Seed Stage Entrepreneurs Hiring Consultants to Raise Money

14 Sep

Increasing chances for success.

David Cummings on Startups

Just this week I’ve encountered two separate consultants that help seed stage entrepreneurs raise money. Of course, I’m very suspect when someone tells me they help entrepreneurs with little-to-no revenue raise money from investors. In each case I asked if they were a broker-dealer that gets a placement fee and they said ‘no’, it’s an hourly rate or project fee to consult.

Preparing a longish pitchbook (e.g. a business plan) with comprehensive financial models requires a tremendous amount of imagination for a startup with a couple paying customers. Financial models can be built to paint any desired picture, especially when there’s almost no historical data to draw from. As an investor, I’d prefer to see the entrepreneurs spend the $25,000 validating the market or signing 10 more customers, instead of hiring a fundraising consultant. Intellectually, I understand that an entrepreneur who’s struggled raising money would resort to getting help from someone…

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