When You’re Raising Capital, You Can’t Prescribe Reality

17 Nov

By Dennis Ford, Founder & CEO, LSN

I talk to fundraising CEOs every day about raising capital to move their discoveries forward towards the market. I ask how they’re conducting the process of finding, vetting and reaching out to investors who are a good fit for their product. Experienced CEOs are typically savvy in their approach to this process. They have a global view, they understand it’s a numbers game, they are cognizant that the early stage investor landscape has changed and they have to adapt right along with it. Experienced fundraising CEOs have a plan A, B and C because they are in tune with the ephemeral nature of global investor opportunities. Experienced CEOs get that its all about relationships and that fundraising takes time and unfortunately usually more time than they would like.  Still they are experienced and they hang in there. However, often I find that less experienced CEOs have a prescription for how they want to get their funding – an attitude that always stuns me.

For example, the CEO might say “I haven’t started yet but here is how I want my round to go down: We want to find a family office to lead the round, and we also need a strategic participant, perhaps an Asia-based large private pharma firm.” These CEOs hope that LSN can simply write a prescription for some investors that will rush in to solve their problem.  There is a prescriptive attitude that a family office will be easier to deal with and therefore give better terms, or deep pocketed Asian investors will solve the future distribution issues, like it was that simple.  Yes, it is good to think big, but underestimating the capital raising issues before you is a real tactical error. You need to to plan for the worst case scenario. You need to go global, and realize it will take more time then you hope for, and you therefore need a plan A, B and C.

I always tell these CEOs that in reality, you need to find investors that are a fit for your product. You have to talk to investors who have a mandate to invest in companies at your stage and with your kind of product or service. You can’t go outbound with a preconceived notion of who is going to get involved. To raise capital, you need to consider every category of investors – including family offices, VCs, pharma and major medical device firms, corporate funds, and foundations. If you research potential investors in your space and perhaps make a heat map of those who you’re a fit for, your life becomes much less prescriptive and more based on reality.

Reality counts when seeking out capital. Do your homework and investigate all the possible investor types that are a good fit. That strategy is a winning one.

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