Eight Rules for Fundraising Timing: You Need Money to Raise Money

I always advise portfolio companies to get fundraising timing right. 1. The fundraising paradox is that you need money to raise money. 2. Start a new round before you have burned through half your cash. Do not foolishly wait until you have nothing left and must beg everyone for help. 3. Coordinate fundraising timing with your burn rate. If you burn cash too quickly, you will be fundraising constantly; a slight misstep can leave you struggling to raise money. 4. If investors think your next round is likely to go badly, this round probably will not go as you hope. If they expect a down round, they generally will not support this one, or will demand a substantial discount now. That starts a vicious cycle of shaken investment confidence. 5. Only with ample cash in hand can you negotiate patiently with outside investors. 6. First seek continued support from existing investors. Ideally, your shareholder structure includes shareholders able to provide stable, continuing support of at least 30%, giving you more breathing room in each round. 7. Produce visible results so investors come to you. Negotiating is easier than when you have to seek them out. 8. Do not give every investor an identical presentation. Customize it somewhat if possible. Investors care about different things; identify the needs of your ‘target’ investor and find a way to address them. (You would do some homework before interviewing with each company or developing a sales prospect, would you not?)