Master urgency, master fundraising - How to effectively manage your funding round.

One of the hardest things to get right when running a fundraising process is to avoid dragging out the process by creating urgency for prospective investors to decide to invest. The longer it drags on, the harder it becomes to close the round at all! If an investor can wait a little bit longer to see more growth, momentum, or conduct further diligence, then they probably will. This makes it harder to achieve the critical mass needed to close a round.

So, how do you create a sense of urgency? Unless you have the hottest, most attractive investment opportunity in the world, the answer usually lies in running a tightly managed, well-orchestrated process. And even if you do have the hottest opportunity in the world, running a well-managed process is still vital to ensure you don’t get trapped into accepting the first offer before you’ve had a chance to collect others.

Throughout all of this, you must be sincere since investors will know when they’re being hustled. It’s best to think of creating a pull to invest ("soft urgency" if you will), rather than pushing people to do things which they aren’t comfortable with ("hard urgency") - no one wants to feel forced or pressured! The strongest incentive and the only one that can be built authentically is competition, which comes from having a compelling investment opportunity and a well-run process. Having said that, good investors won’t be hurried to skip their due diligence and usually have their own internal process that takes a certain amount of time, so understanding that and running your fundraising process to accommodate that is vital!

The goal of the fundraising process is to have multiple offers (i.e., full term sheets) arrive at approximately the same time. This way, they can be compared and potentially negotiated from a position of strength, due to the presence of viable alternatives.

Consider the following pipeline:


When people are in the assessing phase is when you have to maintain their interest level and follow up after a couple of days to prompt them to make a decision – “is there anything more you need to know to make a decision on whether you would like to commit or not?”, or “when should I expect to hear from you?”.

This is harder with VC firms as they all have an internal process, and you have to understand this and align with it, so that the multiple competing parties end around the same time providing you with the aforementioned position of strength for negotiations(for the ultimate goal of as trong negotiating position!). Either way, it’s still very important to keep them engaged continuously throughout.

Soft commits

If an investor is interested in investing as a follower (i.e.,not leading the round) then the aim is to get them to commit to an amount they would like to invest, but without asking them to sign or transfer any actual funds. Basically, you want an expression of interest from them that feels real whilst not guaranteeing them a place in the round. Consider this a soft commitment which you can add to a list with other prospective investors that you should actively build out. Keep them engaged and don’t let the fires go out as you work towards securing the lead and filling up the round – send any positive news or updates you can to them for the time being.

Once you’ve got the full round (or most of it), that’s the time to say, “we’ve got the full £300K we were seeking, I’ll send you the documents in the coming days for a transfer date” and hope that they haven’t lost interest by that point.

If you get bigger commitments or better investors that are a better fit for the business thereby becoming oversubscribed, you can either extend the round, or go back to your soft commits and say“sorry, I know we said you could be in the round, but sadly the lead investor can’t accommodate it, so we can’t take your investment anymore”. This is an unfortunate reality of investing that good investors will understand even if they seem devastated and try to throw their weight around at the time. 

The round should be built around the lead investor since otherwise  – as without them you don’t have a round. When communicating with the prospective lead investor(s), be sure to distinguish soft commits (people you can add to the round around their cheque) from competing offers (people that have made an offer to lead the round that they would be competing with). So, if you have other commitments, ensure you clearly communicate with your lead to see about accommodating them.

What about investors that move quicker than you were expecting and push you to take their money? If it’s a good investor and an offer that you like – and you have done your own diligence on the investor (for more on this, click here) – then great, go ahead and build a round with them.

If you feel that it’s a tactic by them, or that the offer isn’t quite right and you’re not yet convinced, then tell them that’s the case and that you would like to see whether the offer is the current market standard, or that you want to get to know them better and do further diligence before accepting their offer.

What if you don’t get a lead? Well, if the other commitments could together create a big enough round then you can find one of the bigger cheque writers and try to talk them into leading the round where perhaps you suggest terms (e.g., using a market standard term sheet) for them to lead with. Otherwise, you’ll have to keep pushing on to find a lead!

Feet draggers

If an investor seems interested but is unwilling to commit, keeps asking for more data, or wants to see more momentum to de-risk the opportunity, then you can say, “OK, I can keep you updated on the raise”. Then you might receive a lot more interest when you say 2 weeks later, “we’ve got most of the round filled, do you want to join?”.

What if you get a lot of “feet draggers” that aren’t willing to commit? That’s the hard part. If they delay and want to wait-and-see, you put them on a back burner list of investors who you can nudge for a “final chance to invest” as the round comes towards the end or update them as you get new commitments.

If you’re the daring, bold, Salesy type (who’s comfortable bending the truth) you can even convert a whole herd of feet draggers to commitments by saying, “we’ve got 90% of the round committed to invest and we’re closing the round shortly, now is your final chance!”, when in reality you have all these people in the same feet dragging camp with zero commitments. However, this is not advisable because investors usually know one another and frequently talk amongst themselves whilst having zero inclinations to invest in founders that mislead them. A more subtle, safer version might instead be, “we’re talking to other investors who are looking like they will commit”.

Time Wasters

There are also some people who take the call but are never going to invest, even if they don’t know it yet. Treating these as “feet draggers” is fine insofar as you don’t spend too much time or effort on them.

If you want to know more about how to time your round, how much to raise at Seed, or how to pick your lead investor. Check out our dedicated articles below.