Last Friday, Siddharth and I were in Bangalore talking to a group of entrepreneurs that were being incubated at NSRCEL. During a Q&A session, an entrepreneur inquired, “how long does it take to get money after presenting to an investor?” Siddharth had the perfect answer, “3 months if everything goes to plan but you should anticipate at least 6 months!”
These questions about funding timelines are commonly asked by most entrepreneurs, but I have yet to come across an entrepreneur who asks me, “what should I be doing with my business during my attempt to raise funds and/or during the due diligence process being conducted by an investor?” Oftentimes, founders let their business stagnate or slide during fundraising. This trend is disturbing and fatal for the venture as well as its prospect of raising money.
The most important activity that a founder could do during the fundraising process is to continue to drive growth well. The adage that “a rolling stone gathers no moss” can be aptly modified for this situation to point out that “a growing business loseth not investor interest”. Fundraising is an important part of the business but a business that is losing steam will quickly derail the fundraising effort. The dip in business could mean a weak second line of defence, waning customer interest, market saturation or the entry/presence of better competitive products. This opens a Pandora’s box of questions in the investor’s mind that will lead to several uncomfortable conversations and over analysis.
Therefore, a founder can effectively manage their time by responsibly allocating a significant amount to grow the business and similarly a significant amount to fundraise. They should start delegating responsibilities to competent team members and ensure that the business putters along without a glitch during the fundraising process.