Without question, raising capital is an art form. Just this week I was talking with a business-friend about how some founders seem to have no problem raising funding, while others never reach the goal line.
There are a variety of factors that help determine your chances for raising a round of funding. Things such as how good the idea is, the amount of traction you have accomplished, etc. Another key factor, that seems to help those that fit the bill, is whether or not the founder has had a successful exit.
Some founders turn to seeking out help from fundraising experts. Generally speaking, I don’t agree with this approach. There are a few reasons why you shouldn’t pay someone to fundraise for you.
Reasons why the founder(s) should lead fundraising
You as the founder need to drive fundraising. Why? Because you are the visionary, or voice of your business. It is almost impossible to replicate your excitement and vision for the business.
Having the founder, or founders, spearheading fundraising also humanizes you to investors. Investing in a startup requires trust that the founder is going to take good care of the investor’s money. An investors first chance to build a relationship with a founder is often during the fundraising process.
Also, founders are liable for claims made during the fundraising process. You don’t want some random person making false claims on your behalf just to try and land a deal.
Ways to get help with fundraising
If you really feel that you need help fundraising, consider the following options:
- Hire someone onto the team, so that they aren’t seen as an outside agent, to handle the more administrative tasks associated with fundraising. This could include things such as email campaigns, scheduling meetings, sharing your data room, etc.
- If you have multiple co-founders, create a workload structure that allows one founder to focus on fundraising while the other is focused on keeping the business moving forward.
- Leverage advisors. Forming an informal advisory board, made up of experienced entrepreneurs and well-connected professionals, is a great way to extend your fundraising team. If you have the right advisors on board, those advisors should have connections to investors.
- If you feel the need to hire a consultant, only pay them on a success fee basis. Avoid agreeing to an hourly or retainer payment structure. To be candid, there are instances where I have helped startup founders in their fundraising efforts. However, that is generally as part of a larger engagement where I am working with them on their pitch deck. I don’t take engagements where the founder is paying me strictly for direct fundraising activities.
- When your startup has reached the later stages of fundraising, often C and later rounds, it could then make sense to hire an investment bank or firm to assist in the fundraising process.
As a founder, you need to be driving your fundraising process. Less experienced founders look for outside help because they either don’t believe that they have a large enough network of investors or they don’t know how the process works.
I tell most of the founders I work with that they all have investors in their network. They may just be buried layers deep. So, don’t discount the value of your own network.
If you aren’t sure how fundraising really works, try to connect with other founders and ask about their experience. How did they go about fundraising? Where did they meet their first investors? What were those investors looking for in an opportunity?
By the way, I have an entire course that hundreds of startup founders have taken to help them better understand the fundraising process.
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