Startup Funding Espresso – How To Use Round Closings

How To Use Round Closings

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In planning out a fundraise, it’s best to break the raise into a series of round closings.

Communicate the overall fundraise amount to the investor but break it into steps.

The first tranche is called the first round close.

This typically includes family and friends funding.

Use this funding to attract more investors to join.

Set the date for the closing and make the deadline clear when pitching investors.

This gives a target date for investors to make a decision.

A typical target date is eight to twelve weeks before the closing date.

This gives the investor enough time to run their due diligence before investing.

Too short a window and the investor will bail, saying they don’t have enough time.

Too long a window and the investor will procrastinate.

Give investors who come into that round an incentive, such as an investor-friendly valuation.

When that round finishes, start the next one.

Set the next deadline and communicate the date to all the investors who did not invest in the first round.

Inform the investor that you raised the first round and are now moving to the next one.

Use funding from the first round to add momentum to the second one.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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