“I need to raise money.”
The founder typed as our Slack chat began to unfold in a hurried, near manic, pace.
“We only have a few months of cash left and customers are taking too long to close and product isn’t shipping as fast as it should and partners are dragging their feet and…”
I knew this company and this founder well. They’ve built a great business, a great team and a great product. They’re in a market that many VCs are clamoring to place bets in. So, the natural response might have been to start strategizing their raise.
Having played a small part in raising hundreds of millions of dollars for companies I’ve worked with since becoming a VC, this process has become second nature. A few weeks nailing down the right pitch, a few weeks carefully lining up first meetings, then following up, moving through each firm’s process and politics, getting offers and signing a term sheet.
An efficient process for a Series A can take 2–3 months.
This time; however, I took a different approach.
What if, rather than spend the next 8–12 weeks chasing a round of funding, the founder threw all of their energy over the next 6 weeks into closing those sales that were slow or those partners who’d been dragging their feet instead?
Stunned, then bugged, the intrigued, the founder accepted the challenge.
6 weeks later the Slack thread lit up again.
But this time, there was a different kind of manic energy- WE HAVE TOO MUCH BUSINESS!
Not only were they not running out of money, they’d built a reserve of cash and were looking to add to the team in a few key areas.
What had changed? Focus.
With a sole focus on customers, they soon understood why they were slow to close, and closed them. They uncovered a sales channel that they’d underappreciated and overlooked. They got to the heart of the partner’s issues that were keeping a deal from getting signed.
If they had chosen to raise, they would likely have closed a round, but they would have missed an opportunity to deeply understand the key drivers of their company.
Instead, they learned that they were a real business and not just a fundable one.
With so many founders defaulting to fundraising, I fear many are missing the opportunity to discover the same for themselves.
Unsurprisingly, the company above is far more fundable today than they were then. And, if they do chose to raise, they will be doing so from a much more powerful position.
I’d encourage more founders to give themselves the same challenge to focus their time, team and resources on getting to profitability before firing up powerpoint and hitting the road for a raise. You may surprise yourselves with how attainable that goal can be, and how empowering that independence can feel.