Why is it so Hard to Raise Capital?

By Danielle O’Rourke, CEO of ROND Capital

 

When I was pregnant with my son, I had a close friend who was due only a few months before me. She was one of those people who had her kid and within a few weeks, was back to her pre-baby weight and wardrobe.

Naturally, I expected to follow a similar path.  I think you can probably guess what happened.

As of writing this, I’m seven months out and still 15 pounds away from my pre-baby weight.  It has been an uphill slog to manage a new baby while working out, eating healthy, running a business, and everything else.

I’m telling you this story because it’s the perfect analogy for why raising capital is so hard.

We hear the stories about companies who happen upon a prominent investor, and within minutes they have a check in hand and are off to the races to build the next billion dollar company.

These stories are rare exceptions, typically exaggerated, and often ignore the circumstances that allow for such an “easy” capital raise to take place.

If we revisit the circumstances surrounding my friend’s weight loss, it’s clear why she lost the weight, and I didn’t.  First, she didn’t gain as much extra weight as I did, she was already closer to her ideal weight.  Second, she had a village of family members to help her care for the baby. She was also much more diligent about eating healthy and working out than I was.

She was better supported, more prepared and more diligent about accomplishing her goals.  Of course, her weight came off faster.

If you examine the companies who “easily” raise capital, they typically share similar characteristics:

  • The businesses fit nicely in a small box known as an “ideal investment opportunity.”
  • The business owners usually have vast networks of people who know them, believe in them and can write a check in support of them.
  • The business owners know how to access the capital markets and have perfected their approach.

Most business owners don’t fit all these characteristics and that’s why raising capital is so hard.

Raising capital requires us to take time away from something else to develop new networks.  It forces us to expose our personal and professional vulnerabilities to third parties. It requires us to learn an entirely new set of rules and strategies.

Resources to Make Raising Capital Easier

I can’t change your business or develop your network for you.  However, I can give you tools and resources to help you better understand how to navigate a capital raise.

At ROND, we’ve created a resource called the Capital Raise Prep Guide.

This is a step by step guide to help business owners better prepare to access the capital markets.  We want business owners armed with basic information they should know before approaching a capital raise.  It’s free and doesn’t require an email or any personal information to access.