Certainty Of Close
On Friday, I had two separate conversations with founders about fundraising strategies.
Both had an easier path that would likely get them to a closing quickly but might cost them some economics and a harder/longer path that would allow them to maximize economics.
I gave them both the same advice which is that certainty of close is super important, particularly early on in a venture when you see an opportunity and want to capture it before someone else does.
Most decisions are not black and white. There is usually a lot of grey in between. Fundraising is always like that. There is rarely an obvious right answer.
Many founders are advised to run a competitive process, get as many quality offers as you can, and use that competitive dynamic to maximize economics.
While that is a great strategy if you have the luxury of time on your side and the ability to spend several months focused on raising capital, there is often merit to the quick close that maximizes certainty over other things.
Both conversations on Friday ended in a discussion about people and how important they are in all of this. The answer to that is that they are the most important factor of all when raising capital.
If you are comfortable with the people involved and have a high degree of confidence that they will be great partners, then everything else is secondary. That is true for at least the first five years of a venture. At some point, in very late stage or public financings, the people issues lessen and you can optimize for other things.
But early on, if you optimize for anything, optimize for the people you work with. Otherwise you are taking on risks that can and will blow up in your face.
After that, I might put certainty of close next on the list, as long as the economics of the “bird in the hand” are ones you can live with and the people are known quantities. You can rarely go wrong with that combination.
Also, post close the people you can recruit to the team because you closed when you did (and sometimes with whom you did)
Yup, as a CEO, the time you save not pursuing a longer cycle close is time you can use to run the company and make progress. The value of that time cannot be underestimated.
I guess I’m fortunate that the markets I am targeting already have incumbents, mostly considered saturated, yet they are all ripe for disruption due to bad governance, inefficiency of the systems and models. So there’s no real rush, as rushing – fear and scarcity based, which can be mistaken as or lost with an overlay of excitement – leads to mistakes that you can’t afford as easily early on as once you’ve scaled.I know my path is a fairly unique one, so playing the VC game may be the best decision for most, however as always the best position is sitting pretty – where people want to throw money at you for an opportunity of what you’re doing. Of course ideally you never need to raise funding, especially not at unnecessary dilution. And a reminder, the longer you’re working on a problem, the more nuanced understanding you can gain – the more skilled at whatever your talents are focusing on become.It also all really depends what your goal is – if your goal is to create a feature and sell it off or create a platform and create something for the long-term. It’s been a long journey for me.I am waiting for a phone consult with a senior doctor from a clinic I have been to multiple times now for stem cell treatments, only this time it is for their Cayman Islands protocol where they culture your stem cells for 2 weeks giving you 100 – 1000x more stem cells – meaning they can treat more areas at once, and have more potent fluid to inject as well.My hope is after that treatment, date still unknown of their next availability, will allow me to finally move forward again with my life and my projects at a reasonable pace. There’s lots of work to do.Edit: A few days later – had to fix some atrocious grammatical errors, and update because why not: Cayman Islands treatment can only happen in ~7 months from now – so doing a US-based one before then to cover different areas; waiting in pain, especially when unnecessarily, is perhaps the worst thing psychologically – along with when no one is adequately helping you – reenforces the sense of abandonment; those are my top 2 anyhow.
.Good luck, positive karma, best wishes.JLMwww.themusingsofthebigredca…
The research suggests our stem cells age as we age (meaning it may be quality vs quantity). Has this clinic stratified their results by age?
