Never rely on external resources to do your fundraising for you
An important distinction to make when thinking about who should spearhead your fundraising effort is whether you are a “marketplace” company (selling goods and services directly to customers) or an “infrastructure” company (providing a service that is consumed by others). In the first case, you would expect your CEO to be heavily involved in fundraising – he or she will likely have the strongest relationships with venture capitalists. In the second case, it might make more sense for someone with inside knowledge of the infrastructure your company provides – like a CTO or VP of Engineering – to lead the charge.
This mismatch can lead to a number of issues. One is that the sales process focuses on short-term financial gain, while the VC process is designed to look at long-term success and viability. This can create tension in the relationship as one party pushes for quick decisions that may not be in the best interests of either party long-term. Additionally, it can be difficult to get a full picture of a startup during a sales pitch due to the close relationships that are created between sales representatives and their investors. This means that often critical details about a startup’s business or tech runway are left out of conversations, leading to inaccurate assessments about whether or not this company is worth investing in.
Giving away equity is a risky proposition, and should only be done when there is a strong belief that the business will be successful. The founding team should be the ones deciding when and how much equity to give away, in order to maximize the chances of success.
