50 QuestionsStartup general interestVenture Capital

50 Questions: How soon should I start raising my next round?

By October 23, 2012 No Comments

As you may recall Nicholas Lovell of Gamesbrief and I have been writing a series of 50 blog posts which we will then publish as a book designed to help entrepreneurs navigate the sometimes tortuous process of raising money. Our hope is that readers of our book will find a straighter and quicker path to getting cash in the bank.

You can find the original rationale behind the series here, and the list of questions here. We welcome your comments on any and every aspect of what we are doing.


Much as a good blogger should always be posting, a good entrepreneur should always be fundraising. The best deals on both sides come when a good relationship has been built between investor and entrepreneur, and calling a total halt to engaging with investors only to surface again when you want money is no way to build a relationship. Remember that VCs invest in lines not dots.

So the question then, is not when to start and stop fundraising, but when to dial up and dial down the effort, and what to do at each stage.

I like to think of fundraising as having three different phases, a keeping the relationship ticking over phase, a warming up phase, and a full on fundraising phase.

Keeping the relationship ticking over is about maintaining occasional contact with 10-15 of your favourite investors. Good ways to do this include turning up to events where they might be present (particularly if you have organised the event or can get a speaking slot), helping them evaluate deals and people, engaging on social media, getting written about in press that they read (e.g. Techcrunch), and sending occasional emails announcing your good news. None of this should take too much time, and try to include some of the more personal methods (the first three on the list).

In the warming up phase you meet VCs to remind them why you are important, update them on your progress, tell them a round will be coming, and gauge their interest. You are in listening and learning mode. In this phase you will build a shortlist and get feedback on how you tell your story. If you are a hot company enterprising investors may try to beat the competition and seek to invest before you enter the full on fundraising phase. Happy days.

In the full on fundraising phase you prepare a formal fundraising presentation, go see investors and pitch your heart out. In the first meeting you should look to qualify out those that are unlikely to invest and understand and progress the process to get a termsheet from the others (more detail on this here). Each subsequent meeting should have a similar objective.

I wrote before that the average European company should allow 6-9 months to raise capital, and I still think that’s about right. In the US it’s 3-6 months, but processes take longer here, largely because there is less capital in the market. Some deals close more quickly of course, but unless you have lots of investors telling you they are keen to invest it would be a mistake to rely on that. That means moving into the warming up phase 6-9 months before you run out of cash. Hot companies with good investor networks can figure on the lower end of the range.