As an investor in the past and as a pitch coach now, I have come across a surprising number of companies where someone who is not part of the founding team is trying to raise money for the company. Of course, salespeople are very good at sales. (That’s what salespeople are for.)But with the exception of the founders — and the CEO — no investor will take you seriously if you’re leading the way in the fundraising process.
I’m using the job title “salesperson” here – but I’ve seen social media people, marketing people, and even PR people reach out to investors. All around, it’s a very poor indicator for a high value investment, and I know many investors who don’t even consider the investment opportunity.
There are many factors that founders need to develop, but the most important is the job description of a CEO. In the early days when you’re just two or three building a company, everyone does everything. However, as a company grows, the CEO’s role gradually shrinks until only three jobs remain:
- Set the culture for the company.
- Hire the right people to build the company.
- Whatever you do, don’t run out of money.
The issue is the last point on this list. If you’re not the best place to raise money for your startup, what does that say about you? And if you they are. A great place to raise money, why not do it?
Investors are a different beast than your run of the mill customers. They see a lot of money and rarely reach for the checkbook, just waiting for big bucks. Most investors are interested in building an ongoing relationship with their investments. For small investors, it’s a matter of being on regular updates, and when the CEO asks if anyone knows an amazing engineering VP, to dip into your little black book of contacts to see if you can help in some way. For board members, there is much more strategic, ongoing investment. In any case, these investors want to build a continuous relationship with the founders.
Another issue is that typically, only the (co-)founders have significant equity in a company. That’s good for them, and it represents the types of locks. A (co-)founder leaving a company is a big deal. If you’re sending your sales pitch to “sell” the company, your investor knows two things: First, they probably don’t have a meaningful ownership stake in the company, and building an ongoing relationship with that person is unlikely. be vain; They may leave, or (accidentally) misinform the company about certain important matters. Two, if the seller has a large ownership stake, a Different Red flag – that the founders don’t know how to manage their cap table.
Either way, anyone who isn’t one of the company’s founders — and, as I mentioned, the CEO — know that’s a huge red flag for many investors.