5 Minute Biz Magic: Put the Fun Back Into Fundraising
Fundraising can be a mysterious, anxiety-inducing pursuit for many entrepreneurs.
Whether accepting a personal investment from a family member or longtime friend, or watching a wire transfer from professional investors for hundreds of thousands or a few million dollars transform your business resources, fundraising can be intimidating, frustrating, and overwhelming.
But it can be a time full of learning, growth, and strengthening of the business. That’s why we think that fun has a place in the fundraising process. Actually, we really enjoy the fundraising process, and helping entrepreneurs learn the ropes – check out our Fundraising Prep program here.
10 Upsides of Raising Funds
Fundraising isn’t for every business – some are truly better off solely operating from revenues and a solid business model. In fact, startup guru Steve Blank says that the purpose of being a startup, is to stop being a startup as soon as possible, by finding a workable business model. So even startups that do succeed in raising capital, will also eventually have to land on a replicable business model, too. Short-cutting that process, by skipping fundraising and focusing on revenue-generation, is a very viable way to fund your business endeavors.
But if you must raise money, here are 10 upsides of going through fundraising:
- Getting connected to sharp business professionals in your industry, whether mentors, investors or advisors
- Pulling your team together by clarifying roles, responsibilities, and filling any gaps.
- Spending serious time dialing in your financial model and projections.
- Upgrading your banking system, including making sure your business account, credit, and accounting systems are in place.
- Formalizing an operating structure and a governance board that can help direct the company’s future paths
- Requiring fast-paced growth in a compressed period of time, so that the business begins leveling up to match investment performance standards
- Attract senior talent to join the management team due to an increased level of operations
- Gain alignment among your founders, staff, and service providers, to aim toward specific revenue goals
- Secure high profile press pieces, which increases credibility and becomes leverage for sales conversations
- If successful in fundraising, gain credibility in your sector and in the startup community, for having accomplished something less than 5-10% of startups are able to do
With all those benefits (and #1-8 above apply to the pre-funding process, which means you’ll benefit from attempting fundraising, even if not successful in securing private capital), there’s a lot to love about fundraising. It should be a time of growth, learning, and camaraderie among the founders / management team and staff.
Obviously fundraising isn’t easy, mostly because it requires a young company to operate in a more advanced style than what they have done previously, usually due to constrained resources; and also because the effort to reward (ie reach out to 100 investors to close a deal with 3-5) is so fraught with rejection, unresponsiveness, negative critique, and other challenges.
So how can you keep a good perspective, and enjoy the process of fundraising, even while staying focused through the challenges? Here are a couple of tips to keep your gaze up along the way:
- Limit the time that you give to fundraising, to no more than ~25% of your work hours. (10 hours / week, 40 hours / month, including pitching, travel, investor meetings, etc.) Even though fundraising will take everything you can give it, the entrepreneurs who stay focused on sales and managing the business, are more attractive to investors and investment groups. So don’t let the fundraising efforts drown out the actual business activities.
- Make time for re-energizing yourself and the team. Whether that’s from taking time away on the weekend or a night off, or scheduling a team dinner, get together, retreat, or goofy team activity, R&R is essential for staying pumped and energetic during fundraising.
- Consider fundraising to be your backup plan, not your primary plan. Since most companies don’t secure funds, but any company who generates sales can be viable, keep the right perspective. Your business dreams aren’t dependent on any single investor or investment group coming on board. It depends on you and your customers, and the odds are actually in your favor.
- Give up when giving up is the most rational thing to do. Sometimes you will make a full court press at fundraising, and things just don’t come together. Most investment deals occur during two seasonal windows: January through June, and Sept through early Dec. If you’ve missed the window, it might be time to focus on something else for some time, re-tool your approach (either the fundraising strategy / story, or changing your business model / operational strategy), and then coming back to fundraising when you can get more traction. Knowing when to move forward and when to pull back is a key part of not landing in an existentially frustrating cycle of doom where investors are happy to be meeting with you, but are not willing to write checks – the most likely path to fundraising becoming a truly negative experience for you as an entrepreneur.
If you’ve made it this far into this 5 Minute Biz Magic article, awesome! I like to leave a challenge – so here’s this week’s: go back through that list of 10 benefits, and 4 ways to keep fundraising fun, and pick two things you’re going to work on this week. And let us know how it goes – drop us a note at firstname.lastname@example.org, we’d love to hear about your experience applying this skill.