May 21, 2024

Hey Investors - Don’t Waste Founder Time

Happy Tuesday, friends! Like several of you, over the past years, I’ve had the opportunity to sit on both sides of the fundraising table. I’ve raised capital for funds, I’ve raised debt capital to deploy to other founders, I’ve raised from angels and family offices as a founder, and I’ve raised from VCs. I’ve learned a lot of lessons raising capital for Novel that I think are really important for other funders - whether they are lenders or investors — to hear, understand, and live by. Most important of all is this: don’t waste founder time! There are several ways to live by this credo.

First, if you don’t have capital to deploy, don’t take a meeting with an entrepreneur raising capital. Just tell them you don’t have capital to deploy before you take the meeting. Sometimes they’ll want to meet anyway, but savvy ones won’t want to waste their time. Over the course of the hundreds of fundraising meetings I’ve been in, I can remember very well the investors who didn’t have money to deploy, and I can remember very well the moment I realized it during the conversation. In most cases, I had to pry it out of them. Those are the investors who won’t last long. Raising capital is hard enough without having to play Nancy Drew to ascertain whether the investor actually has capital to deploy. “But Keith, that’s part of the game,” some might say. I might reply, “Play stupid games, win stupid prizes…like founders who share openly that you wasted their time.” It’s so important to recognize that founder time is a key resource, and one that has serious constraints. Don’t be the investor who wants to learn more and has no way to actually take action.

Second, say no quickly. If it’s not a yes, just say so. Don’t be nice. Be kind. No entrepreneur wants to jump through extra hoops to get you comfortable. If it’s a no, just say it’s a no.

Third, if you ask how you can be helpful, then do what you say you’re going to do. Seriously. Just do it. And if you’re not open to doing what the entrepreneur is asking of you, then say you’re not going to do it and move on. Entrepreneurs talk, and they know who’s going to be helpful and who won’t. It’s ok not to be as long as you say out loud that you won’t be. That’s honest, which is important in this ecosystem.

Fourth, if you’re a minor investor, then act like one. If you’re not leading or setting terms, or writing a substantial check, once you commit to funding at the terms someone else set, then just do that. The entrepreneur is dealing with lead investors and lawyers, and herding cats trying to get it all done. When investors writing small checks ask for changes to deal docs, it’s a distraction that costs money and time, and in my experience, it usually comes from inexperienced and unsophisticated investors. Don’t be that investor.

Look, as an investor your job is substantially easier than that of the entrepreneur. I can say this because I live both realities. Entrepreneur life is way harder than investor life. Once you’re off the ground as an investor, you can plan. There’s easy math to plan against. Fund economics, for example, are easy to figure out and forecast. This is not true of the entrepreneur. There is more uncertainty, your risk of going to zero is single-threaded, it all depends on you (and your co-founder), etc.

Let me know if you agree or disagree!