"Raising a $250 million Series D round may seem like a distant and unnecessary distraction to startup founders pitching investors for that first $1 million in seed money. But it shouldn't be, according to several founders and venture capitalists. In their view, founders should be charting out a strategy for those later stage fundraises from the beginning. Aven co-founder and CEO Sadi Khan said, while on stage at TechCrunch Disrupt, startup founders should start thinking about their later rounds before they raise their first financing."
""We're a very capital-intensive company; we provide asset-backed credit cards to consumers," Khan said. "We require large amounts of capital to scale up, and we'll require large, large amounts of capital to grow. From day zero, we knew that we needed to have an intensive pipeline of investors that we want to work with over a long period of time.""
"Lila Preston, head of growth equity at Generation Investment Management, said startups should start building these relationships at least two years before they need the capital. Starting these relationships early gives investors time to get to know the business and the market it operates in, Preston added. It also gives investors a peek into the company's growth."
Founders should plan later-stage fundraises from day one, mapping total capital needs across growth stages. Capital-intensive businesses require large, repeated infusions and thus need an ongoing investor pipeline. Early capital planning helps founders prioritize seed investors while cultivating later-stage investors with similar investment flavors. Building relationships with later-stage investors at least two years before a raise gives those investors time to understand the business, market, and growth trajectory. Later-stage investors can add strategic value before investing by doing homework, helping set milestones, and clarifying what success looks like, making early engagement beneficial.
Read at TechCrunch
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