It sounds like an oxymoron, but it is not uncommon for investors to interview entrepreneurs while at the same time those investors have no money to make investments. This is one reason some funds take months to make investments, as they themselves are fundraising while simultaneously screening and doing due diligence.
The reality is that fundraising as time consuming and challenging for fund managers as it is for entrepreneurs. The main difference is the information asymmetry and power dynamic between investors and investees, plus the embarrassment many investors feel when they have no money to invest.
The best practice in these situations is for fund managers to make it clear, up front that they are still raising money, and to state an estimated date when checks will be written. There is nothing to be embarrassed or ashamed about in that fundraising effort. Just as startups face Catch-22s in their fundraising, needing capital to close customers and needing customers to close capital, funds face similar Catch-22s, needing a portfolio to close capital and needing capital to close investments.
I’ve been in both of these situations personally over the last decade. On the investor side, I do my best to tell the startups when I have no money, when it is expected to arrive, and when I might have enough to make the investments they want, as there is always a pipeline of deals to make and not all can be close in the same day.
The all-too-common alternative to that best behavior are investors who make investees feel like an investment in imminent when it can’t happen for months. That behavior not only wastes entrepreneurs’ time, it makes them feel like fundraising is never going to end, or worse, that fundraising is a total waste of time.
Investors, always keep in mind that when entrepreneurs are raising funding, they need that funding now. They’ll live with week or months from now, as they have no choice, but the funding is needed now, if not yesterday, if not weeks or months ago. If your fund is closing in six months or next year, then you are asking a favor of the entrepreneur to spend any time talking to you. Flip the power dynamic and let them decide if they want to spend their time helping you now, and in return provide them introductions to other funds you know who might write them a check before you.
That is the type of win-win that helps make fundraising faster for everyone.