Funded

Chapter 9. The Investor Pipeline

Many entrepreneurs, particularly first-time entrepreneurs, underestimate just how challenging the fundraising process can be. Maybe you think you can hire a banker to raise the round for you. Maybe you think you can put out a finder’s fee and people will find investors for you. Or maybe you think you’ll get a yes after a couple of meetings and don’t think you need to set up anything else. But this way of thinking rarely works and usually does little more than waste time.

You are going to be the one raising money for your company. No one is going to raise it for you. Credible investors don’t like dealing with intermediaries. They want to deal with and get to know the person who will be leading the company, and they don’t like their investment going toward a finder’s fee.

While a single investor can make up a round, rounds are usually made up of a number of investments from different individuals (angel investors) and institutions (venture capital firms), all of whom are buying into a company at the same point in time—generally on the same terms. To put together a round, the average entrepreneur literally needs to be in contact with dozens, if not hundreds, of investors before closing the round.

More than one major investor taking part in a funding round is known as syndication. Participating investors start out as a target list, and become part of your investor sales pipeline (or just pipeline), sometimes referred to as your deal funnel. A ...