Written By: Marc Halpin
It was 2004 in London.
I was working with KPMG who were channel partners for my first startup’s product. Richard (KPMG) and I were in a meeting with a government buyer when Richard was asked to speed up the project and ‘look’ at costs at the same time.
Richard (with a smile on his face) said these words that I will never forget.
“We can go fast, we can be cheap or we can do good work. Pick 2”
Some of you will have heard this before, I’m sure. Back in 2004, it really struck me as one of the absolute realities of doing business. Recently I started thinking about the decisions a Founder makes in raising capital and it struck me there are similar choices and potential compromises to be made here too.
Choice 1 – Raise Quickly
Maybe the most common question we get asked at Kerosene is, “how long will it take to raise my round?” It does depend on your starting point of course, but generally “fast” is 90 days and “slow” is 9 months. This is considered from the first VC meeting, post pitch preparation.
Choice 2 – Good Terms
How much of your company will you give up for that $2M check? What do the control provisions look like? What does the board composition look like? All the elements of the offer from a VC have a potentially dramatic effect on the future of your company. Multiple short (1-3 page) term sheets is what you’re looking for here.
Choice 3 – Great Partner
What can be the most overlooked consideration when raising capital is the firm you take the check from, who the individual partner is and how good the relationship is. This is a marriage of sorts and getting to know VCs over time (before you partner) is a good idea. You’re going to be ‘friends’ for a long time. Having the option to do diligence on a VC firm is where you want to be as a Founder.
In simple terms, Founders often make significant compromises. Which two of the above would you pick and which one would you give up on? These decisions for Founders can be literally life-changing.
What do we do at Kerosene? It’s simple really. We endeavor to support great Founders in a way where they don’t have to make those tough choices.
Have it all.
Kerosene Ventures – Helping Great Founders Raise Capital