The CEO of any startup has three primary roles:
- Raising capital
- Setting the vision and overall strategy
- Hiring the right people
As anyone who has built and run a business from the ground up will tell you, being a CEO is not the easiest gig in the world. With so many different distractions pulling you in so many different directions, it’s easy to get overwhelmed by the minutiae of the day to day and lose sight of those three responsibilities.
To be fair, CEOs are responsible for more than just those three things. Each CEO has to wear multiple hats. But the fundamentals are still true.
Raise Money — And Then Raise More
I’ve noticed a pattern amongst entrepreneurs — even the good ones — where many of them forget the importance of the first responsibility listed above: raising capital. They forget that fundraising is an ongoing job that needs to be done regardless of the current cash balance.
Raising money is hard enough as it is. But by not working on it in between rounds, CEOs and founders make it that much harder on themselves. To be successful, CEOs need to take the A.B.F. approach to fundraising: always be fundraising.
A little maintenance goes a long way — just like heading to the gym on a regular basis is good for your health and fitness. Don’t get fat and lazy in between fundraising rounds — getting back into fighting shape (or fundraising shape!) is 10 times harder when you don’t have a base.
Some readers will almost certainly blow this off as easy-to-say/hard-to-do VC advice, but I actually screwed this up in the past too. Knowing what I know now, I wish I could go back in time and talk to my former-self. There were times when I was terrible about A.B.F. and other times when I was much better at it. The results of each approach were pretty clear.
I now see the difference between CEOs who take the A.B.F. approach and those who treat it as as a finite transaction. If you are not talking to and engaging investors between rounds, you are not A.B.F and you’ll pay later. When it’s time to raise (even in a “things are awesome and I need to fund the growth” scenario) it’s way more work as you are starting the relationships from scratch in many cases. The biggest difference is the fact that, with an A.B.F. mentality, whenever it’s time to raise more money — regardless of whether it’s a big up round or a “leap over the valley of death bridge” — the rounds get done faster, easier, and with more support from investors…and often on better terms.
Here’s a simple contrast between A.B.F and transactional fundraising: 2–3 hours a month woven into everything you do or 3–5 stressful months on the road herding cats during only two good windows per calendar year. Am I getting through?!?
Tips for Making A.B.F. a Reality
So how exactly can you become someone who lives and breathes A.B.F.?
- Maintain two investor lists. The first list should include current investors who you share monthly or quarterly updates with. The second list is for the investors who’ve passed at some point but left the door open. (You know the “if you were at YYZ in MRR we’d take a closer look, keep us posted” folks). Add new contacts to this list as you do the A.B.F. groundwork (networking, taking intros, etc.) This list becomes your target list for the next round.
- Update the first list monthly. Be consistent — make it part of your routine. Put the asks at the top followed by the wins & metrics. The data should be telling a story clearly so there is no ambiguity about what is working and what isn’t. You might even find that they realize it’s time to add more capital to the business before you do. VCs are great at pattern recognition (for better or worse). This is low-hanging-fruit in terms of helping investors follow along as the chart moves up and to the right!
- Solicit feedback and advice from the second list occasionally. You don’t want to be too annoying, but you don’t need to completely disappear either. In a previous blog post, I talked about the idea that when you ask for advice you get investment and when you ask for investment you get advice. Play the game and engage. Ask for feedback on metrics, messaging, and progress to ensure they’re thinking about you and your company.
- Update your target investors every quarter. Put in some face time with investors on that second list. This can be a 20 minute video call. Just say top of mind if you can. Spread it out and mix it up. Personally, I’m way more likely to take a coffee meeting or a quick call to help an entrepreneur I know or to hear how things are going vs agreeing to be pitched formally if the company isn’t on my radar. Asking for quick feedback on a high-level deck or just sending over news of a few wins will get the job done. The occasional business ask will test to see who is really paying attention. Put these at the top of the emails!
Are you the kind of CEO who’s always thinking about raising money but not doing it? Or could your fundraising game be enhanced? The sooner you adopt an A.B.F. mindset, the less time you’ll spend actually fundraising!