Investor Charles Hudson: Avoid These Mistakes to Secure Funding

Charles Hudson, a venture capitalist with over a decade of experience investing in early-stage startups, recently appeared on TechCrunch's podcast "Build Mode" to discuss the common pitfalls founders should avoid.

One of the biggest mistakes is optimizing for high valuations over prudent planning. Hudson notes that while a high valuation can attract media attention and legitimize a company to other investors, founders must be realistic about the expectations they set. The real risk is that founders become "prisoners of their own company" – investors expect them to build something worthy of the large check, not just return the money.

Another mistake is failing to conduct proper due diligence on potential investors. Hudson advises talking to portfolio founders who have worked with the investor to verify claims about recruitment, go-to-market support, and platform connections. Remember, VCs are courting you as much as you are courting them.

Third, many founders don't know whether venture capital is right for their business. Not every great business is venture-scale. Venture capital only works if the company can return the fund. Hudson has become more direct in telling founders what venture capital requires and asking if that aligns with their desire.

Finally, Hudson highlights that the fundraising environment has changed dramatically. Investors are now comparing startups not just against last year's startups, but against the fastest-growing AI companies in history. Even startups doubling, tripling, or quadrupling are hearing that their growth is "good but not great."

The new season of "Build Mode" is available on Apple Podcasts, Spotify, and other platforms, with new episodes every Thursday.