Question & Answer
Should a Founder Pitch to Multiple Investors at Once?
A common question among founders raising capital: should you engage multiple investors in parallel, or focus on one at a time? The short answer – absolutely, you should speak to multiple investors simultaneously.
No serious investor will be offended that you’re exploring multiple options. In fact, they expect it. But there’s a point in the process where exclusivity might come into play. Let’s break it down.
Why Speaking to Multiple Investors Is Critical
Raising capital isn’t just about getting a cheque – it’s about finding the right fit. Investors conduct due diligence on you, but you should be doing the same on them. Engaging multiple investors at once gives you leverage, momentum, and optionality.
Key advantages of speaking to multiple investors:
- Speed: Fundraising takes time. Running discussions in parallel prevents unnecessary delays.
- Leverage: Having multiple offers increases your negotiating power.
- Fit: Different investors bring different strengths. Speaking to many helps you find the right partner.
- Redundancy: Investors drop out all the time. If one deal falls through, you have others in play.
Investors are used to competition. If they see real interest from others, they are more likely to move faster and offer better terms.
Will Investors Get Upset?
A founder’s fear: “What if an investor finds out I’m talking to others and walks away?”
Unlikely. Any investor worth their salt assumes you’re speaking with multiple parties. Investors themselves talk to numerous startups before making a decision – why shouldn’t you do the same?
A sophisticated investor might ask where you are in the process, how many conversations you’re having, or who else is in the mix. Be honest, but strategic. You don’t need to disclose every detail, but acknowledging you have other conversations signals demand and keeps the pressure on.
When Exclusivity Comes Into Play
Investors generally don’t ask for exclusivity in the early stages. However, once a term sheet is on the table, that’s when things change.
A term sheet often includes an exclusivity clause, preventing you from negotiating with others while the deal is finalised. This is reasonable – investors don’t want to spend time on legal work only to be outbid.
How to handle exclusivity:
- Negotiate the timeframe: Keep exclusivity as short as possible, ideally 30-45 days.
- Only grant it when terms are solid: Don’t lock yourself in too early. Ensure key deal points are agreed upon.
- Use it as leverage: If an investor wants exclusivity, you can push for better terms in exchange.
The Risks of a Single-Investor Approach
Some founders mistakenly engage one investor at a time, either to appear committed or because they assume a deal is a sure thing. The risks?
- Loss of leverage: If you only have one option, you take whatever terms they offer.
- Wasted time: If a deal falls through after months of talks, you’re back at square one.
- Slower process: Without urgency, investors may drag their feet.
It’s far better to manage multiple discussions, even if it requires more effort. The alternative – being stuck with a single investor dictating terms – is far worse.
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