Day 3’s lesson might not be relevant to most Bloxers right now, but is essential knowledge for their future. We’re talking about later-stage fundraising—something many will eventually face as they grow. After breaking down the lesson, the challenge kicks off with a fill-in-the-blank outline on venture capital fundraising, pushing Bloxers to grab their calculators and crunch some serious numbers. Mentor consultations follow, allowing them to dig deeper into the “why” behind their metrics. But the real excitement comes as night falls, leading to the third Bloxoff of the season. With drama brewing between the judges over who should win and an unprecedented face-off, this is one you won’t want to miss!
And of course, you don’t want to miss this valuable lesson…
We introduce the concept of "funding tranches," where founders sell portions of their business at different stages instead of giving up significant equity upfront. This phased approach helps maintain ownership while hitting key milestones. Tranches also reduce risk for investors by releasing funds based on proven traction, and investors at different stages can signal validation for future rounds.
The dynamics of venture capital funds are explained, covering Limited Partners (LPs) and General Partners (GPs) and introducing the Rule of Thirds. LPs are the investors who provide the capital, while GPs are the managers responsible for investing that capital in high-growth ventures. The Rule of Thirds is introduced as a guiding principle in VC funds, where typically one-third of investments are expected to perform very well, another third may break even, and the final third may not yield returns. This balance shapes how funds operate and allocate risk.
We explore the lifecycle of a venture capital fund, beginning with the fundraising stage where GPs secure commitments from LPs. Once the fund is raised, GPs deploy that capital by investing in a portfolio of startups. Over time, as these companies grow and some are sold or go public, the fund starts liquidating these assets, returning profits to the LPs. Understanding this lifecycle is crucial for entrepreneurs seeking VC funding, as it explains why VCs are focused on companies with high growth potential—they need to generate returns within a limited timeframe.
Angel investors, who typically invest in early-stage companies, are also discussed. These individuals often provide crucial seed funding before VC involvement. There are two main approaches angel investors use: pooled money and road shows. In the pooled money model, a group of angels contributes to a single fund that is invested in multiple startups, reducing risk for each individual. The road show approach involves entrepreneurs pitching to multiple angel investors, who then decide individually whether to invest. Both models offer unique dynamics and can play an important role in early-stage funding.
Entrepreneurs can prepare for major fundraising rounds by demonstrating traction—clear evidence of growth and market validation. They also need term sheets and subscription agreements—critical documents in the fundraising process. Term sheets define the valuation of the company, the number and type of shares being issued, and how power is distributed among investors and founders. Subscription agreements formalize the deal and outline the legal commitment between the investor and the company. Together, these documents shape the terms of the investment and help both parties understand their roles and expectations in the partnership.
Later-stage angel investors and venture capitalists only back companies that have demonstrated strong growth potential and significant traction. They need to see not just a great idea but concrete evidence that the company is scaling quickly, has market fit, and is on a clear path to substantial revenue.
There’s a narrow window when you qualify for this type of investment. If you wait too long, your company may grow beyond the point where investors can afford to buy in. The key to success is striking at the right moment when your valuation and traction make it attractive for both parties, ensuring that the deal works on both sides.
Breaking down funding into tranches allows founders to stay focused on immediate, achievable goals rather than being overwhelmed by the long-term vision. This approach helps founders adapt to changes along the way, while always aiming for the next milestone, rather than getting lost in the distance of the final summit.
Each stage of investment acts as validation for the next. Early investors signal to later-stage investors that your business is worth backing, providing social proof and credibility. The more validation you have from earlier stages, the easier it becomes to attract larger amounts of capital in later rounds.
When approaching potential investors, it’s important to reach out to all of them at the same time. This 'Blitzkrieg' approach creates a sense of urgency around your business, pushing investors to act quickly. It keeps the focus sharp, accelerates the fundraising process, and ultimately gets you back to growing your company—whether you’ve secured the funding or need to pivot.
Would you rather be on it?
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Chase Curtiss is an innovative digital health expert and clinical exercise physiologist with a strong expertise in developing mobile software solutions within the medical, sports and fitness markets. Chase has an academic and research background in biomechanics, exercise physiology and neuroscience with published research in each field. Chase has been recognized as a pioneer in the mobile health space with the first ever FDA clearance for a software only mobile medical device. He has been highlighted in the Wall Street Journal, Bloomberg TV, Forbes, Pando Daily, Mobihealthnews, the Grey Sheet and many other mainstream and medically focused publications. YouTube has also named Chase NextUP for his work in video instruction content reaching 30 million viewers. As an expert in the field of digital healthcare, Chase is also a regular speaker having presented for events put on by Blue Cross Blue Shield, AARP and Chase was the 2014 commencement speaker for Wichita State University.
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