Fundraising is still business as usual
In this region, expect around 2-4 months for an equity round to close and for money to be in the bank. Furthermore, it is a mistake to think that you can time fundraising, so you should always be fundraising.
Fundraising starts by introductions and building relationships. Would you give money to someone you just met? It takes a little time to build trust and credibility, get started so it is not an issue when it comes time to thrash out those calculators.
It is not done until money is in the bank
We have seen deals announced in the press fall through at the last minute. A lot of external circumstances can cause a deal to fail that often have nothing to do with the business. Look at COVID19 for example, I personally know of hundreds of deals that fell through due to a sudden global health crisis.
Investors do not evaluate you only against your business competitors. They are also thinking about alternative investment opportunities. Funds are a limited resource and backing one start-up means not investing in another. In some cases, they have other portfolio companies that require follow-on funding and that divides the pool even further. In other cases, they have portfolio companies that compete with your business
Right now investors are thinking about the future post COVID19. If they feel like you will not be able to raise follow-on funding because the investment climate is bad or there will not be enough players with the bandwidth to support the industry you are in, they will not risk investing now, even if the future remains unknown.
Investment firms are made up of people and there are often internal dynamics that can affect a deal. General partners that don’t see eye-to-eye, limited partners who exert pressure or attempt to influence direction, timing of funds and expected returns are all some of the factors that could impact whether a deal goes through.
Often, there is nothing you can do to mitigate these circumstances. The important thing is to have a backup plan and know that it is not done until money is in the bank.
Investors are rational players, but human beings nonetheless
Investors are not your close friends, they are not here to help, and they do not owe you anything. They will write you a check only if they think you will make them money. Having said that, they are still people and they are subject to the same emotional subjectivity as the rest of us.
Start by selling yourself, establish trust and credibility, and establish domain-expertise. Be sincere, the investor across the table is just like you. They have social lives and families, they have all the same fears and insecurities you do.
Be honest. There is no such thing as a perfect business and there is no point in trying to pretend that your business has no weaknesses. The more you expose the flaws of your business, the better for you. It demonstrates understanding of your business and what needs to be done to fix it.
After all, you should know more about your business than the investor and if you don’t, then they will not invest in you.
The Private Investment Group
At The Private Investment Group we believe that progress can always be made. We understand that Projects around the world are still trying to connect to Funds & Families - If you are raising capital whether you are a Fund or a company, Seed Stage or Series C get in touch at Obediah@theprivateinvestmentgroup.co.uk