Yes, from my understanding they know the range of potency related to knowing demographics of results, they’ve been doing this research clinically for 18+ years in the US. Also, ~4 months ago now I went to different clinic in the Ukraine for a fetal stem cell treatment: healthy, donated, specific fetal tissue between 7 – 12 weeks is injected first day into blood stream, and second day into adipose tummy fat – as it is best place, most stable temperature, for culturing cells – along with injecting placental tissue which has powerful autoimmune regulation factors; this clinic has been doing fetal stem cell treatments in research since 30 years ago, and clinically for 25 years. My understanding is the sweet spot is apparently before 12 weeks, as the cells haven’t yet differentiated into a specific person at that point – and therefore we all had these base stem cells in us at one point. It has had positive impact, however as it turns out nothing will be a cure-all when it comes to regenerative medicine and the different modalities that are developing. So current clinic I will go to next will take my bone marrow, which will already have been dividing, replicating and replacing the younger cells – 7 to 12 weeks + time that has passed, and slowly will refreshing all cells in body; they/I believe they diagnostic research/evidence of this process happening as well based on telomere length of cells increasing until its maximum length with a certain amount of consecutive treatments. So I should be in good standing that the quantity increase by their 2 weeks of culturing my cells will be on the closer end of the 100 – 1000x that they’ve stated, however I trust the volume increase will be where it needs to be. A lot more detail I could share however this has probably been the most productive, mentally fluid day I’ve had in a long time, so I’m trying not to expend too much energy – hoping for a slower landing vs. a crash back into the pain in my body; and apologies for the lack of paragraphs as that’s one of my decisions for unnecessary editing to get my point across.. 🙂
Hi Matt, if you don’t mind, could you please share some information about this clinic you are going to (do they have a website)? I have been doing research in the regenerative medicine field since 2006. I am not aware of many stem cell treatments clinically proven. Hopefully the one you are getting your treatment from has a good track record. I understand regulation can move too slow for patients, and effective stem cell treatments cannot come soon enough. The least I could do for you is to take a look at the approach and tell you if the concept of the treatment make sense. Will you be open to that?
Hey Palmer, I don’t mind sharing – don’t want to put details publicly here for now though. Just email me from one of your university emails – [email protected], I’ll keep an eye on spam folder just in case. I’m not overly concerned with either of these clinics, however am curious what your review may shine light on. I’ve already had positive experiences from both – and definitely not placebo. Also, my current plan with my mostly on-hold projects is creating a network of health-wellness differentiated platforms, including a holistic platform to in part introduce people to regenerative medicine: the goal of course now is doing better, more holistic research, and determining what different regenerative medicines options work for what, under what conditions, etc. – and then from economic, affordability perspective, ultimately reducing the costs so more people can access them. Always looking for good people to work with in the potentially near future – so it would be good to stay in touch as well.
Thanks Matt. Email sent.
.Perfect advice. Bravo. Well played.Never, ever make “perfect” the enemy of “good enough.”The startup graveyards of the world are littered with great ideas that never felt the enervating and liberating sting of being slapped with a checkbook.Most of the money in the world gets made by people who are 80% right, but done on time.An entrepreneur does herself a favor by being uber organized, lining up all the pigs, kissing them quickly, and picking one before the lights come on.Who you do business with in the formative years of a venture is infinitely more important than how you do business.From the time you get a commitment only bad things can happen until you close. Close like a cobra.JLMwww.themusingsofthebigredca…
ForWho you do business with in the formative years of a venture is infinitely more important than how you do business.Yup. Then the question is, how to select the “who”, or how the heck to know about that person???E.g., people can act, pretend, put on a false front; there is the I. Goffman, The Presentation of Self in Everyday Life,, etc.E.g., last night athttps://www.youtube.com/wat…I watched again the old movieRebecca (1940)with Joan Fontaine and Lawrence Olivia from Alfred Hitchcock and David Selznick.Poor Maxim, he was totally fooled by Rebecca. And Rebecca totally fooled a large fraction of the British upper crust.Along with Rebecca, when she was alive and after she had died, Maxim was totally fooled by his head housekeeper.For nearly all the movie, poor Mrs. de Winter was totally fooled by everyone who said anything about either her or Maxim.Can people be fooled that much and in such ways? Gotta tell you, as inExperience is the great teacher and some will learn from no other.and from “paying full tuition”, the answer is a granite hard, iron clad, towering, YES.So, with this movie, lots of people clearly saw the deception, manipulation — from the entry for the movie at IMDB, the author Daphne du Maurier, writers Robert E. Sherwood, Joan Harrison, Philip MacDonald, Michael Hogan, producer Selznick, director Hitchcock, Franz Waxman (who wrote the music), the cinematography George Barnes, and essentially all the more important actors, and got the situation up on the screen quite clearly.