A Reminder for Would-Be Founders: It Takes Time to Raise Money
Startups and other companies seeking financing often look to venture capital firms to raise funds and provide strategic assistance in the growth of their business. Founders should be aware that the funding process can take longer than anticipated.
Before seeking meetings with investors, founders should develop thoughtful, concise pitch decks that summarize the essentials of the company, including its purpose and overall vision for achieving its goals. Clarity is crucial—a streamlined narrative helps investors make decisions. A good pitch deck must be carefully prepared, as investors will not spend much time reading decks loaded with unnecessary information. Founders should instead focus on forming a cohesive narrative that clearly describes (among other topics): the problem being addressed by the business, how much money is needed, and why the timing is right for an investment. The type of information included in a pitch deck will also depend on the type of investor sought and their experience in the industry.
Finding investors may present another hurdle to founders seeking capital. Many investors are approached through unsolicited emails or calls, but founders are more likely to get a response through an introduction from a colleague or fellow advisor. Founders should be prepared for the possibility that setting up an initial meeting may take weeks in and of itself. Some founders have reached out to more than 60 investors before having even one engage; those that do engage almost always require multiple follow-up meetings and discussions. As a result of those meetings, the process may stretch onwards of weeks depending on several factors, including the investor’s schedule and interest in the business.
Once initial discussions begin, the process to raise money and ultimately close on an agreement may take several additional weeks. Although drafting a term sheet does not guarantee that a deal will be consummated, it does represent a significant step toward closing in the investment process. Founders and investors can expect to devote much of their time and attention to developing a term sheet’s contents. Upon signing, both parties spend additional time in the leadup to closing as they proceed to diligence and financing matters.
Seed fundings provide another avenue for companies to raise capital. Seed fundings are more modest compared to larger venture capital fundings and are generally less formalized in structure and take less time to complete. However, because seed investors typically present less sophisticated operations than their venture capital counterparts, they may be more difficult for companies to engage. As a result, companies may be able to obtain seed money more quickly from fewer investors but may also fall short of the full amount they wish to raise, extending the overall funding timeline.
Before seeking meetings with investors, founders should develop thoughtful, concise pitch decks that summarize the essentials of the company, including its purpose and overall vision for achieving its goals. Clarity is crucial—a streamlined narrative helps investors make decisions. A good pitch deck must be carefully prepared, as investors will not spend much time reading decks loaded with unnecessary information. Founders should instead focus on forming a cohesive narrative that clearly describes (among other topics): the problem being addressed by the business, how much money is needed, and why the timing is right for an investment. The type of information included in a pitch deck will also depend on the type of investor sought and their experience in the industry.
Finding investors may present another hurdle to founders seeking capital. Many investors are approached through unsolicited emails or calls, but founders are more likely to get a response through an introduction from a colleague or fellow advisor. Founders should be prepared for the possibility that setting up an initial meeting may take weeks in and of itself. Some founders have reached out to more than 60 investors before having even one engage; those that do engage almost always require multiple follow-up meetings and discussions. As a result of those meetings, the process may stretch onwards of weeks depending on several factors, including the investor’s schedule and interest in the business.
Once initial discussions begin, the process to raise money and ultimately close on an agreement may take several additional weeks. Although drafting a term sheet does not guarantee that a deal will be consummated, it does represent a significant step toward closing in the investment process. Founders and investors can expect to devote much of their time and attention to developing a term sheet’s contents. Upon signing, both parties spend additional time in the leadup to closing as they proceed to diligence and financing matters.
Seed fundings provide another avenue for companies to raise capital. Seed fundings are more modest compared to larger venture capital fundings and are generally less formalized in structure and take less time to complete. However, because seed investors typically present less sophisticated operations than their venture capital counterparts, they may be more difficult for companies to engage. As a result, companies may be able to obtain seed money more quickly from fewer investors but may also fall short of the full amount they wish to raise, extending the overall funding timeline.