236. Don’t Fundraise, But If You Do Be Ready for Due Diligence

VC Minute
Why would Tom self-fund or limit fundraising if he could? It can distract from the business

VC Minute – quick advice to help startup founders fundraise better

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Tom McGrath:

If I had the opportunity, I wouldn’t fundraise. I think that at least from venture capital, I think that most founders who do it the first time and then they have a big exit, they’re like, yeah, I don’t want to do that again. Some of them will raise venture capital, but many of them that I have spoken with would likely not again, or they would try to self-fund. Or at least limit the amount of venture capital that they have to take on because it is a distraction from the business. And you constantly have to be doing it. In my perfect world, if I had 100 million dollars sitting in my bank account, I would fund my own business. But you know, that’s unfortunately not my reality.

I would say that I would have invested a lot more time upfront just making sure that we had good reporting, good analytics, good accounting, and a really clean data room. One of the major components of what drives these timelines to be longer is not having all the information in one place and not having a good sense of what these people would want in a due diligence checklist. And every stage is different. The level of diligence at a Seed is different than the level of diligence at a Series A. I’m going to know ahead of time that at the Series B, they’re going to want to see that everybody has keyman insurance policies. They’re going to want to see that everybody has intellectual property assignments signed. They want to see non-competes. They want to see all of these different things that I didn’t know that they were needed at the Series B, but I think that I would invest more time in trying to preempt or understand what they’re going to ask for instead of scrambling around, trying to handle 15 different diligence requests from 15 different firms.

As we go to raise the Series B, I’m establishing those relationships now. And that’s another important thing that I would say about funding: don’t wait until you have to do it. You should be having the conversations and building those relationships now.

Rich Maloy:

Thank you, Tom, for some awesome advice this week. Before we wrap up, let’s delve into what sets AVL Growth Partners apart. AVL’s team brings significant years of finance and accounting expertise. Why go fractional? Picture this: a CFO with an average of 19 years of senior finance CFO experience, alongside controllers and accountants with 15 years under their belts. This isn’t just bookkeeping. It’s the expertise your company needs to navigate economic challenges. If you want to take your company to the next level and need the experience required to make it happen, visit avlgrowth.com right now. Time is our most precious asset. Thank you for spending some of it with us this week, and I hope everybody has a wonderful weekend.

About iink

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About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)

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