Fundraising as "6 months full-time" seems an impassable barrier
Shared by Touchgram_Andy · 6d ago · 4 comments

Multiple publications I've seen cite figures like the Blackbird article that says:

Fundraising is a six month, full time job for at least 1 founder

That's incredibly discouraging. I consider what I have and can achieve in 6 months of dedicated work building app features and traction vs losing that chasing a dream. It puts fundraising (again) on the back-burner.

Are they being overly pessimistic about the effort involved? It feels like this is part of a self-fulfilling prophecy that only startups with teams are venture-backable. Because, if you're a solo founder, you don't have that spare 6 months, or even a spare 3 months.

Brainsprays.com · 5d ago

Hi Andy,

First, thank you for being so honest in all of your posts here. Your comments and questions provide good insight into things we all have to deal with as we incorporate regular life into the not so typical life of a startup founder.

To your question - I would say the timeline depends on many factors (short answer).

TL:DR version (my opinion - that's all)

In general, almost anyone that hasn't been through a successful fundraising process underestimates the effort and the time required to get a deal closed (good materials, good prospects/introductions, great meetings/presentations setup, clean due diligence done, standard docs signed, real cash in your bank, certificates issued). The longer it takes, the more that can go wrong with you, your company, your co-founder, your customer, the economy, geopolitically - you name it. For this reason, someone has to apply pressure to the process constantly just like they would to a life threatening wound, based on my experience. When you let up, you screwup in a lot of cases and your company is worse off because you've still diverted resources away from customers but got nothing in return for it.

Venture capital is the least likely source of capital of any type (equity or debt) an entrepreneur can secure, based on my experience. Having said that, if you have the right connections (network), worked for the right company (early employee at a successful venture backed startup or senior employee at a well known venture backed company) or have some other glowing accomplishment (top tiered program in domain of a given fund), the timeline could be different. If you've done any of those things, you are probably one degree of separation from a decent VC and worse case two degrees.

Also, if you have an extraordinary personality, that may help you close angel money in a much shorter period of time. I've literally seen people with none of the things I claim are useful to close venture raise millions from individual investors based largely on their personalities and ability to quickly establish rapport. If a group of individuals really like you, that's a form of trust and it may very well be the most important factor for individual investors that are not part of a formal group.

Similarly, if your market is super hot and you are showing more progress than your peers, there are angels that will take a close look and some of those may make the leap. To be clear, when I say "Angel" I mean that in the older sense of the word: someone with the means and inclination to write a sizable check to a speculative venture (without a committee having to sign off on the investment).

A customer of ours (Alexa B2B side) just closed a round this week where all of the US based investors were individuals and the only "institutional" money was from overseas funds. It took almost six months to the day to close with COVID19. Without COVID19 I'm guessing it could have taken them a year to close real equity (not including bridges from previous individuals that put money into the company). This is because their market got hotter because of COVID.

The last couple of things I'll add is that I've also seen people raise Angel money quickly, on terms that were favorable (perhaps too much) to the founders but ended up with a company that would never (ever) be able to close early stage VC money. This is not always a bad thing, it really depends on management. If management runs a tight ship and exceeds customer expectations, it will show up in sales and ultimately positive operating cash flow (something very few venture backed companies ever achieve). But it can go the other way also, where absent the experience and discipline of professional money very bad hiring decisions are made and ultimately distract the company from focussing on it's customers.

Hope that helps. It's just my perspective though.

ptmn · 4d ago

Fundraising is very expensive. The real cost is time. For early stage startup, time is actually the most valuable asset for searching the right business opportunities. Mostly, non-scalable problems of a niche market.

Capital will help you buy time, but it is not the main facilitator. The article only reflects a partial view of the process. But yes, very time-consuming and very low successful rate.

@WOlefile · 5d ago

I agree, It's better to spend 6 months grinding and improving the product, get user traction so much that investors will actually come to you than cold emailing them. You'll be in a better position to negotiate the deal then

Option B is to just make a great product, get user love enough that theyd want to find you instead and a one sheet would suffice. Id have loved for pioneer to go all the way with the potential of this setup but it's likely just an evolved VC waste of time. Especially when it seems that maybe no one's ever gotten the $1m