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The Last, Arduous Mile of Raising VC

For startups, raising capital is tough slogging. From the outside, the courtship with VCs may look glamorous but it consumes a lot of time and energy.

As well, it can an enormous distraction because a startup’s founders have to spend a lot of time away from the business.They may have to travel, there are a never-ending series of meetings and presentations, and just when things start to look promising, things can go off the rails.

If a startup isn’t careful, raising capital can be dangerous because it shifts the focus away from the business.

What makes the process even more exacerbating is the “last mile” when an investment is tantalizingly close to happening but the discussions go on and on.

The due diligence, the reference checks, and the crossing of the T’s and dotting of the I’s can stretch out the process to point when a startup’s founders are exacerbated, frustrated and wondering if a deal is going to happen.

For startups that find themselves in this situation, it is important to do two key things: don’t lose sight of the prize you’re seeking, and make sure someone is responsible for keeping the business moving forward in the event a deal doesn’t materialize.

In many respects, raising capital is a journey. It can happen in a heartbeat or it can become a marathon. But if attracting venture capital is what needs to happen, a startup needs to stay the course and follow through.

At the same time, the business can’t be neglected or treated as a secondary consideration. Deals fall apart of all kinds of reasons – the economy tanks, investors become skittish when push comes to shove, or another deal emerges that is more attractive.

For a startup, it means running the business that takes into account two scenarios: the deal closes or the deal doesn’t happen. At the end day, the business needs to move forward either way.

While raising venture capital is seen as a major accomplishment, making a deal happen is a huge undertaking. If it happens, it  provides a startup with the financial muscle to aggressively grow. If it doesn’t happen, life goes on and so must the business.

Any thoughts on how startups should handle the “last mile”?

 

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