In my past as an investor and in my present as a pitch coach, I have come across a surprising number of companies where someone who’s not part of the founder team is out there trying to raise money for the company. Sure, salespeople are very good at sales (that is why they are salespeople), but no investor is going to take you seriously if anyone but the founders — and ideally the CEO — is running point on the fundraising process.
I’m using the job title “salesperson” here — but I’ve also seen social media outreach folks, marketing people, and even PR folks reaching out to investors. All around, it’s a really poor indicator for a high-value investment, and I know of a large number of investors who won’t even really look at the investment opportunity.
There are many reasons why the founders need to be out there raising, but the most important one is the job description of a CEO. In the earliest days when there’s just two or three of you building a company, everybody does everything. As a company matures, though, the CEO’s role typically shrinks more and more, until they only have three jobs left:
- Set the culture for the company.
- Hire the right people to build the company.
- Whatever you do, don’t run out of money.
It’s the last bullet point on this list that’s the issue. If you’re not best positioned to raise money for your startup, what does that say about you? And if you are the best-positioned person to raise money, why aren’t you doing it?
Investors are a different beast than your run-of-the-mill customers. They rarely see a pitch and reach for the checkbook, only to wait for the big bucks. Most investors have a desire to build an ongoing relationship of sorts with their investments. For smaller investors, it’s a case of being on the regular updates, and when the CEO asks if anyone knows an amazing VP of engineering, to reach into your little black book of contacts to see if they can help in some way. For board members, there’s usually a lot more strategic, ongoing investment. In any case, these investors will want to build an ongoing relationship with the founders.
The other issue is that typically, it’s only the (co-)founders who have significant equity in a company. That’s good for them, and it represents a lock-in of sorts. A (co-)founder leaving a company is a big deal. If you’re sending your sales flunky out to “sell” the company, your investor will know two things: One, they probably don’t have a meaningful ownership stake in the company, and that building an ongoing relationship with this person will probably be futile; they could leave, or they could be (accidentally) misrepresenting the company in certain important aspects. Two, if the salesperson does have a huge ownership stake, it is a different red flag — that the founders don’t know how to manage their cap table.
Either way, know that receiving a pitch from anyone who isn’t one of the company’s founders — and, as I mentioned, ideally the CEO — is a huge red flag for most investors.