On to the fieldnotes...

A founder recently reached out with this question:

“Why can’t I hire someone (you) to raise money for me?

Just like they have investment banks for big companies or real estate agents for houses, why isn't there something similar for raising capital? It seems so inefficient that a founder who is trying to get a company off the ground has to then shift to a totally different skill set to try and raise money!”

This is a common frustration because fundraising IS so hard and it IS such a different skillset.

I want to break this down because pulling this question apart will help illustrate some of the more important components of fundraising and executing your startup.

First - reasons this makes sense

In most cases, tasks you rarely do but are very important are perfect candidates for outsourcing. In situations like this, bringing on an expert, full-time hire dedicated to the project doesn’t make sense. The skill is nice but the unused capacity is a total waste.

At the same time, trying to take on the task by yourself or with existing resources will also be a waste. You’ll spend cycles getting up to a passable level of competence and still deliver suboptimal results, or worse… damaging ones (my experience when trying to do bookkeeping / accounting myself🤦🏻‍♂️).

Some perfect candidates (especially for early stage co’s):

1. Accounting / bookkeeping

2. Initial Branding

3. Social Media

4. Project design

5. Data Entry

6. Calendaring / Scheduling

7. HR (up to a certain company size)

(read to the end of the article for some outsourcing ideas for the above)

Overall, I’d recommend identifying opportunities to outsource wherever you can comfortably to keep you focused on your core competency and optimizing for speed.

So why does this not work for fundraising?

Yes, fundraising is similar to the above tasks in that it requires a different skill-set than launching a startup. It requires expertise, focus, and is only done in earnest once every 18 months or so… but fundraising is also very different.

The main difference is how crucial connectivity to the founders is. In the examples of candidates for outsourcing, only branding requires some part of the founder’s soul. But even in that engagement, the consultant can extract what they need from just a few one-off meetings.

External funding typically flows from people to startups. And because there’s a limited amount of hard data for most startups, investing in a startup requires a deep understanding of and belief in a founder. The level of trust needed for someone to part with capital for your fledgling company is unique and personal. In other words, it requires real relationships which cannot be outsourced.

This means that anyone trying to raise capital needs to invest time and energy in building relationships. It’s a process that doesn’t scale and requires personal touch, understanding, and individual engagement.

So does that mean there are no ways for founders to build efficiencies into their fundraise?

Learning from the world of Recruiting (outsourcing what you can)

Of the many similar worlds to fundraising, recruiting often comes up as one that has the most overlap with fundraising.

The analogy goes like this - in fundraising, a founder asks an investor to invest dollars in exchange for equity in the company. In recruiting, a founder asks a talented individual to invest the additional dollars they could make at a larger company in exchange for equity.

In both cases, the investor and talent have insufficient data to accurately value the risk they’re taking on. They have to trust what the founder presents to them and make a decision.

But don’t people hire outsourced recruiters?

Yup.

And here’s where we can learn about finding outsourcing opportunities in fundraising.

Companies hire outsourced recruiters all the time, but when you ask a founder who has successfully worked with recruiters, they’ll tell you it doesn’t mean they can step away from the process fully.

Founders are still the main character in recruiting. They’re taking calls with recruits, selling them on the vision, and doing the final interviews + closing calls.

What recruiters do is streamline the process and take out those parts that don’t require the founder like sourcing candidates, conducting initial phone screens, and managing the candidate tracking system.

Do the same with fundraising (outsource the mundane and repetitive)

You can do exactly as you would with recruiting and outsource the parts of the process that don’t require direct engagement with the founders.

By breaking down the fundraising process to its individual steps, you can identify the ones that are most suited for outsourcing:

• Generating target lists of investors

• Mining LinkedIn and contact lists for connectors/supporters

• Organizing and scheduling calls (EA work)

• Updating tracking sheets / fundraising CRMs

These are time consuming tasks that junior team members and outsourced resources can be trained to execute.

Wrapping Up

Finding someone to outsource the “actual fundraising” itself is a bad idea. If anyone offers to do this, they don’t know what they’re talking about.

Instead, you can do what savvy founders do in recruiting and outsource the parts of the process that don't require the soul of the founder. This can help free up founders to focus on the parts of the process that require the personal touch and deliver the best results.

Smart Twitter Takes

Signals… it’s all an investor can go off of with an early stage investment!

This is also the same reason a great deck is important. One partner will need to share info about you as efficiently as possible!

P.S. HA... still me. luckily my crocs are usually not too far away