Fundraising While Still Building a Business

Back in summer 2009 we had just cleared $1 million in annual recurring revenue at Pardot after being in business for almost two-and-a-half years. Globally, the macro economy was in the dumps and Software-as-a-Service (SaaS) companies weren’t in favor. Marketing automation as a market appeared to be a huge opportunity and all signs from our customers pointed to the product being a pain killer and not a vitamin. The next logical step was to raise venture capital and build a huge company. Or so we thought.

Fundraising was a full-time job for four months. After talking to 29 venture firms, doing a half dozen full partner pitches, and getting to verbal term sheet discussions, we decided to call off the process and focus on building the business without institutional capital (see 4 Reasons to Raise Venture Capital). Here are a few thoughts on fundraising while still building a business:

  • Know that fundraising is a full-time job, and plan accordingly
  • Seek help from team members to offload non-essential tasks and free up responsibilities
  • Align potential investors around a desired timeframe and close date, so that there’s a sense of urgency
  • Create a competitive process to bring multiple options to the table in order to maximize strength
  • Always have a backup plan in place in the event fundraising doesn’t work out as planned

Raising money is incredibly difficult, and, combined with building a business, makes it even harder. Fundraising should be a team effort and everyone needs to be on the same page around responsibilities and continuing to push the startup forward.

What else? What are some other thoughts on fundraising while still building a business?

2 thoughts on “Fundraising While Still Building a Business

  1. No question that raising money is difficult and extremely time consuming. Entrepreneurs are often very naive about fundraising in the sense that they think that they can raise only what they need for a relatively short period of time, increase the valuation, go back to the market and then repeat the cycle. The job of fundraising is so time consuming that my recommendation is always to raise more than you need because it IS so time consuming and also because things rarely go exactly as planned. Just when your organization needs you most you might find you have to spend significant time raising the next round. This should be avoided. My advice is “Raise it when you can get it and don’t be greedy.”

  2. Something that occurs very often with entrepreneurs is that when they raise money, they think that the money is unlimited or will keep coming and spend more than what they should. Then they run out of money and they confront serious cash flow problems. Is important to have a plan and discipline. I am new to wordpress, but i like these blogs very much so far.

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