Venture capitalists work in semesters with little deal activity generally taking place across the holidays or over the summer. As a founder, optimizing the time you start, and aim to conclude, your fundraising has a material impact on outcomes.
The ideal time to start your fundraising is January – aiming to close before the summer – or September – aiming to close before the holidays.
Raising when investors are most likely to be at their (virtual) desks has several key benefits.
Generate momentum. For an investment to travel from initial contact all the way to closing, it has to jump a number of hurdles including initial screening, deep dives, partner meetings, investment committee, due diligence, and legals. For this journey to run smoothly, it is essential that people are available and engaged. Delays through any of these steps can lead to a fatal loss of momentum. During periods of inactivity, an investor’s conviction can weaken for myriad reasons, or a new opportunity can present itself which then becomes a priority. Delays cost deals.
Create competitive tension. Venture is a market and the price paid for a company is determined by what investors are willing to pay for it. From a founder’s perspective, engaging the maximum number of well-qualified investors for your round is advisable to optimize the valuation. This is most easily achieved when all the funds you are targeting are available for meetings.
Benefit from chatter in the market. Early-stage investors are more collaborative than many people think. Deal sharing is commonplace as many rounds end up being syndicated among several funds and angel investors. To become a company that is going to successfully close a round, you want people to be talking about you. Deal chatter is constant during semesters, but slows to a crawl – or stops – during the holidays and over the summer making it hard to generate any supportive buzz.
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Founders may be thinking that a contrarian approach of submitting a deck to an investor during a quiet period might help them stand out. After all, if it is quiet, then the investors will have more time to read the materials and think about the opportunity.
More likely than not, your deck will languish in an inbox until such time as the team is back and actively taking pitches again. During periods of lower new deal activity, many investors turn their attention to portfolio company work or other firm development tasks that they have not had a chance to do when it has been busier. And even if a proactive firm does pick it up, you are not going to have a volume of investors engaged at the same time.
Remember: your goal is to be the company that is quickly moving through multiple funds’ internal processes at the same time and is the talk of the (virtual) town.
Optimizing your timing does not guarantee success, but it can certainly help. Be sure also to avoid the frequent mistakes founders make approaching VCs and during the first pitch meeting and follow these tips to maximize the likelihood of closing a round.