Hi there! Over the past few years, I’ve realised that there are many things about fundraising that no one tells you until you’re in the middle of it. This often catches founders out and makes rounds much longer than they need to be. I’m creating this blog series to give founders a better understanding of the fundraising process and some tips on making the process more efficient. It won’t be an exhaustive list of everything you need to do or know for fundraising, but it will try to add some layers on top of what others have already put together.
I’m aiming to make this a weekly blog that will last for about 10 weeks. Follow me on Twitter / LinkedIn to see when I post new instalments.
Lastly, your mileage may vary and I’m happy for new and experienced founders to give their thoughts. Feel free to open up the debate on Twitter / LinkedIn or email me with suggestions to improve the guide.
Why I know a little bit about fundraising
Fundraising is not something founders are born knowing. It’s something that we all have to experience and learn along the way, including the many traps. That said, it is something that everyone can learn, and learn to do well. Fundraising is mostly about understanding the journey and being prepared for the knowns and unknowns.
Why do I know anything about fundraising? Well, I’ve seen it from every angle. I’ve been a founder, a lawyer (private practice and inhouse) and an investor (angel and VC). While a lot of my experience started out as a M&A lawyer at Allens, I probably learnt the most from running Culture Amp’s Series B, C and D capital raises. During those rounds I learned a lot of lessons on what to do and what not to do…
Why getting it right matters
Every founder that’s been through fundraising will tell you that it’s a major distraction. Raising capital might be a necessary distraction for many startups, but it’s not their core purpose. As Didier Elzinga used to tell us after every fundraise, it’s not the money that is important, it was what we can do with that money. The goal for every founder should be to make the fundraising process as short as possible so they can get back to their core mission: growing the business.
The fundraising phases
The first thing to understand is the overall fundraising journey. Essentially, fundraising process can be divided into three phases:
- Phase 1: Building the round
- Phase 2: Closing the round
- Phase 3: Building the next round
Each week we will explore a particular topic within a phase, trying to get to the important elements that you really only learn from experience.
In this section I’ll discuss some of the key elements to starting your fundraising process. How to decide what type of round you want to do (eg priced round or SAFE), how to find new investors and how to talk to existing investors. I’ll also include some practical tips for commercial due diligence and discuss what role a term sheet plays in the process.
In this section I’ll get into more practical tips, including the documentation required to close a round, how to run due diligence and when to get investors involved, or not involved, in the process. We’ll also discuss whether it’s better to run a staggered or simultaneous close.
In the last section, I’ll look at the final pieces to closing a round and how your previous round can influence your next round. We’ll also discuss why it’s important to keep the promises of the previous round and how you can keep investors up to date on your progress.
In next week’s blog, we’ll dive right into one of the big issues for founders: priced rounds versus SAFEs. We’ll get into the pros and cons of each type of fundraising and what factors to consider in deciding whether to do a priced round or use a SAFE for your company’s next fundraising round.