Why you should get professional help to raise investment

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You can do anything but not everything. It might feel like as a founder you *need* and sometimes even *want* to be spinning all the plates, but there are just some things that you just shouldn’t try and do yourself and fundraising is one of them.

You wouldn’t attempt to do your legal work yourself unless you were a qualified solicitor (or at least we hope you wouldn’t). You wouldn’t attempt to file your own accounts with companies house unless you were a qualified accountant. Fundraising is no different. Raising investment is both an art and a science, requiring in depth knowledge of a constantly evolving market.

Unless you’re living and breathing investment every day (spoiler alert – you shouldn’t be!) then you shouldn’t attempt a fundraise without seeking professional support. Even if that support is just a 20 minute chat to sense check your strategy and assumptions.

Before we go any further, we should disclose that Raising Partners, specialises in early-stage equity fundraising, supporting businesses to raise from seed through to series B. We promise this isn’t a sales pitch, there’s no catch to this article, or in fact to the content here on Runway. This is about sharing our advice and knowledge with the start-up ecosystem in the hope that it adds value and helps.

Now that’s out of the way, let’s look at why we think it’s so important that you speak to a professional when it comes to raising investment.

Experience.

You don’t know what you don’t know right? So why on Earth would you know how to successfully fundraise in today’s market if the last time you raised was 18 months ago or you’ve never done it before?

Bringing in professionals to act as an extension of your team can rapidly increase your chances of fundraising success. Good advisors should critically analyse your proposition and help you address any blind spots you may have. Whether it’s walking you through a fully diluted CAP table so that you understand your share structure, both now or in the future, or helping you to build a robust and defensible narrative to sit behind your valuation; your advisors should know what was working 6 months ago and critically, what is working in the market today.

Network.

One of the biggest challenges with early-stage fundraising, and one of the most frequently asked questions we get at Raising Partners, is ‘how do I meet investors?’ Angels can seem like enigmas, VCs can prove hard to reach, and crowdfunding successfully can seem like a minefield. It shouldn’t be that way. But right now it is. So we have to roll with it whilst we work on bigger plans to make the early-stage investment ecosystem easier to navigate and a more diverse place to be for founders.

There’s no denying that working with a professional advisory firm or corporate finance house can open doors you wouldn’t have been able to reach on your own or at a much faster pace. Often their relationships with investors are built on years of working together and is much more personal. Investors have trusted advisors they go to time and again for deal flow, market updates or simply to get opinions from others on due diligence as they stress test other opportunities that have passed their desk. Good advisors should be open about the network they have and the network they don’t.

Time.

There’s no quick wins when it comes to raising money. We’d be sharing them here on Runway if there was! Raising capital is much like having a toddler. Needy, hungry, demanding, and filled with highs and lows. Yep we know, nothing new here, so is the rest of your business. So why spend time on the heavy lifting of fundraising if your attention is best spent elsewhere until the critical moments of the raise.

It’s important to note here that there are some things you can’t delegate. You can delegate authority to a professional, to write a good deck, to walk you through the model and valuation, to advise on the strategy; but you can’t delegate your responsibility as Captain of your start-up’s ship. You need to be happy with the direction you’re going and ultimately whilst investors might seek the good counsel of fellow industry professionals, the only person they want to see pitch is you and your team.

A final word on engaging someone to help you fundraise is that not all corporate finance professionals and fundraising advisors are equal. Like everyone else, they specialise in different sectors, industries, types of investor and stage of growth. Look to work with people who are used to working in the scrappy, rollercoaster ride of early-stage capital and truly get the early-stage landscape rather than assigning the task of fundraising to a business you know because they built a brand out of delivering a service that wasn’t start-up fundraising!

A real world example

Without naming names let’s look at an example of an anonymised scenario we’ve seen happen this year: Company A is a healthtech business with a monthly recurring revenue of £10,000 at time of raising. They’ve built their product and are delivering promising early metrics but they need to raise a second-seed round to get them through to Series A and beyond. They engage a well-known corporate finance company and sign up to pay a monthly retainer fee (very normal), for the company to produce a business plan and financial model and then share the opportunity amongst their network. The model inevitably comes back showing that they need to raise £2m which is far more than the £750,000 they had set out to raise originally. This strategy means they need to raise at a much higher valuation to avoid crippling dilution. The founders of Company A are skeptical at first, unsure if now is the right time to raise as much as that, but quickly come round to the idea when they think about how they would spend their £2,000,000!

The corporate finance team duly write a lengthy business plan and begin their quest to find investors. They send the deal to 25 institutional funds, with 5 showing some interest and exploring due diligence and the remainder either not coming back at all or stating that the deal is too early. All the while, Company A is burning through cash and getting more and more concerned about the lack of capital flowing in. 3 months turns into 9 and now the business is in a sticky situation, cash is running out, fees are stacking up and they still aren’t any closer to closing the deal.

Feeling deflated, Company A takes a new approach and engages a new team of fundraising advisors to get a fresh perspective. Immediately, their new team rewrite the plan in the form of a detailed pitch deck with all the key metrics they know investors are looking for right up front and brought the content to life with a slick and professional design. They revise the target back to the original round size of £750,000 at a much more palatable valuation for early-stage investors and send the deck out to angel investors, early-stage funds and family offices. In 12 weeks, the deal is closed.

What did Company A learn?

Firstly, the suggestion that Company A should raise more than the founders originally planned was the wrong strategy for the stage of the business and led to a lot of time being wasted speaking to investors who were simply never going to invest because the business was just too early for them. Just because you *could* raise more money, doesn’t mean you should.

Having advisors on board was critical to the success of the round but having the right advisors who understood their stage and the investment landscape they were operating in from day one would have saved them a lot of time and money!

Runway Recap

  • Working with professionals can rapidly increase your chances of fundraising success
  • Consider how many investors you know… a professional will open doors to their network for you
  • Managing a fundraise is a whole job in and of itself, so don’t underestimate the impact on your daily job if you don’t have the right resource to help