds, I thought this could be a good reminder of the fundamentals that are still needed to make a startup work – regardless of funding.
The ‘chasm’ is full of skeletons
Raising lots of money doesn’t guarantee success to a startup. In fact, it often creates false confidence and can mask fundamental problems that should be solved early.
Builder.ai is a great example, The company was a true innovator in the no-code/services space that enabled to democratise app development. Despite the massive war chest of over $450M raised from top investors and ambitious vision, the company announced today that it’s going into administration.
Or consider Northvolt, the Swedish battery manufacturer that raised a staggering $13 billion i debt and equity since 20216 (!), the largest venture backed company in Europe. The company recently filed for bankruptcy protection, its grand plans colliding with manufacturing realities and market dynamics that no amount of funding could solve.
In Israel’s bustling tech scene, we’ve seen similar stories unfold. Just this week, Noogata, the AI analytics platform that raised $28M from top-tier VCs, shut down after failing to find sustainable product-market fit. Coho, despite raising substantial rounds for its data platform vision, couldn’t crack the code on customer acquisition and retention. Wing Cloud, the productivity startup that generated buzz and funding, ultimately couldn’t scale beyond its initial traction.
Why startups fail
I’ll risk sounding like a cliche, but the numbers don’t lie. Approximately 90% of startups fail and it’s not news to anyone that failure is a part of the startup ecosystem. The reasons for why startups fail have stayed fairly consistent over time:
- 34-35% fail due to no market need or poor product-market fit
- 16-29% run out of cash
- 22% struggle with weak marketing strategy
- 18% face team problems
- 6% hit operational or technical issues
- 2% encounter legal or regulatory problems
Notice what’s missing from the top reasons? “Didn’t raise enough money” isn’t on the list. The leading cause of failure—by a wide margin—is building something people don’t actually want. The second most common reason, running out of cash, is often a symptom of the first problem, not the root cause.
These aren’t stories of founders who couldn’t execute or markets that didn’t exist. These are cautionary tales about what happens when funding becomes a substitute for fundamentals.
Money as Rocket Fuel, Not Life Support
The most successful founders I work with treat capital like rocket fuel: incredibly powerful when you know exactly where you’re going, potentially destructive when you don’t. Money amplifies everything. If you have solid unit economics, engaged customers, and efficient operations, funding accelerates your trajectory. If you don’t, it amplifies the problems and makes them more expensive.
More funding doesn’t solve product-market fit. It doesn’t fix team dynamics. It doesn’t automatically create demand where none exists. What it does is give you more time and resources to figure these things out—but only if you’re actively working on the right problems.
When you’re running on fumes, every decision gets scrutinized. You can’t afford to hire that expensive VP of Growth until you understand exactly what drives growth. You can’t build that fancy feature until you know customers actually want it. You can’t launch that marketing campaign until you’re certain it will generate ROI.
Sometimes the resource constraint isn’t a bug… it forces clarity, efficiency, and relentless focus on what matters most.
That being said, once a startup finds the beginning of product market fit and need to scale quickly to capiure the market, that’s when venture capital works best. It accelerates something that’s already working, not trying to figure out what works in the first place. When you have proven unit economics, clear customer demand, and efficient operations, funding becomes a multiplier. When you’re still figuring out your core business model, it becomes expensive experimentation.
The Real Success Metric
In a world obsessed with funding announcements and unicorn valuations, it’s easy to forget what actually matters: building something valuable that customers love and will pay for. Whether you do that with $10,000 or $100 million is less important than doing it efficiently and sustainably.
The companies that endure aren’t necessarily the ones with the biggest war chests. They’re the ones that figured out how to create value before they figured out how to raise money. And when they do raise money, they use it to amplify what’s already working rather than hoping it will fix what isn’t.
Remember: in the startup game, it’s not about having the most fuel. It’s about knowing exactly where you’re going and why you’re going to get there first.
He is a former General Partner at Google Ventures (GV) in Europe, former head of Google for Entrepreneurs in Europe, and founding head of Campus London, Google's first startup hub. Eze writes on Israeli tech, venture capital, artificial intelligence, and founder strategy.
He is also the founder of Techbikers, a nonprofit that brings together the startup ecosystem on cycling challenges in support of Room to Read.
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