Should you announce your funding round?

You worked hard, your product has traction and you managed to close a funding round. You are now in dilemma over whether you should announce it to the world or not.

Funding announcements are generally a good chance to reiterate what your company is about and highlight recent achievements;  you should use it to your advantage.

A well-timed funding announcement will help you improve customer confidence. Showing that you have a financial runway will cause customers to believe that you will be around next year. If you managed to get a reputable angel or a VC firm in on your financing deal, that will also be a positive indicator to potential clients.

A funding announcement will also improve recruiting efforts, letting potential hires know that you have enough resources to keep payroll going.

On the negative side, your funding announcement might tip off potential competitors who will use your funding announcement as a tool to raise money themselves or change their strategy. Some competitors won’t even know you exist before the funding announcement is made.

Equally important is the distraction that the whole fundraising process and post funding announcement puts on the team. Every minute you spend searching for and reading your name in the news is a minute you won’t spend on your product. Lately, particularly in Atlantic Canada, there has been a trend of funders announcing funding rounds before the companies do. This is wrong.

A funding announcement is a tool that should be left to the company to use when founders need a push. Founders need to be able to use it strategically. There is no benefit to the funder, beyond a “feel-good” glow from announcing the funding before the company does.

Ironically, it ultimately hurts the funders as the taking the spotlight away from the company lessens the company’s chances for success and funders chances for return on investment.

There are many reasons why the company might want to wait a bit for a funding announcement and funders need to understand those reasons and be on the same page with the company. It might be that the company is in the middle of product testing and does not want to waste a PR opportunity on coverage that won’t benefit the business.

Bigger VC funds and some Supper Angel Investors are a bit wiser and prefer to keep their seed investments away from the public eye. If there is a chance that they won’t be leading or participating in a series A, they do not want to send a negative signal to other prospective investors.

You should seriously consider including a “first to announce” clause in your funding term sheet and provide a time window to your investors after which it is ok for them to do their own announcement if they wish to do so. Generally, 48h is sufficient.

Keep in mind that the press release itself is not the end-game. You must spend time building relationships with journalists and reaching them out individually with your press release. Otherwise your funding announcement will pass unnoticed.

If you are still undecided, a quote from Sun Tzu might help you make up your mind:

“Appear weak when you are strong, and strong when you are weak”

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2 comments

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