Closing on time

I´m an avid fan of Mark Susters newsletter Both Sides of the Table.

In his recent newsletter How to Develop Your Fundraising Strategy Mark writes some tips and tricks of how to raise capital. Its a must read if you are raising capital. But after having read the article I felt he really missed to make one key point so I wrote him a reply on the topic "closing on time". I thought maybe I should share it somewhere more availiable than his inbox.

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Great article.

I know my reply is a bit longish but I think you might appreciate the perspective.

I really think you miss one crucial point under "13. Create ugency". You mention it as you refer to Sequoias fund raising strategy: "we close in x time". I believe that this strategy was the single most critical to my latest fund raising success. This is how I think of it:

1. 1. If you never close on time people know that they can wait. If you do, they know they have to make a decision.
2. 2. Therefore I have made "I always close on time" core to my fundraising strategy. At each next round I want to be able to say: "I close on time and I can prove it".
3. 3. They might claim that "you have to wait". Well, thats also part of my core strategy. I set up our structure so that we can take the worst famine without even twitching and I can prove it (http://vimeo.com/22653093). So I just say: "Ill close without cash, we are already starving and we can continue for another 6 months if thats what it takes. Either you are in or you are out".
4. 4. Then, I give the investors my time table and I ask: "do you think you can make it?"

Does it work? I think so:

1. 
   
2. 1. The ones that saw me close in front of their eyes in the first round were definitely keen on the next round (and I can prove it! :) )
3. 2. Ive closed on the planned day twice now and that is with quite tight time constraints: 2 months
   
4. 3. Ive closed on my set target price (which most Swedish investors thought was ridiculously high, I say "buy quality, cry once").

I did this despite:

1. 
   
2. 1. Many VCs being on vacation for the first month (aug-sep 2011).
3. 2. A bad downturn that made everybody super scared.
4. 3. Im not proven in any way. No education, no former success, no hype.
5. 4. My business is not proven (yet). On the contrary, in Sweden VCs (but not customers) are terrified of e-signing and the legal stuff. Especially in Sweden as they have seen the big fail of the bank sponsored e-identification system that everybody hates.
6. 5. Raising in Sweden, one of the most seed capital depleted countries in the world I would like to believe.

Keep up the good work. I love your articles.

Lukas