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8 Things I Learned While Raising First Round Of Funding

8 Things I Learned While Raising First Round Of Funding

Hi Sushant (name changed),

Please let me know if the offer is still on the table?

With trembling hands and lot of courage, I pressed send, put down the phone on the table and turned to my laptop.

Though I could sense the sudden change in interest, I wished the investor never replies because it will be too painful. Somehow, I was hoping for a miracle. I scrolled through my Facebook feed, but my mind was still on the phone. No reply. My news feed was filled with posts from YourStory and Inc42 with news like Two IIT Mumbai Alumni raised X Mn $ funding from Y investor. Three IIT Delhi students raised 2nd round of funding from another investor. Why didn’t anyone tell me to join IIT, I cursed myself.


Somehow, everything around me became dead silent as I read the message:

We think that the risk has increased and we decided not to pursue this further.

We are screwed now. The discussions were happening since two months. Everything was decided. We got the commitment, marketing plan was ready, hired new employees, pre-ordered  lot of t-shirts. Only thing needed was the funding amount and we would have exploded. The sudden withdrawal from investor at the last moment left us completely paralysed.

We messaged each other for next 30 min trying to know the reason for sudden change, but nothing good turned out. Almost in tears, I ended the discussion with final message,

Sushant, I don’t understand the sudden change, but we planned everything based on your promised commitment. I won’t force you to change your mind but I would say this. I am confident in my abilities and I would surely make the coolest t-shirts brand in India. With funding, I would have achieved it sooner. Without funding, it will take some time but will happen for sure. Wish you all the best your in endeavours.

We were so angry and disappointed.

Sitting at Paradise Restaurant, over a jumbo pack of Chicken Biryani, me and my partner discussed for hours over what went wrong, how we could have avoided it and the future course of action (somehow eating your fav food when distressed makes the pain go numb).

Here are the lessons I learned after my first encounter while raising funds:

Do you really need an investor?

Think about what is your ultimate goal. Are you happy with having a decent size company making good enough profits while maintaining full control? Then don’t raise funds just because everyone else is doing it. If the only thing affecting your ultimate goal is lack of funds and you cannot raise funds on your own, then finding an investor is a way to go.

Fund raising is not a separate activity

Once we achieved good traction, we focused fully on raising funds and somewhat lost focus on the ongoing business. Raising funds takes a lot of time and energy, which can be utilized in growing business. If you have more than one co-founder, one person should focus on fundraising and other should continue growing the business. Funding may or may not materialise but a sustainable business will keep you in race.

Omg.. He/she said YES? Don’t plan the wedding yet

We had got commitment from the investor and stopped the fund raising activities. After that we utilised all the time in planning how are we going to use that money for company’s growth. We saw slight downfall in our daily orders, but we thought no problem as soon as funds arrive we will start aggressive marketing and will cover it up. It was a mistake and it backfired. Ultimately investor backed out and we were left with a downhill slope in growth and lot of debts.

What’s mine is yours, not

Do not share every single detail about your company, plans, growth strategy, competitors etc. to investor until they’re fully on board. We showed all of our cards based on the word of commitment. We showed who our main competitors are, how much money they are making etc. and if possible we might have shown and praised the grass is much greener on the other side.

Will you have babies together?

Before putting ring on fingers andvow, at least ask, if you are going to have babies together. Meaning do you both agree on the same exit strategy? In future, if the investor wants to sell off the company if any good offer arrives and you want to retain it, it will turn very bad. Nothing wrong in asking upfront what exit are you looking for?

Its all about money, honey

Fundraising and getting an investor on-board might sound great, but ultimately it is a business deal. And nothing wrong with that. They are looking for great ROI and you are looking for quick growth potential. Still, please check if you are marrying a cheque book or a great partner? I was furious when the deal was cancelled, but I thought of this way that it’s just a business deal. They saw some risk or found someone better or they changed their mind, anything can happen. You can’t blame them. That is why maintaining focus on a growing sustainable business is a must, so that you don’t fall, if funding efforts do not materialise.

Its not done until it’s done

We made a mistake of not pursuing other offers. When we got commitment, the investor told us its final and do not look anywhere else. We got inquiries from 2-3 investors after initial commitment, but we politely refused them. Now, how bad it will looks if we go back and tell them initial investor has refused and now we have come to you.

This is not the end

We were so down when this happened. “We wanted to jump in chullu bhar water.” Got lot of thoughts of shutting down or selling it off, but we didn’t. Funding efforts did not succeed? No worry. Remember, you did not start company just to raise funds. Fund raising is just an activity to grow business. Focus on making a sustainable and profitable business even if its small.

Finally, I learned  fundraising is not the heart of business but just a part of business.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.