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Why is capital raising not immediate after pitching an investor?

You should know that you will not get resources in the first pitch you make in front of investors.

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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 Entrepreneur contributors are their own.

Campaign Creators vía Unsplash

If you are in your early stages and you are close to your first capital raise, you should know that you will not get resources in the first pitch you make in front of investors and that once you have convinced that you have a great company to be invested by some of them, the capital that you will receive will not be obtained immediately. No one will write you a check after you first submitted your project.

Although they are investment funds and their job is to find companies to inject money, it is not that simple; the people who contribute their capital are not giving it away, they are doing business and just as they are betting on a project, within the spectrum of "risk" they seek security.

But for this, you need to understand how venture capital or venture capital investment funds operate. To begin with, a fund is an institutional structure or an investment vehicle, which is implemented 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 period.

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

Image: Jp Valery via Unsplash

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

So we recommend you look for the funds that fit your company in advance, it will not only take time to make the appointments, but the review and investment process. It is very common for entrepreneurs to be unaware of the path involved in raising capital and probably because of this situation they may even despair.