Raising Capital—How Long Should It Take?
Do you know the number one enemy of most start-up business failures?
It’s time. How long it takes to get things done. Product development and testing. Legal and regulatory approvals. Negotiating sales. Hiring. Raising capital.
The length of time that these things take is always longer than most senior executives estimate; sometimes significantly longer. So how much time should you allow to raise a round of capital?
Questions
I attended a lovely BBQ this past week at a colleague’s house, with senior executives—mostly CEOs and CFOs—of private companies from the SF Bay Area. I now know what it must feel like to be a doctor, once you tell people what you do for work.
Founder: “Excuse me. Did I overhear that you help companies raise money?”
Me: “Yes. I also work as a trusted advisor on business strategy, increasing company value, developing investor pitch decks, and as a consigliere to C-level executives.”
Founder: “We’ve been in business for three years, raised a $2 million seed round, and have been trying to raise an A for the last nine months. What’s happening in the markets? Are VCs not investing right now because of Trump?” I smiled.
I had similar conversations with three other firms that night, in different levels of depth, all stymied that it was taking them longer than three months to raise a round of equity. All of them wanted to know the answer to a burning question: How long should it take to raise a round of equity?
Expectations
Founders frequently have unrealistic expectations in three areas when it comes to raising capital, namely:
Their level of expertise in executing a raise.
How long it will take.
How much it will cost.
Key Point: Raising capital requires that you have the cash to go through the process. Don’t wait until you’re running on fumes before you start a raise—you’ll likely fail.
Next week, we will look at setting a timeline for the process and how to move forward.
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Until next week!
All the best,
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