Why is capital raising not immediate after launching an investor?


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This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process. Opinions expressed by Contractor the contributors are theirs.

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If you are just starting out and are close to your first capital increase, you need to know that you won’t get resources in the first pitch you make in front of investors and that once some of them are convinced that you have a large business to invest, the capital that you will receive will not be obtained immediately. No one will write you a check after you first submit your project.

Although these are investment funds and their job is to find companies to inject money, it is not that simple; the people who bring in their capital don’t give it up, they do business and just like they bet on a project, in the “risk” spectrum, they seek security.

But for this you have to understand how capital risk or venture capital investment funds operate. To begin with, a fund is an institutional structure or an investment vehicle, which is set up by an operator to invest in an asset class, a mixture of them or in other smaller funds; have an expectation of risk / return; with an explicit proposal, the well-known investment thesis, within a specified timeframe.

In the structure there is a sponsor (G2 Momentum Capital, G2 Fintech Fund, Dila Capital, ALLVP, Village Capital, among others) who are looking for investors to bring capital to this fund (known as Limited Partners), the fund money does not belong to the sponsor, but to these investors and everyone wins when the investment process does to the startups, they are sold after a certain time.

Image: Jp Valery via Unsplash

When you go to make a pitch, there is a deliberation between the partners of the fund, where the viability of the project is assessed, not only of the idea, but of its market, finances, valuation, who are the entrepreneurs, if they present the characteristics of the profile sought in a company of this type, its level of dilution, its financial projections, its legal and accounting status (this is called due diligence ), among many other elements relevant to investors and once it is decided to invest in the project then a call is done (called capital) to limited partners so that they contribute their capital for each company recruited. This is the reason why investment processes take time. The stories you see on TV are not quite true.

So we recommend that you research the right funds for your business in advance, it will not only take time to make the appointments, but also the review and investment process. It is very common for entrepreneurs to ignore how far they have come to raise capital and probably because of this situation they can even despair.

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