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Updated September 15, 2023You’re reading an excerpt of The Holloway Guide to Raising Venture Capital, a book by Andy Sparks and over 55 other contributors. A current and comprehensive resource for entrepreneurs, with technical detail, practical knowledge, real-world scenarios, and pitfalls to avoid. Purchase the book to support the author and the ad-free Holloway reading experience. You get instant digital access, over 770 links and references, commentary and future updates, and a high-quality PDF download.
Except in rare cases (like if you’ve gained a ton of traction by bootstrapping and investors are now selling themselves to you), preparing and running the actual process of fundraising is time-consuming, regardless of whether you’re a first-time or repeat founder.* Raising venture capital almost always takes longer than you think and will distract you and your team from building your company. A founder’s job, especially in the early days, will be hiring the team, sales and business development, building the initial product, and raising capital.
controversy Prominent investors disagree on how much time founders should allocate to fundraising. Paul Graham, founder of startup accelerator Y Combinator, advises startups to constrain fundraising to a limited time period,* while Upfront Ventures partner Mark Suster says startups should allocate a few hours every week to the meetings and activities related to fundraising, citing, among other reasons, that good relationships take time to build, and can’t develop if they’re relegated to specific times of year. Graham suggests startups with multiple founders assign only one founder to fundraising, so that the other founder or founders are not distracted from company operations.
Figuring out whether you can allocate the time to fundraise depends on how long the process will take, right? This is impossible to generalize, but everyone wants to know. So we’ll go ahead and answer this for you, but please take it with a grain of salt, because every fundraising process is different: From the moment you decide to raise venture capital through to signing a term sheet, the process takes an average of three months. If you’ve founded four companies already and your newest one is really hot, it could take two weeks and you won’t have to lift a finger; investors might flock to your door. If you’re just starting out building your network from scratch, it might take closer to six months.
Startup coach Dave Bailey is adamant that founders wait to raise venture capital. In a blog post, “The Dangers of Raising Venture Capital Too Early,” Bailey provides valuable insights into how venture capital can strap founders into a plan that will keep them from iterating and improving. When your company is still working out the details of its big idea, venture funding can be a mistake because it pressures founders to build a team and a business model before they fully understand their product and customers. If it’s possible to bootstrap your way to some amount of customer revenue, do it.*
Skills are your leverage at the early stage, not money.Dave Bailey, CEO coach*
Most investors agree it’s far easier to have confidence in an individual or team if you can see a trajectory of progress. But at the same time, many founders wait too long before meeting investors. If you feel like you aren’t ready to ask investors for money, it can still be a great time to meet them to begin building a relationship—you are, after all, signing up for a multi-year journey that potentially involves millions of dollars. “You ask for money, you get advice; you ask for advice, you get money” is another quip heard frequently in the startup ecosystem.*