Brad Feld offers a very useful answer to an important question Tuesday in Ask the VC, a discussion that also belongs here in this blog. First, the question:
Q: … as an early-stage company looking to raise a seed round of under $500k ASAP to help us grow, what are your thoughts about outsourcing fundraising to a place like Vfinance so I can focus on running the business? Are there any drawbacks?
And then the answer:
A: (Brad) This is a bad idea. You should not do it. Even though fundraising–especially for an early-stage company–can turn into a full-time job, it’s an important one for the founders to do.
You need to treat fundraising as a priority. Presumably the reason you are raising $500k is to be able to hire a few people to help you leverage your time better as you are trying to get your business up and running. If you don’t put enough energy into this, you fall into a classic chicken and egg problem where you don’t have the money to build out your team, but you don’t have enough time to go raise the money because you are busy doing everything because you don’t have the team.
Take a deep breath and realize that fundraising has to become the most important thing you are doing at this stage. Find an early investor or advisor that knows you, likes you and has credibility and hopefully a network of other investors and advisors. Ask this person to help you with introductions to other angel investors. Manage these introductions like a sales process–once you have a pipeline of potential investors, spend the most time with the ones that appear to be most interested. At the earliest stage they are investing as much in you as they are in the business and idea, so make sure you are on the front line of this effort.
Start every day off with this. Fundraising should be the first thing you spend time on each day until you get it done. Once you take 100 percent responsibility for it and make it your priority, it’ll get easier.
Thanks Brad, that’s a very useful post.