The process of securing venture capital or any other type of private equity funding is very time consuming. With all of the preparation, travel, presentations and required follow-up, entrepreneurs often forget to focus on their business. This article reminds entrepreneurs that while focusing on their venture fund raising activities is important to move their start-up company forward, they need to remember to focus on their business and to move it forward, as this is just as important of an activity as is venture funding is for their start-up company.
Fund Raising is a Time Consuming Activity.
Ask any entrepreneur that has secured venture funding, and they will tell you that it is a very time consuming activity. First, there is the materials preparation, including the development of your start-up company’s:
- Executive Summary,
- Business Plan, and
- Road Show Materials.
Each of these documents, individually, can take substantial development time, working and then re-working to get them to the level of being investor-quality documentation. As such, it usually takes several months of research, due diligence, creation, writing and then re-writing to develop the appropriate investor documentation. Also, getting the attention venture funding investors (e.g., venture capitalists), just to schedule a meeting, can be very laborious and challenging for entrepreneurs. This is especially true if you do not have a lawyer or some other person to provide your start-up company with the appropriate “soft” introduction to the investor community. Then, there is the required travel, presentations and follow-up with each of the individual venture investment groups, just to get to the next level of potential investor interest. So, as can be described by seasoned entrepreneurs, venture fund raising is a very time consuming and difficult task that can take all of your available time, if you let it. This leaves little time to focus on your start-up company’s day-to-day business related activities. This is not a recipe for a successful start-up business as there a multitude of issues that need to be addressed daily to ensure your start-up company in moving in the right direction and at the same time creating value for your company.
Fund Raising Takes Time.
Many entrepreneurs assume that they can secure venture funding in two months or less. This is not realistic. Even in a good economy, it takes a typical start-up company 6 to 12 months to secure venture funding for the development of their technology, product or service offering. This time table assumes that you have contacts in the funding community, and can set up your initial meetings with investors fairly early in the funding process. If this is not the case, then you can add on a few months to just schedule your initial meetings with targeted investors. Also, in today’s economy, this funding time table is even longer, given the fact that in slow economic times, investors tend to stick with their current investments, making it just that much more difficult for entrepreneurs to secure funding, from these same investors, than it would be in a strong economy. Therefore, as an entrepreneur, you need to look at a realistic time table for securing venture funds, and often the resulting time table is much longer than originally anticipated. This can make the funding process and the associated time frame can be even more detrimental to the overall development of your start-up company.
You are in Business to Create Value for Your Company.
As an entrepreneur, you are in business to create value for your company. This means that in addition to securing venture funding, you must work diligently to move your company forward, with or without funding, such that you are creating value for your company every day. This should be your personal expectation and it surely is the expectation of your investors. They have to believe that even without funding that you and your executive team can continue to use creative ways to move your company forward and at the same time creating underlying value for your company in the market. This can include:
- Securing customers,
- Aligning with strategic partners,
- Developing your sales channels,
- Continue to market your company to target customers,
- Working with early “beta” test customers,
- Moving product development forward to the next level, and
All of these activities and many others can create inherent value for your start-up company, both in the market and to your potential investors. So remember, that securing venture funding is only one vehicle that can be used to move your company to the next significant value level. There are many other things you can do on your own through securing customers, the development of a strategic partnership, or bootstrapping that can also create near term value for your start-up company, and at the same time prove to your investors that you have the ability to move your start-up company’s business forward, even in non-ideal financial circumstances.
Continuing to Focus on Your Company’s Business is Often Beneficial.
During the venture funding process, focusing on your company’s business can take you away from the everyday hassles associated with venture funding. This can be a good thing. By continuing to simultaneously focusing on your company’s day-to-day business activities, you can move your company forward to the next level and accomplish significant milestones that will be beneficial to your company. This business focus can also create new opportunities that were not originally available to you and your company at the beginning of the venture funding process. Remember, the venture funding road is a long one, and continuing to knock down significant development milestones, securing customers, or developing strategic partnerships, etc. can be just the ticket to get the attention of your investors. Also, often, significant business opportunities often take time to develop and by continuing to focus on your business, while your are raising funding, can often provide the required time period for such opportunities to develop and take hold for your start-up company.
Focusing on Your Business Can Facilitate Funding.
In the end, by focusing on your business while working to secure venture funding may be the vehicle that facilities the funding for your company. No company can go for 6 to 12 months, without focusing on their business. In addition, by developing new business opportunities during the funding process, you continue to create value for your company and its potential investors. One or all of these business activities together, may be just the ticket that gives your potential investors the proof that your company is the one they are willing to risk their monies on to provide the types of returns they require. Therefore, continue to focus on your company’s business and your investors will recognize the value you are creating during for your start-up company, even before you secure funding from third party investors.
Focusing on venture funding is just one phase of your start-up company’s development. But, your company’s business is the real item that needs to be developed to create value for your company. Therefore, while you are trying to secure funding for your start-up company do not forget to focus on your business. By doing so, you can create significant value along the way and at the same time help facilitate the venture funding of your start-up company.