Post-Closing
In this section I share a few tips on managing startup life post-closing, including taking time to celebrate and recuperate as well as recognizing that you are in a new context with different demands, opportunities, and challenges.
The money is in the bank! The round has been closed! Amazing! Congrats! Time to pop the champagne, breathe a sigh of relief, and celebrate. Right?
Actually, most founders I have worked with do not naturally take a moment to celebrate when they close their funding round. Instead, there is a flurry of emotions that hit you one after the other.
Initially, the experience can feel quite surreal. You wake up to a much larger bank account - practically overnight (it feels that way despite the fact that the last 9 months have been a non-stop grind). When the news breaks, you suddenly become “hot” and everyone congratulates you on your success - colleagues, prospective employees and investors, the media, friends, even your family despite probably not knowing much about how venture capital works. It’s understandable; the dollar amounts tend to be large after all.
Then something akin to panic sets in. You realize that this is not success, but just a milestone. And one that comes with a significant burden too. Now you actually have to deploy the capital with the goal of significantly increasing the valuation of the company. You have 18-24 months to accomplish that before jumping back on the fundraising rollercoaster.
Also, while fundraising in the last few months, you had less time to spend on the business. So now there may be all sorts of fires that need to be put out.
And so on and so on.
Here is some advice that might help during these crazy times:
Breathe. That’s always good advice as it helps center you.
Take a moment to celebrate. Both for yourself, as well as with your cofounders and team. This is a major milestone and it will allow you to do things that were previously out of reach. That’s worth acknowledging.
Recuperate as much as logistics permit. Fundraising is physically and mentally draining. Take a vacation if you can. Even a weekend getaway can be tremendously recharging.
Thank those, who helped you. It takes a village and it is worth circling back to everyone who lent you a hand with introductions and advice and so on, as well as people who supported you emotionally.
Move forward with purpose. You have a lot more capital available now, and you should take care to deploy it intelligently. When building your fundraising deck, you outlined your plan. While you were out fundraising, perhaps some new fires started or new opportunities popped up or you learned new things. Either way, reassess the situation, decide what matters, and go execute with purpose.
Recognize that you are in a new context. You have new shareholders, which hopefully will help in difficult moments with their capital, advice, and network. You will need to learn to work with the different personalities involved. If this is your first institutional round, you might need to start managing the company more professionally - for example, running official board meetings and all the details associated with that (tip: lawyers are very helpful with such matters).
Make sure to keep your new (and old) investors engaged. Remember: even though they are technically committed, they manage a portfolio, which naturally focuses their attention on their biggest winners and on those that communicate regularly, in that order. So, while working to become a big winner, make sure to communicate regularly! One tactic that can help is to send a newsletter with key highlights, lowlights, and asks for help on a regular cadence (typically somewhere between monthly and quarterly).
My experience suggests that most investors will be passive and help on demand, while a minority will be actively supportive. Both of those groups are easy to work with. But there is a third group: those that become disengaged or even destructive, for a myriad of reasons including retiring, shifting interests, leaving venture capital, or moving between firms.
That’s a challenging group to manage. At best, they become what people call “dead equity” - i.e. they own equity but are not involved in building the business. But investors tend to have special rights by virtue of owning preferred stock. So at worst, such disengaged shareholders can actively drag down a startup, for example by not signing legal documents on time or at all, holding up M&A negotiations, and so on.
There is not an easy or straightforward way of dealing with such investors. The key thing is to recognize when someone, who previously invested in and supported you, has made the shift to this category. Only then can you start to problem solve, in collaboration with your executive team, board of directors, and other key investors.
As you make progress and further scale your company, your leadership skills will be tested and challenged. A lot of this will probably be quite hard to handle, especially since most things at most startups are constantly on fire. But despite such challenges, this is a unique opportunity to grow as a leader, executive, and human (tip: advisors are very helpful with such matters). Make the most of it and don’t forget that your ultimate job is to lead the company, which requires making decisions and moving forward with conviction.
Finally, remember that you are now on the VC rollercoaster. Which means that you will likely need to fundraise again in the next 18-24 months to keep the company alive and growing. As you shift from early-stage fundraising towards later rounds (B and onwards), the nature of fundraising will shift as well. The bar you need to clear will get higher and higher. And the mixture between hype and traction shifts away from the former towards the latter. Keep all of this in mind as you execute.
Congratulations on closing once again and good luck going forward!