By Sheetal Bahl | 25 January 2024
More than a decade ago, before my foray into investing, I was part of a startup in desperate need of funding. At that time, the Indian market had a limited number of seed investors, a reality that heavily favoured them. This imbalance often resulted in what I can only describe as ghastly and egregious behaviour from these investors.
I remember once pitching to an angel network, seeking a particular amount at a specific valuation. Their response, devoid of prior discussion, was a counteroffer of just 0.7X the asked amount at half the proposed valuation. We were not only baffled but also had little choice but to engage further, hoping to bring some sense to the table. During our first meeting, they kept us waiting for over 45 minutes, audibly enjoying themselves, with no apology upon our eventual admittance. Following several similarly disheartening interactions, they made us an offer we ultimately refused. The cumulative effect of these experiences led us to shut down the company.
I share this story to illustrate a point: we understand the challenge of raising money as a founder, perhaps more intimately than many current founders, given today’s somewhat improved VC landscape.
However, I want to convey a lesser-known truth: fundraising is an even more pervasive and painful process for venture capitalists. Here's why:
A Primary Responsibility: For most fund managers, fundraising isn't just a task; it's the primary focus of our job description. It consumes a substantial part of our mental energy.
A Constant Cycle: We are raising money roughly half our professional VC lives. For instance, if you start a fund today, you'll likely spend two years raising capital, followed by three years of deploying it. Then, almost immediately, you begin the process anew to stay in the game, ad infintum.
Higher Stakes: The amounts we seek to raise are significantly larger than what a typical startup seeks, which just exacerbates the pressure.
Broader Accountability: Unlike founders, who primarily interact with their most recent investors, venture capitalists are accountable to a broader group. We often manage relationships with over 50 individuals and institutions throughout the life of the fund.
Fund raising is hard. It’s soul-sapping. We understand that. If we don’t behave like we do, it’s only because of the natural human tendencies to not display vulnerability and to pay-the-suffering-forward. While such behaviour is not always justifiable, when you witness it, a knowing smile might be apt. And if you’re feeling generous, forgive us.