Startup fundraising is painful because VC hasn’t evolved in decades

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Caena platform offers VCs, accelerators and incubators a radically more efficient approach to deploying capital

You know a system is broken when there are so many “hot fixes” being applied in order to get it to function. In the four years since I accidentally picked up endurance running, one of the items I have learnt to always have to hand is the KT Tape. As with most marathoners, by race day, at least one part of my body would have given way under the stress of intense training. KT Tape and pain killers means I can get to the start line, take on 26.2 miles and stand a chance of getting to the finish line.

 

 Today, Venture Capital is in that category. As an investment banker, I experienced first-hand the impact of a system that hadn’t evolved in decades — long turnaround times, frustrated analysts, unhappy clients and billions of dollars lost to inefficiencies. Still, the chaos in investment bank is nothing compared to venture capital. Nothing strikes fear in the average founder than the thought of having to approach VCs for capital. The fundraising process is complex, expensive and time-consuming.

 

Fred Destin, founder of strive.vc and one of the UK’s most experienced investors captured the frustrations founders face when fundraising. In a tweet that received hundreds of responses, likes and retweets, he asked a simple question “how do you make the VC product a better experience for founders?” It’s worth reading the blog form of the tweet and responses but in summary, venture capital industry that has financed and supervised innovation across sectors from healthcare to climate change is in dire need of disruption.

 

Unfortunately, founders bear the brunt of the chaotic, backward nature of the VC industry. the costs of navigating the system can be exorbitant. In the UK, a “serial entrepreneur and investor” promotes a bootcamp offering founders access to “insider knowledge” and tips on how to navigate the VC process. Great idea except it costs £5,000 to participate.

 

The costs quickly add up. Advisors and consultants charge thousands for all sorts of other services incidental to startup fundraising — financial modelling, pitch deck reviews, brokerage, intros and so on. This expense is a huge barrier to entrepreneurs who are starting out on the journey.

A startup’s scarcest asset is time, venture capitalists in Boston turned out to be champions at wasting it.

Sebastian Mallaby, The Power Law

In his new and widely popular book on the history of venture capital, Sebastian Mallaby described Boston based VCs in the early 1980s as time wasters for the way they treated entrepreneurs. He could as well have been describing the situation today.

 

There are a lot of ways venture capital can improve but perhaps a better way to look at it is this: if there was a chance to build an industry from scratch which would support talented founders while making money for its backers what would it look like? At Caena we have a view based on the hundreds of conversations we’ve had with founders and investors over the past year —  venture capital should be transparent, accessible and entrepreneurial. Unsurprisingly, the responses to Fred Destin’s question demonstrate the need for change.

 

Caena was founded on the conviction that change doesn’t just happen, it has to be created. We are building tools for startups, VCs and other investment firms to radically simplify the fundraising process. We are one year into the journey are are more convinced than ever that our data-driven approach is the right course and will help achieve the dreams we have for a venture capital industry that works for everyone.

Our first tool, an automated financial modelling platform has been used by hundreds of founders and we are now building for investment firms. In a matter of weeks, the customer journey for an investment firm receiving financial forecasts from founders will look completely different.

 

If this weren’t a very hard problem then surely it would have been solved. My team at Caena and I know this. We are excited not in spite of the difficulty but because of it. If you are a VC, incubator or accelerator and believe “there has to be a better way” than the current painful and inefficient process, get in touch and let’s discuss how we can help you.

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