Fundraise Or Don’t, There Is No Try

Saturday, March 8, 2014 0 No tags Permalink 0

“We’re trying to raise between $500-700k.”

I’ve heard startup founders say variations of that phrase dozens of times. In fact, I’ve been the entrepreneur saying that exact phrase to all types of investors. Now that I’m an investor and I hear entrepreneurs utter those words, I cringe because there are two fundamental flaws at stake.

The first problem is the word “try.” Earlier this week, I corrected a startup founder on this very subject and he mentioned my thought was very Yoda-like: “Do or do not, there is no try.” This is 100% true; investors want to put their money on entrepreneurs who will always find a way to make things work. They will get a round together if it’s the last thing they do. The word “try” implies a level of insecurity or ambiguity. Try means the round may happen, and it may not. As an entrepreneur pitching an investor, you want to create the feeling of urgency and scarcity. You WILL raise money and this thing WILL succeed…is the investor in, or is he/she out?

Yoda Fountain at the Presidio, San Francisco

Keep in mind: There is no try.

You may think this is just semantics, but when there’s not a lot of information available about an early stage startup, many investors go with their gut placing their bet on a confident entrepreneur. They look for any and all signs of weakness as a risk for their money. “Try” implies risk.

The other major problem is the fact that in that phrase, the entrepreneur mentions a range of dollars for the round. This implies he/she doesn’t have a firm understanding of how much capital is needed to hit the next few milestones. While it may be true that the round may fluctuate in size due to supply and demand of capital, an entrepreneur must know a) how much money they need and b) how that capital will be deployed once it is in the bank. Giving a range makes an investor question just how prepared an entrepreneur is and how well he/she knows how to scale the business. Do they have what it takes to succeed and get a sizable return on the investment?

Raising capital is a long, hard, ambiguous process, so mitigate your risk by being very careful wording key issues related to financing. Investors look at all information in front of them, and insecurity is easy to sniff out.


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