Timing Your Fundraising Efforts
The real reason everyone is racing for capital at the end of their runway.
For some reason timing is something that most hunters never quite figure out. For me I can’t understand why that is, because is the founder of the company you should be thanking both about today, but also about what the company looks like five years from now, and as a result there should never be a surprise that you are running out of money. However time and again I hear of, and talk to founders who need money within either a couple of weeks for a couple of months. However they don’t take into account for some reason that equity, raising an echo
That raising an equity round will likely take six months. At a minimum, they should be planning for 6 to 9 months in order to account for the process of bringing investors along, getting them comfortable with your company, letting them see the development of the company overtime and more.
On the other hand, reasons that capital can be accomplished and a much shorter timeline, however the requirements to do so I’m much more quantitative and strict. And just as you’d expect, there are certain requirements you must meet and documentation you must have in place in order to obtain the type of Financing.
Furthermore, timing should not be the driving factor behind what type of financing you obtain. Running out of time and then turning to the debt market in order to obtain some growth Capital is the last thing you want to do. Instead you should be doing the trajectory of your company as far out into the future as possible, and then determine in the optimal type of financing you’ll need in order to hit the growth rates that you’re aiming for, and or achieve the personal lifestyle outcomes that you are optimizing for. Once you understand the ideal type of financing for a company, try to tweak the variables that are a factor in obtaining it, and plan far enough ahead that you can both properly apply for the funding, and also allow for a contingency in, or a delay in obtaining that, which will inevitably happen.
Why is it that founders are always running out of time? My hypothesis is that they do actually see the need for capital coming down the road, but avoid the hard decision of applying for it. It’s a very complex calculation and founders are generally optimistic to begin with. So inevitably they lean on that optimism and avoid a difficult decision which I believe we can all understand. This is why we are in the process of building a platform to text this person away from founders. We will apply for capital on their behalf and have an on we will have an ongoing list of offers available to you so that you can call that Capital down in any form that’s relevant at any time.