Should You Hire a Startup Fundraising Consultant? 4 Outstanding Points to Consider

Start-ups face a lot of challenges and pressures. Raising money from financial institutions and venture capitalists is only one of them. Other than seeking capital from investors, you also have to find ways to attract more potential investors.

To accomplish this, you need a startup fundraising consultant. Venture capital (VC) funding is one of the most sought-after resources for startups. Even the most innovative, forward-thinking companies can’t secure VC funding on their own.

To become more competitive with other startups and stand out from the crowd, you should hire a fundraising consultant. But, before you do so, you need to understand what a fundraising consultant can and cannot do for your startup.

Here are four great points you should consider before hiring a fundraising consultant.

What to look for in a startup fundraising consultant?

Startup fundraising consultants will be able to help you develop a strategy to raise money from investors. While it’s important for you to have a vision for your business, the fundraising process requires you to be flexible and strategic.

You’ll need to have a clear plan of how to approach the investors with your business model and how much you need to obtain the funds you seek. Startup fundraising consultants can help you with the entire process of finding investors.

This includes the research and vetting of investors before meeting with them, as we explain the preparation process for angel investment in this article, as well as the follow-up with investors to close the deal.

Startup fundraising consultants can also help you with structuring the financial terms of your deal, such as how and when you’ll pay the investors, any legal implications of your funding, and tax implications of your deal.

Cost of hiring a startup fundraising consultant

The cost of hiring a startup fundraising consultant is based on a few factors. The first is the size of your deal. The larger the deal, the more it costs.

If you’re looking to raise a very large amount of money, hiring a consultant can be expensive. If you’re looking to hire a consultant for a smaller deal, you can get the services for less.

The second factor that determines the cost of hiring a consultant is the expertise of the consultant. If you’re looking to hire a consultant who has expertise in your industry, it will cost you more.

Lastly, the costs of a startup fundraising consultant depend on their terms of services. What do they actually plan to do?

Typically the costs can be incurred in three ways: 1) as a percentage of the fundraising with the success fee logic in mind; 2) as a fixed amount to compensate the time and efforts for assisting the startup; 3) as a percentage of future sales or profit to represent the “growth royalty fee” since the consultant helps the company to grow in the future.

Below we will discuss 4 main characteristics of a great startup fundraising consultant.

1. Hire a consultant you can trust

Trust is one of the most important yet delicate aspects of any consultant/advisor relationship with the client. Before hiring a fundraising consultant, you need to be sure that they are the right fit for your company.

There are a few ways you can do this. You can ask your business and industry friends who they would recommend and see if they know any of the consultants themselves.

You can also do an online search for reviews of the consultants you’re considering hiring. You can also consider attending or sponsoring a local or online meet-up group for entrepreneurs.

These kinds of events can provide you with a lot of information about the fundraising industry and may even introduce you to people who know other fundraising consultants.

In addition, to build trust, it is important to have a first meeting with potential consultants to see if there is a click. A good first impression can go a long way to build trust.

2. Know what your investor needs and wants before meeting with a consultant

Before hiring a consultant, you need to know what your investor needs and wants. You, as the entrepreneur, have the advantage of knowing what your investor needs and wants. Your investors are specific to your business. So, it is crucial that you know what they want to ensure a successful fundraising process.

If you already know what your investor wants, you will be able to respond accordingly. Investors want to see that both you and your company have a vision for reaching their goal. In other words, investors want to see that there is a clear plan that will lead to the desired outcome.

It is very beneficial to learn specifically about your investors’ priorities and objectives before making the final decision about hiring a consultant. You could learn about objectives of investors through informal talks, startup events or pitches in the early stage of your startup.

The fundraising process is a long one. It can take up to two years for an investor to get their money back. So, you need to invest your time and effort in learning their viewpoints and priorities.

This is an important point because, according to our experiences, many startups ignore their potential investors as they focus on building a product and talking to potential customers. We explain in this article in details that these activities are important but certainly not sufficient in terms of understanding investors’ logic and priorities.

Investors want to see that you have a coherent plan and strategy to achieve your goal. This will help you get funding faster and also ensure that they get a return on their investment.

3. Look for a Consultant Who Has Expertise in Your Industry

Many entrepreneurs make a mistake while hiring a consultant. They look for a consultant who has expertise in fundraising in general, not specific expertise in your industry. This is why they end up hiring a consultant who has no idea about their business.

Furthermore, it may also result in the consultant hiring the wrong team. It is crucial that you look for a consultant who has expertise in your industry. This will ensure that the consultant has an understanding of your business.

Moreover, industry experience often helps with the industry networks. A startup fundraising consultant with relevant industry experience has probably earned reputation and knows important people within your industry that can be your future business partners or investors.

He will, therefore, be better equipped to assist you in understanding your investors’ needs and expectations. Investors want to see that your business is well thought out. They want to know that you have a sound business model and strategy that will lead to financial success.

This is because investors want to know that their investment will be repaid with interest. If not, then why should they invest their money?

4. To be sure, check to see if the firm is certified!

One of the best ways to ensure that your consultants are good and legit is to ensure that they are certified. This will ensure that you are dealing with a consultant who is experienced and experienced.

A certified consultant will also have an extensive background in the industry. You will be able to check what their experience is in your industry, how long they have been working in the industry, and the number of clients they have assisted in raising funds.

A good way to find out if a firm is certified is to look at the firm’s website. If they have a section on their website called “Certifications”, you will know that the firm is certified.

You can also find out certification details from the state licensing department. In most states, fundraising consultants must be certified.

Final Words

Fundraising is no easy task. It requires a lot of effort and time. And, if you want to raise funds from investors, you need to put in even more effort and time.

It is important that you take time to properly structure your fundraising efforts and make sure that they are effective. And, the best way to do this is to hire a fundraising consultant.

When you hire a fundraising consultant, you can be sure that your investment efforts will be structured properly, ad that your fundraising efforts will be structured properly, and that they will be effective.