# Continuous fundraising
- URL: https://www.petrikajander.com/continuous-fundraising/
- Author: Petri Kajander
- Date: 2020-05-25
- Language: en
- Audio: https://anchor.fm/s/1018a6478/podcast/play/98857297/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2025-1-22%2F395326727-22050-1-07e7ca2cc61261a4.mp3
- Video: https://www.youtube.com/watch?v=IjrAonCaJOI

Startup fundraising stages have been blurry for a long time already. If it is not convertible notes that you pop like soda then it’s the round name prefixes pre- or late- or the actual round amounts that have been going up significantly.

The notion of making a funding event is also evolving. Often, it takes a long time to get everybody in sync to close a round. Yet, the world does not revolve around your startup nor your expenses wait your investors.

The reality is that continuous funding is the answer. It’s like sales. You just have to do it all the time.

When you find a suitable investor take the money. You can still cadence your valuation around a total target but you don’t wait till everyone has arrived.

One of the challenges is to make the investors not to wait for each other but commit to their amount as they come. This is a balancing act where the demand and supply meet the closing skills of the founder.

First come first served discounts and showing that you mean business by raising the valuation with each investor/funding threshold are ways to get pass the wait-and-see game.

Standardising the documentation including the investment and shareholder agreements to reflect the new reality makes life more efficient and easier.

When you have your docs in order and capabilities ready for new funding in a moments notice it becomes a routine like any admin.

Practise makes perfect but actual revenues make winners.

[Video](https://www.youtube.com/watch?v=A3lr49QmUIo)

## Transcript (https://www.youtube.com/watch?v=IjrAonCaJOI, YouTube's automatic captions)

[0:02] Fundraising startup fundraising stages have been blurry for a long time already if it is not convertible notes that you pop like soda then it's the round name prefixes pre- or late or the actual round amounts that have been going up significantly the notion of making a funding event is also evolving often it takes a long time to get everybody in sync to close around yet the world does not revolve around your startup nor your expenses waight your investors the reality is that continuous funding is the answer it's like sales you just have to do it all the time when you find a suitable investor take the money you can still Cadence your valuation around a total Target but you don't wait till everyone has arrived one of the challenges is to make the investors not to wait for each other but commit to their amount as they come this is a balancing act where the demand and Supply meet the closing skills of.

[1:05] The founder first come first served discounts and showing that you mean business by raising the valuation with each investor slf funding threshold are ways to get past the weight and see game standardizing the documentation including the investment and shareholder agreements to reflect the new reality makes life more efficient and easier when you have your docs in order and capabilities ready for new funding in a moment's notice it becomes a routine like any admin practice makes perfect but actual revenues make winners.

## Transcript (https://www.youtube.com/watch?v=A3lr49QmUIo)

[0:00] What is continuous fundraising? Usually, startups have funding rounds. Well, what is a round? Well, it's basically you decide the amount of money you need for a period of time. It's being usually, hopefully between 12 to 18 months, but it can be a shorter time as well. And in order to attract new funds, you need to define the terms for the funding round, the valuation and put all the documents in place and make sure that everything is ready for investors to come in. Obviously, you need to have your pitch deck and these things in order as well. What is the issue?

[0:51] Well, who is the first investor? How do you get someone to commit? Usually, it's easier to get the funding round closed when you already have a lead investor. A lead investor is someone who is as the name and term tells taking the lead in the negotiations and doing that on behalf of the other investors. And if you have more than one investor involved, then it's called a syndicate. Oftentimes, you need more than one person or investor to get the funding objective achieved. So how do you do that? It's a bit of a chicken and egg problem because everybody is looking at and waiting for someone else to make the first move.

[1:47] And this is obviously a bit troubling. And as a startup, as an entrepreneur, as a founder, you don't have too much time to wait. Fundraising is not fun. It's taking your attention from other things, namely building your company, but it's something you need to do. And fundraising is like sales, you pretty much need to do it all the time. How to solve this issue? How to get your funding objectives achieved and be successful in a way that it doesn't drain you? Something which I've been recommending to do, obviously this may not be in your case the optimal choice, but in some cases and oftentimes I recommend is to shift to a model called continuous fundraising.

[2:49] What does it mean? In the traditional fundraising, you define the round. Let's say you want to get 1 million. Then you knock on doors, send your pitch decks, get a lot of rejection. And finally, when you have enough investors and you agree on the terms, then you close the round. This can take anywhere between a few weeks which is exceptional to the usual six to eight months, even longer times 9-12 months to close from the initial start. And, the money only comes when the documents are signed and it is actually in the bank account.

[3:39] And in order to prevent this to happen, continuous fundraising is a process where you put everything ready for the investors. You may be standardising the documents,  your investment agreement and your shareholder agreement. You define the terms for the round. You get approval from shareholders as well, from the owners of the company, and the previous investors if you have those so that you actually have the capabilities of closing a round. What you do is that you can set a total amount what you want to get. You can call it a round if you like. And you put valuation in place and the basic terms, but instead of waiting for everyone to come on board and finally close it at once, with a huge delay often, you can do it in a way with first-come-first-served basis.

[4:47] And it means that you take the money as it comes. You wouldn't wait. Well, how do I achieve this? Well, you could, for example, say that let's keep the example of 1 million, that you want to get the first 200 000 quickly. And you would say that, okay, I'm willing to give a 20% discount on the one who is giving the first 200 000 or for the first 200 000. And then you can, for example, say that, okay, the next 100 000 you're giving a 10% or the next 200 000 you're giving a 10% discount on the evaluation, whatever that is in your case. So you actually giving an incentive for the investor to come first. And as you say, you take the money when it comes and you'll keep on going.

[5:42] You can achieve this with the convertible notes, and it's been done a lot with the convertible notes. That's a bit off the topic here. But you can also do it with equity investing as well. You can approve with your board, depending on your local legislation, but usually, it's possible to approve these rounds, if you call them mini rounds even per investor basis, if you will. In this way, you can get the funding started and there are a few covenants as well. One of them is that it's not credible if you say that you give a discount and then you actually are not raising the valuation or keeping the valuation and reducing the discount if you will.

[6:33] What you need to do is you have to keep your word and show that if you wait around, there's no point waiting because the price is going up. And when you get the ball moving, you'll get the fundraising round going this gives you also a bit more leverage. If you take investors like piecemeal type they don't have that much leverage because usually what happens as well is that when all the investors are starting to negotiate the deal, they have the leverage that time is on their side. In some cases, you may even have revealed the other parties so they can even collude against you. If you'll take the money when it comes and when you actually don't need it, that's an even better case.

[7:25] This way more or less, you can set the terms if you standardize the documents. And if you say this is how I'm going to do it. This is a bit more advanced technique to go through. If you're a first-time founder take someone who already has done rounds before to help you with this thing because if you put your valuation too high or your shareholder agreement, the investment agreement are not exactly on the money you are not closing any investors and you're just wasting your time as well. So this is something which I nowadays recommend for a lot of people to do: continuous fundraising. This was just a quick overview and idea for you to ponder and think about a bit but if you have any other ideas how to also break the first mover block, which often happens I'm happy to hear about them and feel free to leave your comments and see you in the next video!