Scott Hartley on the “Billy Madison” Approach to Fundraising
Why being the most mature company at your stage, is a good thing
Startups are often encouraged to move quickly from one fundraising milestone to the next. Each round is seen as validation, momentum, and progress. But moving too fast can create pressure that compounds over time, especially when valuation begins to outpace traction.
Scott Hartley outlines how this dynamic often leads to one of the most difficult outcomes in venture: the down round. When companies raise ahead of their metrics, expectations increase faster than the business can support. Eventually, that gap has to close, and when it does, it can result in dilution, complex terms, and strained investor relationships.
The article introduces what it calls the “Billy Madison approach” to fundraising. The idea challenges the conventional push to advance as quickly as possible. Instead, it suggests that founders should remain in their current stage longer, using that time to mature, and build strength before moving up.
The concept draws from the idea of “staying back a grade” to become the strongest in the class, rather than the precocious student skipping grades. In startup terms, this means continuing to operate at Pre-Seed or Seed while outperforming the expectations tied to that stage. Rather than stretching to meet the demands of a higher round, companies position themselves as leaders within their cohort.
This creates both strategic and practical advantages. Companies that exceed expectations and key metrics at their stage often have stronger leverage when they do raise. They are able to negotiate better terms and avoid unnecessary complexity that can come with larger, premature rounds.
The piece also emphasizes the importance of optics. Even small differences in raise size and stage name can shift how a company is perceived. A round that moves slightly beyond typical Seed levels can bring Series A expectations, changing how performance is evaluated. Managing that boundary carefully allows founders to control both narrative and trajectory.
Beyond optics, the approach reinforces fundamentals. Taking more time at the current stage allows founders to refine product, build a repeatable sales motion, define customer base, and develop a clear understanding of unit economics. These elements become critical as companies scale and face higher expectations in later rounds.
The takeaway is not to avoid raising capital, but to align fundraising with readiness. Growth should be supported by traction, not just ambition. By pacing rounds thoughtfully, startups can build stronger foundations and move forward with greater confidence when the time comes.
Read more on Scott Hartley’s Substack.