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Part 2: Are you raising capital? Don't let this destroy your company.

This is Part 2 of this previous post, where I wrote "If I had only done ONE thing differently, I would not be writing this post today." (referring to the fact that my startup Trybu.mx almost went bankrupt).

To help you understand, I need to give you more context and I'll use Vivino's recent fundraise as an example.

👉 But remember this: raising capital should never be the end goal.

Back to the story...

I think that many entrepreneurs get distracted with news headlines such as this one (by TechCrunch): "Vivino raises $155 million for wine recommendation and marketplace app"

As readers, we hardly ever understand what is really behind this headline (i.e. what's behind Vivino's successful fundraise)

Behind this successful raise, there are many variables at play that aligned in order for this outcome to happen.

But, the key variables that aligned are:

  1. Vivino demonstrated traction (i.e. created value)
  2. Vivino had enough time to raise their round
  3. People leading the fundraise knew what they were doing

The problem with many entrepreneurs is that we correlate success with raising money. The VC industry is filled with this "sexy" headlines (of startups raising millions of dollars). We, therefore, believe that raising millions of dollars is the way to build a successful business.

At least this is what I believed. TLTR: THIS WAS MY ONE BIG MISTAKE: I believed that raising capital was the end goal, instead of focusing on reaching PROFITABILITY.

As the CEO, I thought that raising capital was my (sole) responsibility. Everyone says this is the CEO's main responsibility - right?

Wrong!

The CEO's (only) responsibility is to create value, and, raising capital does not create value.

In September 2020, however, I set out to raise our seed round of $500k "before we ran out of capital." (We had runway until January 2021.)

After 5 intense months, nearly 300 meetings with investors in the US, Mexico, Colombia, Peru, Argentina, Brazil, Chile, and the UK, AND almost a mental break down, I failed to raise our Seed Round.

95% of my time was spent in meetings with prospective investors instead of helping my company generate revenue!

It is a never-ending process, one I thought was a statistics game. I needed to meet with 100 investors to have one say yes - guess what? This is not the right way to do it.

Interestingly, I ran a nearly perfect fundraising process. This is where I have most experience after 10+ years working in the PE/VC industry. (Side story: I led our firm's investment in Casper's Series C round - heads up! Superficial headline in the link 🙃)

I got meetings with 100+ investors globally. I got second meetings with nearly all investors I sent an email to. I had a handful of investors doing their due diligence. The process was perfect.

Then, what was the problem? Why I could not raise $500k for Trybu.mx with such a "perfect fundraising process"? (This is another story to tell.)

But the ONE thing I could have done differently was to focus on reaching PROFITABILITY, not raising capital.

Time is your most valuable resource. Use it wisely. Focus on the right thing. Don't get distracted with sexy headlines or vanity metrics.

🎲 TAKE ACTION Please share your questions, comments or feedback. I would love to dig deeper into the details, hoping you can learn from my mistakes.

BONUS

If you think you need to raise capital, think again. Ask yourself why do you need to raise capital? If you really need to raise capital, make sure this is not the end goal (i.e. your company's future is not dependent on successfully raising capital). Remember that your role as CEO is to create value, not to raise capital.

If, however, you are convinced that you want to raise capital, make sure you can answer these questions:

  1. Is this the right time to raise?
  2. Are you and your company ready to raise?
  3. Do you know what will it take for you to successfully raise your round?
  4. Are you the right person to lead a fundraising process?

PS - I am creating a high level guide that will help you run a successful fundraising process. If you want early access and a special (early adopter) discount, please fill our this form.

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  1. 2

    I prefer bootstrapping and believe, customers are the best kind of investors. However, for anyone planning to raise fund, the best time to raise fund is when you do not need money.

  2. 1

    Agree with your message. You must always build and create value in your company. While advising entrepreneurs, as soon as they ask for money or how to rise the first capital, I tell them to think again why they are building that company.

    An investor one thing for most is that won't invest on an entrepreneur that doesn't show passion on what he is building.

    @EduardoHolsch and how about the company? I can see that the website is still up. I would love to hear more about your company.

  3. 1

    Hi @nabati, @fabi_bo, @diealvarado, @dnramirez, @steveprocter, @Alexvais,
    @MyPath_finder, @generationAaya, @kwasielew, @demec, @RxAssim!

    You all asked me to let you know when the next part of the story was out. It is out :)

    Hope you find value in it and please reach of with follow up questions as I would love to share more with you.

    Cheers,
    Eduardo

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