Just this week I’ve encountered two separate consultants that help seed stage entrepreneurs raise money. Of course, I’m very suspect when someone tells me they help entrepreneurs with little-to-no revenue raise money from investors. In each case I asked if they were a broker-dealer that gets a placement fee and they said ‘no’, it’s an hourly rate or project fee to consult.
Preparing a longish pitchbook (e.g. a business plan) with comprehensive financial models requires a tremendous amount of imagination for a startup with a couple paying customers. Financial models can be built to paint any desired picture, especially when there’s almost no historical data to draw from. As an investor, I’d prefer to see the entrepreneurs spend the $25,000 validating the market or signing 10 more customers, instead of hiring a fundraising consultant. Intellectually, I understand that an entrepreneur who’s struggled raising money would resort to getting help from someone that promises them a successful outcome.
While a fundraising consultant isn’t a good use of money for a seed stage entrepreneur, here are a few things that are worth investing in:
- Investor Deck – Find someone who’s great at storytelling, build a slidedeck, and then hire a graphic designer to make it professional looking (~$500)
- Financial Model – Grab a free financial model online (e.g. here’s a great financial model for SaaS startups) and pay a CPA for two hours of their time to help understand it (~$300)
- Executive Summary – Write a simple two-page executive summary with all the pertinent sections and have a friend proof-read it ($50 to buy them a nice meal in exchange for their help)
So, for under $1,000, an entrepreneur has all the tools necessary to pitch investors and speak intelligently about their startup’s potential. This doesn’t guarantee raising money but it does increase the chances of success.
What else? What are some other thoughts on fundraising consultants for seed stage startups?