Given the investment pace has been strong, trade sales are keeping GPs busy returning capital and several firms have closed new funds this year, the need for a week or two in Sun Valley or Nantucket seems understandable. However, investors seem to have stayed around the office this Summer. The Crunchbase data above show that the two largest volume weeks for Series C or later financings have come in July and August. LPs take heart, your investors are hard at work…
If you sell to the enterprise and are raising capital, you need a plan for interacting with your key customers during the raise. Potential investors want to talk with a young company’s customers to validate the customer’s intent to keep buying the product or service. However, management lives or dies with its key customers. It needs them for larger future purchase orders and prospective customer references. Asking customers to take prospective investor calls, often from multiple investors, is spending precious relationship capital.
Investors tend to be curious and skeptical types. The questions they ask about how the customer views the capabilities of the team or its products might cause the customer to view the company differently. What happens if the company does not come to terms with an investor? The customer is then wondering about vendor viability if a funding is not announced. The type of investor you want will respect the value of customer time and confidence. However, investors need to do this diligence to assess risk before investing. Managing customer conversations to everyone’s satisfaction is tricky, but we have a few suggestions that have proven helpful.
Industry thought leader Fred Wilson has written recently advocating inside led rounds and assertive monetization of pro rata rights. Fred is delivering fellow early stage VCs graduate-level education on maximizing fund return. However, he is, uncharacteristically, not advocating what may be best for building the company. Once a company is out of development and focused on scaling – moving from $10 million in revenue toward $50 million – an outside lead for the next round makes a lot of sense.
I am biased. I make a living raising growth rounds of capital led by new investors. However, I choose to do this for living because I believe the process is healthy and necessary for growing companies.
Raising the Next Round 