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Leveraging Parallel Fundraising – Using the Start-up Approach for raising Venture Capital

By April 19, 2022May 30th, 2022No Comments

For founders, the norm is to fundraise serially. They set up meetings one at a time and meet with potential investors whenever available. This results in a fundraising campaign where there could be many weeks in between the individual meetings. Such a strategy could potentially decrease founder leverage. By allowing investors to set the schedule, the potential gaps between meetings could allow preceding investors to inadvertently filter information to investors in successive meetings. Subsequent investors have to wonder why someone else has passed on the deal. Later investors therefore have an informational advantage and know whether or not the deal is gaining momentum. One way to tackle this challenge is through parallel fundraising. 

The term ‘parallel fundraising’ refers to the strategy of tilting the fundraising market from investors to founders. This is done by setting up meetings with investors at different firms within a short time frame. In practice, this means a founder sets up all first meetings with firms they would like to approach within a one- to two-week period. Second meetings happen in week two or three, partner meetings in week three or four, and negotiations happen in week four or five. With parallel fundraising, every investor has a similar starting point in regards to the founders and the start-up, effectively reducing bias induced by information that might have passed through the grapevine. 

For Venture Capital funds, high intensity fundraising can have advantages as well. The way you schedule meetings within a round can greatly influence the sense of urgency to invest in a fund. It is critical to understand when and where to use leverage while fundraising. Though you can generate leverage from several different sources, fundraising leverage generally comes down to effectively using an investor’s fear of missing out on an outlier fund. Another big benefit to high intensity fundraising is that you can gather significant LP feedback on a consistent basis and make changes early on in the fundraising campaign. By regularly collecting investor insights and making the appropriate modifications, you can stay in touch with the market. It’s much easier to change course early than trying to pull a major overhaul nearing the end of the fundraising period. 

Running a tight process while fundraising is a deceptively complex task. The trick is convincing LP’s that your fund will be one of the outliers. The way you do this comes down to a mix of fundraising traction, team, strategy, market opportunity, and thesis. Fund managers who combine these elements in a way that makes their upcoming success appear inevitable generally have more leverage while raising money. Similar to an election campaign, when you start fundraising, everything else grinds to a halt. The problem is not the time fundraising consumes but that it becomes the top idea in your mind. And when you do decide to raise money, you should focus your whole attention on it so you can get it done quickly and get back to work. 

At c*funds we understand the importance of pacing in the fundraising cycle. Our specially tailored high intensity packages streamline the pre-marketing, marketing process allowing GPs to stand in front of the LPs at the right time. Whether it is a sprint or a marathon, pacing is what ultimately determines if the athlete will cross the finish line, and it is likewise a deciding factor when striving to reach a hard cap.