Being a startup CEO is tough. Work life balance, as nice as it is, is not easy. Many leadership gurus – who invest in or mentor startup founders – often find CEOs struggle with the pace.
One of the biggest challenges startup founders faces is balancing the continuous need to raise capital while running the business. Raising capital requires pitch preparation, networking, meetings with investors and potential investors, meetings with accountants and lawyers, internal meetings with the leadership team to decide valuations and on and on.
What is a startup CEO to do?
Let’s first decide on the premise that there is no such thing as balance. Balance is a fallacy. However, all is not lost. CEOs look at raising capital as a siloed event away from running the business – the two activities are not necessarily mutually exclusive and, at times, should be considered one and the same. Let’s consider it a combined activity and separate at the same time.
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While focusing on the running of the business, startup CEOs are consistently monitoring revenue traction and product growth. Investors and potential investors are looking for the same thing. Investors focus on the startup’s CEO’s ability to execute on company goals that are generally centred on revenue growth. CEOs are constantly thinking about the business – they pitch all the time.
Let’s look at “Fintech Startup A”: There was a CEO who was running a SaaS-based fintech startup that did not like pitching. This CEO wanted to focus instead on running the business, growing the startup by attracting more customers. As the platform began to achieve product-market fit, the CEO suddenly found the need to raise capital as there was a lag between releasing new product features that the market required and the expected new customers which were expected but had not come yet. The CEO found that attending networking events with investors, participating in panels, interviewing venture capital firms, and generally networking with potential investors was not a good use of their time. As a result, when the capital requirements became evident, the CEO was not prepared.
Meanwhile, at another startup, let’s call it “Fintech Startup B,” the CEO understood the need to always be networking. She attended every possible investor networking event while keeping tabs on the business. Its healthcare app was gaining traction, and investors were happy with the company’s progress and the positive reviews it was receiving. She looked at her investors as ambassadors, champions, and door openers.
When the time came to raise their seed round, they went back to their carefully cultivated network and were able to quickly fill their investment round. The CEO of Fintech Startup B knew the importance of building a network – she constantly refined and perfected his pitch because she was attending events, aligning business development goals with investment attraction goals, and was able to achieve growth in both.
The startup CEO’s key to success is learning to combine activities that can achieve different but equally important outcomes. CEOs must constantly be raising capital and always be thinking about the business. Sometimes a CEO may not be actively raising capital because the capital requirements are met, but he should always be thinking of future capital requirements and therefore should be attending any events that put them in direct contact with future investors.
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At the same time, nothing attracts investors more than revenue traction. Investors or potential investors admire a startup founder’s ability to constantly be networking as well as leading revenue attraction.
Branding and always pitching to investors and customers are critical activities, and talking about your business regardless of audience should be a constant activity. Customers have become investors, and investors have become customers. Many failed startups collapse due to insufficient capital, and a portion of the failure can be directly attributed to the inability of founders to understand the importance of combining revenue growth and capital fundraising activities.
Always be raising, always be closing, always be talking about the business.
Teruel Carrasco is vice president of entrepreneur engagement at Valhalla Private Capital.
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