Process: "Fundraising is wretched"

When thinking about anything that has any kind of process around it, I generally take the stance of:  the process around something serves a purpose in some capacity;  it may not be a process that serves me well and my engaging in the process may not feel efficient or nice, but the process is efficient for some entity with some purpose. And that process ALWAYS serves the purpose of the one in power.

You can actually apply this thinking to pretty much anything: customer service, purchasing, government, institutional, Disney World.  My current favorite example is TSA security in the airport.  People whine and complain about it – and I do too – I can’t stand it. But, it serves someone/something quite well – you just have to understand it.  Meaning – even with multiple checkpoints, the process is very sequential and single threaded; it’s very cumbersome and labor intensive (for everyone -consumer and provider). This is really a pain for the traveller. BUT – it’s great for someone.

That someone, has an intent, a message and a purpose. I am not sure I can causally identify the real root of all that for TSA, but here it goes:  If we assume that the purpose of the security check points (in addition to actually checking for terrorists) is to demonstrate control over the environment, demonstrate commitment via the number of people engaged, delay people to remind them of the importance of security and humiliate (minor humiliation) people so they feel a bit out of control them selves (and further the notion that the TSA is in control), then the process of security checkpoints a airports is marvelous. It serves that purpose perfectly. Disclaimer: I am not saying that is the purpose but the process maps to the results.

The same process thinking can be applied to purchase paths on websites. If the intent of CNN was to have people actually buy something – it would be a disaster of a design.  If the intent of was social-networking – it would be a bad design.  However, for Amazon’s, the intent is to make it easy to find something to buy and easy to make that purchase.  In this case, the process serves that goal.  I mentioned that the process serves the one in power – think of LL Bean or Amazon.  Great customer service – easy to execute a purchase, etc etc.  The customer is in power. Think TSA – painful, communicating dis-empowerment and worry – the government is in power (albeit to keep you safe). 

So, I was talking to another successful entrepreneur the other day who is also in the process of raising money. He said to me “raising money is the most wretched thing we do.”  Now – all my process proselytizing aside, I feel the same way.  For the entrepreneur, it is painful, ugly, humiliating and tiresome.  It’s really something I don’t enjoy.

But the process of fund-raising is not inherently wretched. When you look at it through the investor’s eye – and mainly through the lens of risk mitigation, it becomes quite elegant.  If the the purpose is to remove risk as much as possible (and I think it is), then the items below from a process sense map perfectly to the goal.

  1. Weed out those not serious: To ensure only those who are serious about raising capital actually work at it – the process (organic or intentional, it does not matter) must be difficult.  Keep funding sources in-obvious, hard to find, difficult to contact.
  2. Weed out those without credentials:  To ensure that those resilient enough to find sources are legit, the process must have gate keepers.  Only accept funding opportunities from those you trust.
  3. Weed out those who don’t “seem right”: Those that make it through steps one and two, must pass additional scrutiny around soft skills such as presenting, personal presentation, dress. They also need to pass a backrground check. Not a legal one – but like “where did you go to school”, who do you know?
  4. Weed out those with anything incomplete:  That includes business plan, team, or product.
  5. Weed out those that don’t conform to investment criteria: That means by business segment, market type, etc.
  6. Weed out those that that don’t have all their ducks in a row:  Meaning – when performing legal and business due diligence (which actually started way back at 1 – but this is more detailed), remove risk by removing opportunities that have business or legal issues
  7. Once an investor does elect to invest, offer terms that only work for the investor.  This is obvious

 So – it is wretched for the entrepreneur.  Of course, there are investors who don’t play by those rules completely, and they are typically the ones who don’t use risk mitigation as the limiting factor on investment.  When a different criteria is used, the process is different. 

Once you understand it – it’s a lot easier to stomach the process.  Still is not really fun though.

Posted on April 1, 2008 in Funding

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