The long hard road to raising funds and one genius shortcut
12 March 2021
At a time when speed to market is everything, entrepreneurs are spending hundreds of hours and thousands of dollars seeking funding, only to come up empty. We look at the barriers faced by entrepreneurs on the long road to raising funds and explore how Qodeo provides a shortcut around them.
Founders of growth entrepreneurial businesses are often very good at what they do – understanding their customers, streamlining their operations and managing their teams. But they’re not usually versed in venture capital (VC) or private equity (PE). Nor are they intimately acquainted with the ins and outs of angel or “family business” investment.
As a result, when it’s time to take their business to the next level and raise some funds, they don’t know where to start. Giving entrepreneurs that starting point, in the same way you seek out a medical specialist or a tradesman for their expertise, as the venture domain expert, Qodeo steers you in the right direction for private equity funding.
Where the time goes: entrepreneur pain points
Within the VC/PE industry, there is often an expectation that anyone seeking funding should know the terminology and be familiar with how investing works.
Insider terms like “stage” and “series”, “pre-seed” and “seed” are used across the board. Subtle differences between corporate venturers versus venture capital versus private equity must be understood. People entering this space need to grasp where VC and PE money comes from and ultimately, why it’s so important for investors to see growth and aggression in the businesses they back.
An entrepreneur can spend hundreds of hours learning about the industry and thousands of euros, pounds or dollars on activities like emailing and calling people, sending out documents and going to networking events and conferences. Research conducted by Business School INSEAD MBA on Qodeo’s behalf confirmed that many entrepreneurs make huge investments in time and money, only to give up or get dead-ended.
Qodeo director and former Deputy CEO of Coutts Bank, Paul Wright, likens the process of fund raising to ‘pinballing’: being bounced from firm to firm without getting a result, or even in some cases, getting any kind of reply. It’s not that the funds are dismissive; often they’re just busy. One leading US VC said he gets 1,000 approaches a day and just doesn’t have the time to read through them.
What is also frustrating is the time wasted trying to get onto the short lists of VCs who might not even be the right fit in the end.
Where an SME founder is regional, they have the additional struggle of being off the radar for many VCs, and unable to access or understand these sources of funding. It can be discouraging, seeing other businesses similar to theirs getting more favourable investor attention because they’re located in financial hubs. And the major information gap that regional entrepreneurs experience means they don’t know where to start.
This is where being a Qodeo match puts you inside the trusted network, helps you beat regional bias, and get noticed by VCs, which is even harder now in the COVID era with fewer in-person events.
The network problem
Most entrepreneurs traditionally build their investor list through professional networks, networking events or word of mouth.
Many are also buying directories or doing Google searches on VC/PE, educating themselves using financial news services on the web. Yet desk research is made harder because of a lack of coverage by news aggregators.
This curtailing of opportunity applies whether the entrepreneur is just starting out in their business journey, or they’re more established.
“The industry can feel like a club that’s hard to join,” Glass says.
Hours and dollars saved: Why Qodeo exists
The instant matching feature of the Qodeo platform makes cool, warm and hot matches automatically visible to investors, graded by appropriateness.
Glass says hot matches are rare as there are many factors that need to be 100% aligned to create a perfect match. “It’s the cool and warm matches that are most interesting anyway,” Glass says. “While they show there are some factors missing, they do give VCs the opportunity to add value. Even if some businesses aren’t quite right yet, or even if they’re only half-baked, VCs can put them on a shortlist and monitor them.”
Entrepreneurs can contact their warm and hot matches; or in some cases where there are few warm matches, they might discover the time isn’t right for them; perhaps their opportunity isn’t at the right scale for investors. Which again, saves them time and money. In fact, independent research conducted in 2019 showed that 75% of entrepreneurs who used Qodeo saved 200 to 500 hours finding their perfect match.
And finally, instant matching also saves goodwill – you can lose a VC by approaching at the wrong time.
The Concierge advantage
The Qodeo Concierge service takes time-saving up a notch by helping entrepreneurs update their profiles to make them investment-ready and more matchable.
For an annual fee of $99.95, a fraction of the cost of a consultant or accountant, Qodeo’s team conducts one-on-one triage of your profile, massaging answers to get sharper, best-fit matches, which can otherwise be difficult if you’re not on top of industry terminology and nuances.
“It’s important that an entrepreneur engage with VCs in a way they’re familiar with, and at the right time,” Glass says.
Let entrepreneurs do what they do best
Many entrepreneurs, especially regional or diverse founders, are unlikely to ever build up serious expertise in fundraising. Nor should they necessarily be expected to have an MBA from Harvard Business School, or be spending hours and weeks “looking under the hood” of capital raising.
Mostly, they should be focused on running their business. And any time they do spend should be focused in a targeted way, rather than wasting time scatter-gunning.
Qodeo delivers targeted matching for an affordable monthly subscription. As Caleb Winder of Memorial Care Innovation in Boston said, “At 9.95 it’s a no-brainer.” Sign up today.Sign up for Qodeo