On Friday, I had two separate conversations with founders about fundraising strategies.
Both had an easier path that would likely get them to a closing quickly but might cost them some economics and a harder/longer path that would allow them to maximize economics.
I gave them both the same advice which is that certainty of close is super important, particularly early on in a venture when you see an opportunity and want to capture it before someone else does.
Most decisions are not black and white. There is usually a lot of grey in between. Fundraising is always like that. There is rarely an obvious right answer.
Many founders are advised to run a competitive process, get as many quality offers as you can, and use that competitive dynamic to maximize economics.
While that is a great strategy if you have the luxury of time on your side and the ability to spend several months focused on raising capital, there is often merit to the quick close that maximizes certainty over other things.
Both conversations on Friday ended in a discussion about people and how important they are in all of this. The answer to that is that they are the most important factor of all when raising capital.
If you are comfortable with the people involved and have a high degree of confidence that they will be great partners, then everything else is secondary. That is true for at least the first five years of a venture. At some point, in very late stage or public financings, the people issues lessen and you can optimize for other things.
But early on, if you optimize for anything, optimize for the people you work with. Otherwise you are taking on risks that can and will blow up in your face.
After that, I might put certainty of close next on the list, as long as the economics of the “bird in the hand” are ones you can live with and the people are known quantities. You can rarely go wrong with that combination.
