As I wrote in my last post, I had several conversations last week that touched on the topic of the early-stage CEO. These were with a number of people that collectively include experiences as founders, CTOs, and CEOs. The subject that dominated these conversations was that of fundraising. Previously, I had received conflicting inputs as to how much of a CEO’s time is consumed by this and to what degree is my corporate experience relevant. These new inputs helped clarify the key factors that play into these questions.
On the topic of a CEO’s time allocation to fundraising I had received early inputs ranging from “all encompassing” to “not so much if things are going well”. One of my conversations Friday addressed this by parsing out a CEO’s experience to before and after VC financing. Prior to receiving venture capital a CEO’s time is largely consumed by fundraising as the startup is operating on limited funds and is racing to hit milestones and attract additional investment before these funds are consumed. The survival of the company is at stake and nothing takes precedence over this. After receiving venture capital the focus shifts more to execution as this now becomes the gating item to gaining market traction and additional investment. Certainly, after receiving venture capital the CEO still is spending time with investors and is positioning for further investment but the sense I got was that this is at a lesser intensity than before the initial round of venture capital.
The second item I explored was the comparison between internal corporate and external startup fundraising. I am seeking to understand how much of the experience I have in soliciting funds from senior managers within a large company is applicable to raising money from potential investors for a startup. Taking the various inputs I received in composite I put together the following set of conclusions. First, there is the simple dynamic of getting a meeting with the potential investor. In a large company the path is usually clear and involves working up one’s chain-of command. In a startup, before one can even make a pitch for funding there are the challenges of determining who to pitch and how to get their attention. Second, there is the obvious difference in that with corporate fundraising one is usually dealing with a single potential “investor” while with a startup there are many. This, by itself, implies a larger time commitment as multiple engagements with multiple entities need to be pursued to successfully obtain funding. Third, with internal corporate fundraising there is a stronger focus on the execution plan as opposed to the factors startup investors focus on—opportunity, differentiation, positioning, business model, team, etc.
Having said this, there nonetheless are different flavors of corporate fundraising with varying degrees of applicability to startups. Seeking approval for next year’s budget for a mature, modestly-growing business is very different than seeking funding for a completely new corporate initiative. As my experience lies primarily with the latter I do think much of it is transferable to startup fundraising. There are certainly many rookie startup CEOs who have successfully raised millions of dollars without this experience so I feel comfortable that I can as well. The real question is whether this is a role I want to have. Do I want to be spending a large chunk of my time raising money than being more focused on strategy, execution, customers, team-building, etc.? If yes, then an early-stage CEO role would be appropriate for me. If no, then either an early-stage VP Marketing or a late-stage CEO might be better. More food for thought…