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Top five typical frustrations and confusions in the fundraising process

If you’ve been paying attention you will know that Nicholas Lovell and I are writing a book for entrepreneurs who want to raise venture capital. It’s tentatively titled Get Funded. We are now preparing to shoot a promotional video which opens with five frustrations that entrepreneurs frequently encounter when they embark on the fundraising process, expressed as questions. Then it will cut to the second section where Nicholas and I give answers. The idea is that these two opening sections will illustrate the fundraising problems we are seeking to alleviate and show that we have some good content to offer.

These are my best guess at those to five frustrations and our one to two sentence response.

1. What does she want to see in my pitch?

She wants to see you present a confident and convincing story about how you are going to build a big business. Get the story right and you will get the chance to fill in the details later.

2. How much money should I ask for?

The amount that is right for your company, generally an amount that allows you to significantly increase the value of your business with a decent cushion on top. Pitching the amount that you think fits the investment size of the VC you’re talking to is putting the cart before the horse and will either make you look bad or your company will end up with the wrong plan and the wrong amount of money.

3. We were getting on great, but I haven’t heard from him for ages, what does it mean?

It means you should chase him for an update. If after a couple of chases you still haven’t heard anything it probably means they aren’t interested, much like that girl/boy you were sweet on who didn’t return your calls when you were 13. Console yourself with the fact that you probably didn’t want to partner with the sort of person who doesn’t return calls anyway.

4. What on earth does this termsheet mean with it’s liquidation preferences, anti-dilution and protective provisions?

Like many industries venture capital has developed its own language which is confusing when you first come across it. Most of the concepts are actually pretty simple when you get into it. For example, liquidation preferences are financial structures whereby rather than just getting a share of the company investors get their money back first and then get a share of the company on top.

5. Is this VC going to take control if I let her on my board?

Probably not, but you should ask her, and ask to speak with people at other companies she’s invested in to find out. Good VCs know that the best way to make money is to back great entrepreneurs and help from the sidelines whilst they do their thing.

Any and all thoughts on the above appreciated.

  • Andrew Hall (sumdog)

    How about: How many investors do I need to see before I get an investment?

    The highly successful Fanduel CEO, Nigel Ecceles, recounted that he saw 84 before gaining an investment.

  • http://www.theequitykicker.com brisbourne

    That’s a good one. Also – ‘how long will it take?’
    tks

  • Andrei Sharky

    When do investors usually take control of the board? If you aren’t doing to well even earlier as a condition for more money ? So not just some special clauses but board majority?

  • http://www.theequitykicker.com brisbourne

    Investors can typically only make a proactive move to formally take control of the board if the company needs their money and they demand control as a condition. The situation I was getting at here is the more subtle one where an investor dominates by force of personality.