Fundraising: Lessons From the Tortoise & The Hare
Realistic expectation is one of the vital factors that contribute to the success of a fund raising exercise – for the company, its advisors and potential investors. When expectations are not aligned, chances of failure in fund raising are increased.
It's useful to note that financial investors and sizable corporate investors typically have internal deal review and approval process, and also, they can be looking at a few deals at only one point in time. It's advisable to give some leeway in terms of response time, and this needs to be factored into the cash flow projection of the fund raising company as part of its overall business plan.
By the same token, it's also vital for the fundraising company to be realistic about its turnaround time with regards to requests for detailed information during the entire deal process. There are some typical investor information requests that can be pre-empted; and these should be prepared well in advance in order to better manage turnaround time during the deal process.
Due diligence is another potential delay factor. In this regard, there's the classic disconnect: the fundraising company believes that there are few contentious due diligence issues, while investors tend to prudent and scrutinize the company for red flags that need to be brought up as part of their internal review and approval process. To put this in perspective, there are two sides to a deal, and each side has its own agenda, and it's therefore vital to have realistic expectations.
In our experience, the fundraising company has a tendency to be the "hare" in the fable; and whilst we certainly do not recommend that it should be like the "tortoise", it's absolutely vital to take the requisite time to prepare and have realistic expectations for a fundraising exercise.
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