Dear Advisor: How long will Fundraising take? (or) 8 steps you need to Know to Fundraise Successfully

December 2022, updated in January, March -- May, November 2023, and May 2024 for relevancy 

Having mentored over 100 startups at a number of accelerators, one topic (that understandably) comes up again and again: what do I need to know to fundraise successfully? What’s the expected timeline for getting a VC check?

I'm here to help you prepare, covering: what to expect, what fundraising is and isn’t, and how long things may take, so that you can create a fundraising strategy (and roadmap) that works for you.

I will assume that:

TL;DR: Please allow yourself 12-24 months to raise your next round; here's why.

Step 1: Evaluate if you’re Fundable

I hate to ask this, as this may be really hard to hear, but how scalable do you expect your company to be? That is, VCs invest when they expect a high enough ROI so that their 2 and 20 fund fee compensation structure makes sense. LPs give money to funds because they expect to diversify their portfolio of investments and get better returns than the market.

Do you expect your investors to be able to make a sizable (10x+) ROI by investing in your product, e.g. can you get a 10X+ valuation? Or, put another way, how can you help them make much more money than they've put in?

Step 2: Start with the End Goal of Raise

Now that we got that out of the way – and you’re fundable, start by understanding your end goals for the raise. That is:

Make sure to include these points in your pitch deck

Step 3: Understand VC Funds and Investment Thesis

One mistake I see founders make is assuming that every VC invests in every start-up – and, under this assumption, sends out their pitch deck accordingly. 

To help you identify what (specific) VC funds your start-up may or may not be a fit for, I've found that each VC firm tends to focus their investments based on all of the following:

Here are a few examples of how vastly different investment theses are:

To find out more about VC firms, check out:

Which ones are now a better match based on what you’re looking for, and what each of the VC firms is looking to invest in? 

Bonus tip: If you end up asking your network for introductions to specific VCs, this is something you should consider sharing (especially if the fit is not obvious), e.g. why you’d like an introduction to this particular firm/fund (above all other VCs)?

Step 4: Craft your Pitch Deck

You just got a warm intro – or your cold calls paid off – and you’re asked to share the deck. Another common mistake I see founders make is asking VCs for a signed NDA before sharing the pitch deck; they won’t; Brad Feld shares why. (As an aside, I also don’t sign NDAs for exploratory, complementary calls.)

Some firms see 8K+ decks per year (!); here's advice on how to stand out. Your pitch deck, at a high level, in layman's terms, should tell us the story of:

Major kudos if the story also builds rapport along the way – and lets us conclude that we need to invest in you now. 🙂

For more advice on pitch decks, please see these blog posts:

Step 5: Pitch deck due diligence 

At this point, someone on the VC side (or from their network) will do due diligence on your pitch deck, to see if there's a potential fit, and recommend that you move forward to the next step: a meeting with someone from the VC firm.

If you're not a potential fit, see if you can get feedback on areas for improvement. You can use this as an opportunity to touch base with the firm (and stay top-of-mind) as you move forward addressing the most relevant feedback to improve your go-to-market or product-market-fit (depending on your stage).

Step 6: Pitch to VC

At this point, you'll be asked to pitch in person or remotely.

This meeting will help the VC firm to evaluate the team and team dynamic, hold Q&A and evaluate if you're a fit, and then recommend you to the next meetings: a more in-depth due diligence of your company.

The 2 most common mistakes I see at this stage are: 

Topics that you may be asked about, either at a high level or with a bit more detail, especially if you haven't touched on it in the deck:

Don't forget to ask for feedback and/or advice. For a list of investors that welcome cold calls, please see this blog post.

Step 7: In-depth Due Diligence

You've made it this far, congratulations! 

At this point, the investment firm's team and/or its network of advisors/consultants will be scheduling a number of meetings with you, to do more in-depth due diligence to better understand and dive deep into your team, financials, technology, product, how far along are you actually, to better understand and risk, challenges and opportunities around how likely you are to deliver on what you promise. 

This stage may take weeks or a few months, depending on everyone's availability (from the startup team to the evaluating team) and how prepared you are to walk through the details at this stage.

Don't forget to ask for input and/or feedback here as well.

Step 8: Term Sheet 

You're almost there! Now it's time to outline and iron out all the terms around the investment by this particular VC firm; this document is called a term sheet, one per firm that's making an investment. 

I can't stress this enough: please find a lawyer you trust (yesterday!), one that has experience navigating and negotiating term sheets to help you understand every word in the contract and to advocate on your behalf.

This stage may take a few months as well, depending on the legal teams' availability on both sides as well as how many discussions and revisions you'll have. (For reference, in my consulting business, it takes an average of 3 weeks to iron out a consulting agreement that both sides are OK with – or walk away from the potential collaboration.)

Should conversations fall apart, as they sometimes do, this step restarts with the next potential investment firm -- and with each firm that's making an investment. That's another reason why it may take a long time to close the round!

Parting advice

Good luck!!

You're not getting a "yes" from investors. Let's rescue your pitch deck!  Please schedule a (flat-fee) session with me

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