Ask an Investor has covered in the past if you should announce a funding round. So assuming you’ve decided to announce your round, the next decision you need to make is when.
As it turns out, ‘immediately’ may not necessarily be the right answer! Which brings up maybe the most important point of this article: there is almost no expiration date on a funding announcement*. We’ve done deals where almost a year has gone by before the company has announced the round.
A brief recap, the big reasons you are publishing your funding is for one or more of:
- getting more investment dollars
- recruiting talent
- acquiring customers
The two questions I, in turn, ask founders are: what exactly are you trying to accomplish with a funding announcement and secondly, is now the ideal time to achieve that goal. I’ll go through all three goals in turn and break down some timing thoughts.
Getting more investment dollars
This one is easy. If your round is full and closed, there is no announcement needed. Move on. Otherwise, announce immediately. Your mileage may vary in actually getting investments from a funding announcement.
Also, I would be remiss if I don’t point out that a funding announcement solely to raise funds is a no-no in just about every jurisdiction. There are serious rules around “general solicitation” (or “general advertising”). Please see the OSC (in Ontario) and SEC (In US). Just saying.
Whatever your plans are, it’s important to note that funding announcements are a one-time thing. You don’t get to do them twice.
If recruitment of quality candidates isn’t currently a problem you are having or if you are not now hiring — hold off on an announcement! There is no point in having a rush of candidates when you don’t need them. If the candidates you are attracting are reticent to sign on without funding — you are free to tell them about the funding privately. This way you get some of the benefits of the announcement without having to release the funding news, saving the announcement for a better time.
Time your funding announcement for when you open many new positions or if you are struggling to attract candidates. For less risk-tolerant talent (i.e. people who like stable long-term jobs – unlike us crazy entrepreneurs) a funding announcement sends a critical de-risking signal – time to apply!
Frankly, the previous two reasons are nice-to-haves. Acquiring customers is what it’s all about. A well-timed funding announcement can give your sales a good jolt.
If your customers are coming in droves or you are in pre-launch (and not building a waiting list), hold back on the announcement. I generally counsel pre-launch companies to wait on their funding announcement until they can combine it with a launch announcement. This way, there is something immediately actionable when someone comes across your announcement in the news.
On business-to-business sales, a well-timed funding announcement may be just the thing to help close a massive client.
Likewise, if customer acquisition rates are great, holding off on an immediate announcement is likely the right call. Inevitably, especially between long product update cycles, customer acquisition can lag. A funding announcement coupled with some other news may be just the thing to revitalize sales.
Likewise, on business-to-business sales, a well-timed funding announcement may be just the thing to help close a massive client.
Whatever your plans are, it’s important to note that funding announcements are a one-time thing (per funding round). You don’t get to do them twice. The buzz generated by them dies off pretty quickly, so timing them is paramount.
Your takeaway here is: don’t rush into an announcement. Take the time to think about your desired outcomes and build an announcement strategy, including timing, which maximizes those outcomes.
PS: Do you handle the earned media outreach yourself or hire a PR Firm?
There are pros and cons to doing it internally vs hiring a PR firm. AAI has you covered. If after reading this link, you think you’ve got a handle on everything, do it yourself. If most of this was gibberish, hire a PR firm!
* Which is why I’m so cynical about stats on funding. There are so many errors that creep into these numbers that, while good for general guideposts on funding levels, the actual numbers should not be used for any real purpose.
Don’t expect fundraising publicity to immediately multiply your round size. Investors do track funding announcements and multiple closes on an investment round do occur, but high quality investors won’t write a cheque instantly just because another investor is at the table.
The caveat to this point is that angel investors in your pre-seed round often will commit capital because of a high signal investor — but you’re unlikely to convince a journalist that a pre-seed raise is newsworthy enough to warrant space in their publication. Arguably, this should be your smallest priority — companies rarely raise venture capital funding on public signals, while talent and customers can be strongly swayed by name recognition.
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