Getting on Your Fundraising Bike
And keeping your balance.
This is a “Hello World!” blog post from the analyst team here at Beacon Capital. One of the things we do is look at some of the new opportunities that come in, and make sure we get these in front of the Partners at Beacon to be discussed at our weekly progress meetings. We noticed how busy it can get in certain months and have been thinking about how we could help entrepreneurs shape their approach when they reach out to us, so that both parties have a better first experience. We asked around, we listened, and now we are starting with a series of short weekly blog posts to give you some insight into how we work.
How cyclical is fundraising?
One of the observations over the years is that fundraising appears to be cyclical; entrepreneurs seem to prefer certain months to start their fundraising. Take 2015 for example: we were approached by 1600 teams, and we interacted with 548 of them (the breakdown of our funnel will be posted in the next blog). By ‘interacted’ we mean that at the very least we had a call or a meeting to try and understand their business in greater detail. This means, on average we had conversations with just over 10 startups per week. Havingplotted the 548 first interactions over the twelve months, the outcome suggests that entrepreneurs chose January, February and October to start their fundraising.
Are these months the best time to approach us? Maybe not: those periods are the busiest and consequently it leads to us being (just a little) less sensitive when an entrepreneur has an “off day”. With the burst of entrepreneurs approaching us during these periods, it’s not inconceivable that good opportunities may be missed because they were not presented as well as they could have been. In other words, by choosing these months to start your fundraising you may be entering the market when the competition is most intensive. Are you making your life more difficult than it should be?
And just to give you a full picture of the activity in a VC like Beacon Capital, we also plotted the deals that have closed over the same period; we average a deal per month with the most eventful months being May and August (!), well clear of the busiest months for seeing new opportunities (January & February). Interestingly, October also seems to be a relatively busy month, both for closing as well as seeing new opportunities.
Keep in mind that a transaction can take anywhere between two to three months from the first meeting to close (taking the new transaction that closed in November as an example, we started engaging with the founding team in September).
It may seem counterintuitive as most people believe VCs do very little in the summer, but approaching us in the relatively quiet months of June, July and September will give you this extra bit of space to develop a relationship, by getting to know us and putting your ideas across.
Fundraising should be driven by the capital needs of the business and not how busy or not the VCs are, but *if* you have the option then maybe you should start engaging with VCs during their “lower activity months”. However, if you still find yourself approaching us during the busiest months, then be prepared for relatively slower responses and for a little bit more persistence from your end.
In the coming weeks, we’ll share a breakdown on our deal funnel and how this relates to our investment focus.
Take away message
Fundraising should be driven by the capital needs of the business and not how busy or not the VCs are, but *if* you have the option then maybe you should start engaging with the VCs during their “low activity months”. However, if you still find yourself approaching us during the busiest months, then be prepared for relatively slower responses and for a little bit more persistence from your end.
In the coming weeks, we’ll share a breakdown on our deal funnel and our investment focus.