Most founders we work with believe that they’ll close their round in a few weeks. Frankly, some think it’ll take them as little as 1-2 weeks. In 9 out of 10 cases, that’s wrong, and it can be a fatal mistake.

Why? Because you’ll start raising way too late and raise too little money. The first implication is dangerous for obvious reasons: you’ll run out of cash before you’ll have had the chance to close your round.

The second implication is more sneaky. Instead of raising 18-24 months of runway, of which you’ll need the first 12 months to make significant enough progress as a business to be ready to raise your next round, you’ll be tempted to raise 12 months of runway. Why not, right? It reduces your funding ask and should make it easier to close your round.

Then, technically, 6 months into your 12 months runway, you have to go out and start raising your next round again. In just 6 months, however, you are very unlikely to have achieved the milestones you needed to be ready for your next round. The result? Investors give you the "come back later", you fail to raise capital, and ultimately run out of cash – same result as with the first reason, but different root cause.

Exceptions? Yes, it can go fast(er), but don’t plan for miracles. Instead, plan conservatively, expect that it’ll take you 6 months to raise and adapt your planned cash burn and funding ask accordingly.

How come it's so long? First, you need to get ready with a pitch deck, investor lead list, and more. Then, you need to network, send cold emails, get intros, etc. You know how sales is, it takes time for folks to even just read your email. Let alone discussing your pitch deck with colleagues and building conviction around your investment case. You’ll have to follow up 2-3x times, and that alone can take 2-3 weeks. You need to find time for your first call, and then the investor needs to decide whether they want to keep talking to you. They may ask you for more information or keep discussing your case internally. Then they may want to have a workshop with you to dive into certain aspects of your business. From there, they may have to pitch your case to the investment committee. And that doesn't yet account for short-term changes of priorities at the fund you're talking to and changes in market conditions overall. Then negotiations, due diligence, etc. start. Even just for the legal stuff to be sorted out and the money to hit your account can take 3-4 weeks.

How can you expedite the proecss? Come ready, have materials at hand to answer various possible questions. Similar to sales, you’ll want to have an investor CRM to not lose track of leads. Look for investors that are looking for start-ups like yours and are known for fast decision-making processes. It's never efficient to spend your time with unqualified leads and don't rely on any given lead in your pipeline. Finally, try to create FOMO, e.g., by locking in investors and then telling others that your round is about to be full. It's difficult to do but the effect of urgency and scarcity is significant in all areas of business.

Don't get caught off guard. Plan wisely.

Talk soon,

Rafael

PS: How do we help you? My team and I build pitch decks, review existing decks, and offer pitch simulations. Get in touch if you or someone you know may be interested.

PPS: This mini course is based on our popular “Fundraising & Pitch Deck” newsletter.