The Investment Banker Pandemic
Time and again, I have warned early-stage founders to steer clear of using the services of a banker to help raise money but unfortunately, that pandemic has overrun our ecosystem. Many bankers have made a comfortable lifestyle out of fleecing unsuspecting founders. The false dream that these 1-star bankers promise founders make my skin crawl, as many of the business models that they push to me aren’t even eligible for venture capital, and the bankers are aware of it.
I would also like to acknowledge that there are many bankers that are doing some excellent work and every penny paid to them is worth their weight in gold. Some of these bankers have worked with our portfolio companies and I have interacted with a few for fundraisers, but NONE aka ZERO were for raising amounts below $5 million (Rs. 35 crores).
Then there are angel networks that reach out to us about their portfolio companies and while I am disillusioned with the concept of angel networks, the angel networks do not (or should not) charge their portfolio companies for connecting them to funds; it is a part of their duties.
Raising outside money is the toughest and most gruelling of exercises (I had to endure this myself while raising $6 million for my fund) and no banker is going to make it easy for you. I too have had investors drop out or reduce commitments at the last moment and while I understand that it can be frustrating, the cold-calling, the rejections, the ‘getting close’, are all part of the process. FYI, I reached out to over 5,000 people for the first close and will be reaching out to 5,000 more for the next one. Every founder must do this; persistence is key.
If you still feel that you need the services of a banker, I have compiled a few articles that could help with the selection process. Eventually, it is up to the founders to decide to ‘banker’ or not but choosing an advisor to delegate the fundraising process without doing the required due diligence to select them is truly just “abdicating” the responsibility, which is simply unrewarding in every sense of the word.
How to Choose the Right Investment Banker
By David Mahmood, Founder, Allegiance Capital
The Art of Selecting an Investment Banker
By Katie May, CEO of ShippingEasy
7 things to consider when choosing an investment banker
By Martin A. Traber, Chairman of Capital Markets Group of Skyway Capital Markets
10 Questions to Ask When Choosing an Investment Banker
By Dan Lee