Introduction

Raising capital is essential yet often frustrating for many founders. Mistakes during the capital raising process can lead to missed opportunities and costly setbacks. In over a decade of working with more than 1,500 companies, we've identified some surprisingly simple but critical missteps that can derail even the most promising capital raises.

Here’s a guide to the top 10 avoidable mistakes in capital raising, along with actionable insights to steer clear of these pitfalls.

1. Using Assistants to Handle Investor Follow-ups

A personal connection is crucial when building relationships with investors. Having an assistant manage follow-ups might seem efficient, but it often gives the impression that the founder is distant or disengaged. Investors want to feel that the founder is committed and fully involved. To keep the relationship authentic, founders should manage follow-ups themselves or closely supervise a trusted partner with experience in investor relations.

2. Failing to Personalise Communication

A generic email sent to interested investors can be highly off-putting. In one instance, a founder sent a mass email with all 140 investor recipients visibly CC'd without personal greetings. Investors appreciate a tailored approach, which shows respect for their potential involvement. Personalising communication not only establishes a professional tone but also helps build rapport.

3. Requiring an NDA Too Early

Many investors shy away from signing an NDA right at the start. Requesting confidentiality agreements before they fully understand the investment opportunity can feel burdensome and premature. Instead, focus on sharing high-level information first, and discuss sensitive details after confirming genuine investor interest.

4. Involving Too Many People in Investor Communication

Investor relations should be streamlined to maintain consistency and trust. While it may seem advantageous to involve multiple team members, this approach often creates confusion and signals a lack of organisation. Designate one or two team members—preferably with investor relations experience—to manage all communications to avoid miscommunication and mixed messages.

5. Taking Too Long to Respond to Investor Inquiries

Prompt responses are critical. In one situation, a founder took four months to reply to an investor’s questions, losing the opportunity entirely. Investors see delays as a sign of disinterest or disorganisation, both of which can significantly damage the credibility of a capital raise. Aim to respond within a reasonable timeframe, ideally within a few days.

6. Changing Share Price Based on Emotions

Raising capital can be an emotional roller coaster, but fluctuating the share price based on daily emotions is unwise. Investors may interpret inconsistent pricing as a lack of confidence in the company. Set a fair, stable share price early on and stick with it to build investor trust and prevent the appearance of instability.

7. Overloading Investors with Information

A lengthy email or massive attachment as an introductory communication is overwhelming. Sending a four-page email with a 90-page investment memorandum may be interpreted as a lack of consideration for investors’ time. Start with a concise, one-page overview, and offer more details once investors have expressed interest.

8. Delegating Capital Raising Responsibilities Entirely

Handing over the capital raising process to an outside professional can seem convenient, but complete detachment is risky. Founders should stay actively involved, monitoring the process and ensuring they’re updated on investor engagements. Maintaining visibility on investor discussions builds credibility and reassures investors that the founder is fully committed.

9. Relying on a Single Investor

Pinning hopes on a single interested investor can halt momentum. Even if an investor expresses strong interest, continue engaging with other potential backers until the funds are secured. A diverse pipeline of potential investors not only increases chances of success but also gives you leverage in negotiations.

10. Failing to Build Interest Before Launching the Raise

Building a buzz around your investment opportunity before officially launching the raise is essential. Start by networking and engaging with potential investors early, well before the formal raise begins. Creating a sense of momentum and urgency will help drive investor interest and accelerate the fundraising timeline.

Conclusion

Avoiding these common mistakes can significantly improve your capital raising outcomes. Remember, fundraising is a complex process that requires attention, strategy, and adaptability. Avoid these errors, stay engaged, and keep communications professional to create a seamless experience for your investors. By refining your approach, you'll be better positioned to attract the right investors and secure the funding needed to grow your business.

Final Thoughts: Share and Learn

If you’ve encountered any of these challenges in your own capital raising efforts, or have additional tips to share, please let us know in the comments. Let’s create a community of founders who can learn from each other’s experiences to improve the capital raising process.