Looking For Capital? The Top Three Questions For Fundraising CEOs Before You Start

13 Nov

By Dennis Ford, Founder & CEO, LSN

Dennis book

At LSN, my five business development executives talk to about 35 CEOs each week, all of whom are in fundraising mode.  If we also consider the conferences and seminars we attend, LSN’s business development staff has spoken to close to a thousand fundraising executives since the company was founded.  Now, that is not a bad sample size.  At LSN, we always begin with three questions that will help us net out the status of the entrepreneurs we are starting a dialogue with.

The first question is, “Are you indeed fundraising?”  One would think this question is a binary matter…but it’s not.  The answers range from “Yes, we’re totally dedicated to raising money,” to “We are just sticking with our private network of investors,” to “We plan on starting a campaign soon.” What these answers reveal is how committed you are to raising capital, and that’s why it’s the most important question for us; LSN engages only with dedicated fundraisers.

The second question is, “Do you know how long it will take to raise a financing round, from start to finish?”  This is a bit of a trick question.  From inexperienced entrepreneurs and from executives who haven’t been fundraising as of late, we often hear answers ranging from 3-9 months, which have found is highly optimistic; in our experience, closing a round usually takes 9-18 months.

The third question is, “Do you know how much a 12-month fundraising campaign will cost?”  This question provides some interesting answers.  Many CEOs haven’t drawn up a yearly fundraising budget at all, and when they put pen to paper to quantify the issue, they realize that it will take a lot of money to go out and raise money.  Figure 1 provides the typical cost of the essential components of your campaign:

1

Figure 1

We use these three questions to gauge whether the CEO has done their homework on what it will take to raise a financing round and has a good grasp of the commitment required.  There is a lot more to raising capital than simply declaring that you’re raising capital and then staying within a limited region or a small network.

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