Fundraising is Sales on Steroids

Have you heard the saying “Fundraising is just like sales” before? Investors say this a lot, but I have found this is not the case. The entrepreneur job description includes being a salesman and a fundraiser. I have been on both sides of the coin. Started off working sales selling water refill stations. I thought “Hey, if I can sell water, I can sell anything.” I was wrong. Fundraising is another level. If sales are the minor leagues, fundraising for startups is like winning the world series.

Who wants who?

In sales, you usually want the client way more than the client wants you. The power relationship is heavily favored towards the client. They have all the leverage and negotiating power, while the salesmen is stuck with the short end of the stick. This requires the salesmen to find creative ways to not be the annoying pest soliciting at every door. For example, you look at the pictures on their desk and say “You have adorable children” or my go to “Your dog is so cute!” These will get them grinning from ear-to-ear and open up the conversation to not feel like just that pesky kid that is trying to scam you out of your money.

In fundraising, you can see that the investors want the deal more than the founders do. It is rare, but founders can find themselves in the “hot girl at school” situation. Similar to high school where everyone wants to date that one hot girl, your growth is so crazy that every big shot investor is fighting for a piece of the pie. That same pesky sales kid has now transformed into a hot girl with more dates than she can handle. Here is where you can see a shift in the power relationship and founders are not always at the short end of the stick. They can negotiate more fairly and even turn down deals for better ones.

How long?

A typical sales cycle can be anywhere from a week to 6 months, but once the deal is signed majority of the work is done. You do have to follow up with your clients but you don’t have to see them that often. A salesman will go through a normal CRM (customer relationship management) pipeline of cold calls, leads, meetings, follow up meetings, and yes or no to the deal. Methodically, a salesman can figure out where he needs to improve by looking at his CRM. Is there a big drop off between leads and meetings? Maybe a change in my approach of how to source quality leads is needed.

In fundraising, there is no typical fundraising cycle. The average fundraising period is 6–9 months. A general rule of thumb that I have found true is take the time you think it will take you to close the round of funding and double it. This rule can also apply to the amount of money you think you need (double it). Unfortunately, this is where the rules of thumb end. Founders can be fundraising for over a year and have to change up deals on the fly. Many times, you will see founders cut the round short and break it up into chunks because it is taking too long. Other times, rounds seem to close before they even opened. You just really never know what is going to happen with fundraising.

Is it that time of the year?

Most sales cycles are not dramatically affected by the time of year. When it gets closer to the holiday season work typically gets slower. Big bosses go on vacation and contracts are harder to get signed. Unless your product is seasonal, your sales cycle should stay constant throughout the year.

For fundraising (and for many things in startups), timing is everything! There is a prime time between January and mid-March (spring break) that is a great time for fundraising. The best time in my opinion is after summer break (late August) and before the holiday season (late November). Everyone is feeling refreshed from break and ready to get down to business (cue Mulan music). It is possible to raise outside of prime time, but it is much more difficult. Investors are typically very rich people that travel a lot in general and even more during the holidays. They also have families and kids that are out from school during spring break. When else do they get to take out the yacht?! Overall, timing your round is crucial to successful fundraising.

If you are a salesman turned entrepreneur, I challenge you to not rely on your old sales techniques. It may get you a good start, but raising a successful round requires a whole new bag of tricks. Step up your game and keep moving forward. Learn from your mistakes and if this water-selling salesman can do it, I am sure you can too!