A few months ago while I was still working at “the startup,” I came to the realisation that fundraising was one of the hardest things a founder would do on his/her startup journey. So I (small me), decided to do something about it. And by do something I mean I took it upon myself to work with founders on their fundraising journey, hold their hand through the process, advise them, review their pitch decks until it was ready, introduce them to investors, lobby for them and just teach them how to immerse themselves in the startup ecosystem. Basically, my job now is to get startups investor ready.
Sounds simple enough right? WRONG!
To clarify, I don’t think there’s a formula to fundraising or any science to it (anyone who tells you differently is being disingenuous). It is purely an art and as such can take many different shapes, forms and techniques.
I knew starting out this project would take a lot of work and I was sure it would be draining but BOY! was I in for the shock of my life. It’s almost as if I did not take into account the many nuances of this industry.
On one hand you have the investors with little to no time on their hands to be dealing with a small fish like me and on the other hand you have the founders who think because I have a small network I can get them money/investments in 2 weeks. (lol)
All this talk and I’ve still not explained what fundraising is. Fundraising is a process where by startups seek investments from individuals (angels) or institutions (VCs) to aid the growth of their business. There are different stages of fundraising; pre-seed, seed, series A, series B and so on as long as the alphabets go until an exit happens. An exit could come in the form of a sale of the company to a bigger industry player (e.g Paystack to Stripe) or in the form of an Initial Public Offering (IPO) (e.g Iroko) where the startup sells their shares on an exchange to the general public.
Now when you’re fundraising you can go through angels or VCs but another avenue I always recommend to early stage startups are incubators and accelerators (I’ll write a separate post on this). These organisations not only give guidance to new founders they also provide a platform that exposes you to a variety of investors with various investment objectives and tastes. So a startup that wants to fundraise would need to think about the various avenues they can explore and decide on which ones suit their needs best.
Back to what I was saying.
This is easily one of the most challenging things I have ever done (and I went to Nigerian law School during a pandemic!). Some would say what I’m doing is scouting but I beg to differ. I don’t like to refer to myself as a scout (A scout is a person who connects investors to potential deals because they have a network of founders looking for investments) because I’m not. I have many of the qualities of a scout but the one thing I lack is a connection to one VC. Which as you know I’ve been trying to rectify (see here). I, however, doubt I’d ever be a traditional scout because I like to get down in the trenches with the founders. Their goal becomes my goal and their successes my own.
I can’t say this journey hasn’t been and isn’t a rewarding one because I have learnt so much in such a short time. So here are some of the things I’ve learnt:
- PATIENCE: This applies to both the clients and investors. You need to be patient when dealing with them. Investors because they are high net worth people who are very busy and have a lot of people looking for them. And then the startups, especially the startups. They are your wards and should always be treated as such. They are working with you to build out their own baby and if like me you work with very early stage startups, that work triples.
- NETWORKING: This becomes your life. Every interaction you have becomes a networking opportunity. Be careful not to be too extreme and become an opportunist but find a balance where you can leverage your relationships to create value for everyone involved including yourself.
- IT TAKES TIME: Before I sign any consulting contract with my clients, I make sure to hammer this point in, “FUNDRAISING TAKES TIME.” I told one of my startups, that was getting frustrated with how long this was taking, that more established businesses take a minimum of 3–6 months to raise a successful round while less established ones can take up to 12 months. This is because no matter how much you know or believe in your product, convincing a stranger to give you their money is hard. Investors assume a lot of risk when they invest in a company and this risk heightens when the company is very early. Why? Because statistically about 90% of startups fail.
Currently I’m working with 5 startups who are raising and they range from idea to revenue generating. What this means for me is that the work I do for each of them is very different. It also means that I’ve had to start mastering all the things I wrote down above.
I’ve started to feel like I was in over my head when I decided to chase this career path. Mostly because I’m new to the ecosystem and don’t know that many people or anything really but we learn and grow every day.
Until next time…