(i) The insight those story tellers and movie makers had into people and personality combined with (ii) the ability to act are scary!E.g., they all understood that the happiest he could ever be was to be with her when she was really happy to be with him, and she WAS! GOOD movie!For venture capital, one issue is the fiduciary responsibility of the venture partner to the limited partners the entrepreneur may never have met and, thus, has little or no basis for the suggested trust.For another, since neither the entrepreneur nor the financiers can count on luck, they are necessarily looking at a small acorn and evaluating its ability, with its environment, quickly to become a towering oak while such results are necessarily rare. So, all involved must trust in the evaluation, accurately to detect something rare, from the first meeting through little doubt about the result.In my experience, there are some significantly helpful means of evaluation, but the investors don’t use those. So, while the entrepreneur’s evaluation may constitute good evidence, the investors, not seeing such evidence, may suddenly change their mind and sink the company.There can be disagreement right away on the “team”: While one of the biggest threats is co-founder disputes, the investors don’t like sole founders.Ah, what a coincidence: In the movie we hearHe travels fastest who travels alone. Equity funding, private equity, venture capital, etc., are old, but are they necessary now? For entrepreneurs in the hot area of venture funding, information technology, now there is: The required capital expense of hardware and infrastructure software are surprisingly inexpensive meaning that equity funding can be less important.
It’s always nice to know that there is a safety net below as you step out on the high wire!! Preferably, before you head out.
CONTRIBUTORS:Two founders standout when you talk fundraising and continue to be mentioned as the wealthiest men yearly.Can anyone briefly explain how they raised funding and maintained control without diluting their personal equity or did they regain or increase their equity and control over the years? Jeff Bezos, Bill Gates!One non-founder & former MSFT CEO Steve Ballmer (A study of how stock options really work).Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT
Well said Fred.From my experience nothing is worse that running out of capital and not making payroll.Makes not paying vendors a walk in the park.If you’ve never done this, don’t.When you do this you have failed, plain and simple.You get through it but there is no nuance at the moment other than this hard realization.
Can’t agree more. Figure out how much money you need to get to the next milestone. Maybe throw in some cushions if the market conditions allow it. And just close it.
Here in SA we have just gone through an investment transaction taking on a majority shareholder. We did this purely because this means we are now ‘black-owned’ and can continue to do business with the big listed companies in the country.I realise this is very different from a US fundraising round – but some of the issues Fred lists ring true.We needed to find an investor and run a selection process. We did not have the luxury of too much time due to legal thresholds and deadlines which essentially meant our ‘blackness’ would run out unless we found an investor. In the end we went with investors referred to us by a friend. It made the investors and the process less strange to have a referral.The whole negotiation and actual closing of the deal was about 500% more intense and difficult than I thought it would be. But we did it. We got paid. We became black owned and we move on.
Few companies ever raise external capital. A small percentage of seed funded companies prove out their business model enough to raise follow on funding. I would think a very, very select few ever receive multiple term sheets. Get to the close so you can continue to operate and focus on building the value of your business. Don’t discount the intangibles of the team and partners. Sounds like good advice.
Mr. Wilson’s sage advice goes beyond raising capital. Optimizing for outcome vs. embracing the opportunity presented is a tough call for sure. Either decision is right as it’s going to provide an education. Of course, in the moment, money will be gained or lost so the stakes feel higher. If at all possible, take money out of the equation, and the gut will provide the right answer. Having an investor/mentor that truly operates from the gut is a huge blessing. -g
.Voice of experience. Well played.JLMwww.themusingsofthebigredca…