26th
Fundraising ‡ business development
I recently had a fundraising discussion with the head of BD at company looking to raise capital. He is a good guy and the company is doing cool stuff. But a word to the wise - fundraising is not business development and your BD lead should not run your fundraising process. Fundraising is fundamentally the responsibility of the CEO and cannot be delegated to other members of the team.
I get the rationale for having the head of BD run the fundraising process; business development professionals are deal people - they are articulate, know how to sell and are skilled negotiators. Their job is to ‘do the deal.’
And this is where some companies get tripped up. Despite the fact that it looks like a duck, walks luck a duck and talks like a duck, your discussion with a VC is *not* a ‘deal’ in the traditional BD sense. It is not a temporal alignment of strategic interests.
Your engagement with a VC is a marriage. It is a fundamental, nearly irrevocable, company-life-long partnership.
From the investor’s perspective, the single most important determinant of whether or not to enter into the partnership is the people. Don’t get me wrong, everyone on the team is important, but there is no avoiding the reality that the CEO is the one driving the ship - the overall strategy, the product vision, the key sales initiatives, the hiring of lieutenants, and so much more. The CEO is the final decision maker and ultimately bears responsibility for the success of failure of the company. The buck stops at the CEO.
When the CEO is not leading the fundraising discussion, rightly or wrongly, that in and of itself sends a strong negative signal - is he incapable of describing the vision? Does he have a problem inspiring others to believe in the opportunity? Is he unable to sell? Will he be steam-rolled in a negotiation?
Conversely, having the CEO run the process puts the CEO’s capacities as a leader, visionary and salesperson on display to inspire investor confidence. Furthermore, it enables the irreplaceable opportunity for the CEO to develop a relationship the investor. Remember, a venture investment is more akin to a marriage than a ‘deal’, and it only works if there is a strong relationship built upon mutual trust and respect. The CEO is the primary point of contact between the company and the investor, and it is the CEO who needs to play point building that relationship on behalf of the company.
To be clear - the CEO is not the only important team member and is often times not even the smartest or most capable (the best CEOs hire people who are smarter and more capable than themselves!). All the team members are important. But for the reasons described above, fundraising is fundamentally a CEO-level responsibility and should not be delegated.
