How long will it take to raise the money we intend to raise?
How long does it usually take to raise X million?
When can you guarantee me that I will get X million?
Entrepreneurs always ask me those questions of timing for all the good reasons they have. Capital raise is a seduction game. Thus their question can be translated into: How long can it take to seduce a person?
First of all, a person could simply never be seduced. That is more common than not. This is the main risk in prospecting investors. Investors have increasingly more criterias, such as a branch of activity they know well.
As we have a track record of success, some entrepreneurs are convinced that we have a priviledged contact with some investors that would invest without looking too much at the flaws of their business. It is not so even with investors who have had a long serie of successes with us.
There are several very simple reasons for thiabout s to be so:
- We are not the investor’s but the entrepreneur’s advisors.
- Our investors are mostly institutional and thus, very professional.
- They know that refusing one or more investments proposed will never break the relationship with us as long as they motivate their refusal just like we
know that a failure in an investment will never break the relationship with
them as long as we are ethical towards them.
In private equity, regardless of the currency (USD, EUR, GBP), the rule of thumb is that a low level broker can raise about one million monthly while a good level broker can reach ten times as much and a top level broker upto twenty times this amount!
This rule of thumb can provide you with a good indication of the timing you are about to face, provided that you know what kind of level broker(s) you are facing and how many there are distributing the issue considered ?
Some large investment funds could invest within one day but generally, if they can do that, it is because they are well protected by a strong due diligence process. Thus the time of this process is typically from six months to a year.
While these timings are valid for fundraising under fifty million, it must be precised that delinquent or late reportings like uncertainties, lies or misrepresentations diffused by a member of the management or of the board of the issuer can interrupt the fundraising process at any time.
For cases of private equity for a startup company, in other words an issuer that is not billing, the difficulty is to raise an amount the first quarter of the issue. This can take upto several years. Once that level is reached, the process accelerates drastically because of the matching funds game.