7 avoidable capital raising mistakes

2 responses

  1. Mark MacLeod says:

    I’d be remiss as a startup CFO if I didn’t comment on this.

    These all definitely count as sins. I have seen or heard of all but #s 5 and 6 being committed.

    I think you’re missing a frequent one: Serial pitching. This is when people pitch a fund or two and see these discussions through before adding new funds to the pipeline.

    VCs just can’t say “no” (at least most VCs). Inexperienced entrepreneurs might actually think they’re in a deal cycle, when in reality they’re not.

  2. My number one pet peeve is people who don’t do a bit of research on a potential funder before the pitch… Marketing 101… Know your audience. All funders are different — figure out which funders fit your company in terms of (1) stage (2) industry sector (3) geographic market etc. This information is readily available on most VC/venture debt firm websites.

    Identify, before the pitch, what the funder cares about. For example, Mark mentions financials above. In contrast, in a recent blog post (http://blog.techcapital.com/2008/08/25/venture-…), Tim Jackson at our firm said:

    “We get sent some massive spreadsheets and while we appreciate the hours (or days) that went into detailing the information, it is not something we need to evaluate an opportunity. The reality is, that with the experience we have, we can usually ballpark the financing requirements with a few simple questions. Eg Q – how many people do you plan to hire. A – 10 FTE. Q – How long do you think it will take to get to Beta. A – 12 months. Assuming you hit your plan, we know you will need approximately $1.25 million, so allowing for slippage and capital to fund the period between beta and next fundraising round we will probably assume this will be a $2 million initial investment.”

    We invest at the seed/early stage of a company’s development so it is almost impossible to pull together somewhat accurate financials.

    Also, the entrepreneurs we work with often have no office or staff… 🙂

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