Every now and then, I meet with a company where the CEO does not lead fundraising discussions.
Right or wrong, I think this almost never works. We actually just invested in a company where this dynamic existed initially – but because the non-CEO co-founder had become a personal friend, I was able to give that feedback very directly and they took it to heart in future discussions.
Looking back to the ~30+ times I’ve personally seen a pitch yield an investment from NextView or Spark, I don’t think I can think of a single time when the CEO was not far and away the main person in charge of raising money. And I’ve seen all sorts of different founding team dynamics:
- Balanced team – ie: 2 or 3 cofounders all very similar in seniority
- Young CEO / experienced “President”
- Technical CEO with limited fundraising experience
- Very experienced entrepreneur who should be “too important” to attend first meetings
I’m not saying this is necessarily rational. Yes, sometimes, the CEO should be more focused on the business than talking to investors unless they are interested. And yes, sometimes, someone else on the team may have more experience with the fundraising process and might be better equipped to lead those efforts.
But the reality is that the job of a CEO is different than all others. It’s the role with the most influence and the most pressure. Investors often don’t get enough time with entrepreneurs before they have to make an investment decision as it is, so they want as much exposure to the CEO as possible.
Plus, it’s an industry norm, and even if it’s irrational, heuristics play a big part in the fundraising process. Deviate from the norm, and it can lead to all sorts of questions like these below (many of which aren’t really founded in reality, but will have an impact nonetheless):
- Who is really running this company?
- Is this CEO not going to be transparent with me since I’m not dealing with him or her directly?
- Is this other person I’m talking to actually trying to usurp power in this company? Is he going to be a problem down the road?
- Can this CEO effectively sell the vision of this company when it comes to the next round of financing or future M&A discussions?