Fundraising consultant or finance adviser: which do you actually need?

Somewhere between closing an angel round and starting a proper seed or Series A process, most founders get the same set of calls. A boutique firm offers to take the company to its investor network for a monthly retainer and a success fee. A virtual CFO practice offers to get the finances in order. Someone met at an event offers warm introductions to three funds in exchange for advisory shares. And a friend who raised last year says the only thing that matters is the deck.

All of them are describing themselves as fundraising help. They're selling very different things, on very different terms, and each is the right answer for a different kind of problem.

The confusion is expensive in a particular way. Hiring the wrong kind of help doesn't just waste the fee. It can burn through your investor list with a company that isn't ready to be looked at, and investors remember the companies that stalled in diligence.

Four kinds of help that get called the same thing

It helps to separate them by what they actually do, rather than by what they call themselves.

• ·Fundraising consultants and investment bankers run the process. They build or polish the investor materials, draw up a target list, make introductions, manage the pipeline of conversations, and help negotiate the term sheet. At the smaller end of the market this is a boutique firm or an individual with a network. At the larger end it's a bank.
• ·Finance advisers and fractional CFOs work on the business being raised for. The financial model, the monthly numbers, the metrics definitions, the reconciliations, the data room and the preparation for diligence questions. They're mostly not in the room with investors, and they don't make introductions.
• ·Advisers paid in equity trade access and credibility for a small stake, usually through advisory shares or options that vest over time. Some are genuinely useful. Some make two introductions and then disappear with a vesting schedule still running.
• ·Lawyers and company secretaries handle the term sheet, the shareholders' agreement, the share allotment and the filings. You need them for every round regardless of who else you hire.

Plenty of firms blur these lines, and some do more than one well. But when you're deciding what to buy, ask which of these four jobs you're actually paying for. Most of the disappointment founders describe afterwards comes from paying for one job while expecting another.

What each one is paid to do, and why it matters

The way someone is paid tells you what they're optimising for. That isn't a criticism of anyone. It's just how incentives work.

A fundraising consultant paid a success fee earns most when a round closes, and more when the round is larger. That lines up well with your interest in closing. It lines up less well with your interest in closing with the right investor, on the right terms, at a size that doesn't dilute you more than necessary. A good consultant manages that tension honestly. A mediocre one pushes towards whatever closes fastest.

A finance adviser paid for the work earns the same whether or not you raise. Their incentive is the quality of the preparation, and a good one will tell you that you aren't ready yet, which is advice a success-fee arrangement makes awkward to give.

An equity adviser's incentive depends almost entirely on the vesting terms. Advisory equity that vests monthly over two years, with a clear description of what's expected, is a fair trade. Advisory equity granted up front for the promise of introductions is a gamble you usually lose.

Which problem do you actually have?

Most founders assume their problem is access, because access is the part of fundraising that's visible. Meetings feel like progress. But for a lot of Indian startups between seed and Series A, access isn't the constraint. Meetings happen. It's what happens after them that goes wrong.

Signs the problem is access

• ·Your numbers are clean, reconciled, and you can explain every metric in your deck without checking.
• ·You've raised before, but from angels, and have no relationships with institutional funds.
• ·Investors who do meet you move quickly to a second meeting and ask for data you can send the same day.
• ·You're raising in a sector or geography where few funds are active and you don't know who they are.

Signs the problem is readiness

• ·First meetings go well, then conversations stall after the first data request.
• ·The revenue in your deck and the revenue in your books are different numbers, and you'd need a call to explain why.
• ·Nobody has written down how ARR, churn or CAC are calculated, and they've changed over time.
• ·Your model's growth assumptions came from a template rather than from your own history.
• ·Your last round's paperwork, cap table or statutory filings have gaps you've been meaning to fix.
• ·An investor has already said something like 'come back when the numbers are clearer'.

If you recognise yourself in the second list, a fundraising consultant will get you more meetings that end the same way. What you need first is the finance work.

Why the order matters so much

Here's an illustrative example of how getting it backwards plays out. The company and figures are invented, but the pattern is common.

A B2B software company with about ₹4 crore of annual revenue hires a fundraising boutique to run its Series A. The boutique is competent and well connected. Within two months it has taken the company to 40 funds, and 12 take a first meeting. Three move to diligence and send data requests.

In all three, the same thing happens. The ARR on the deck is calculated from contracts signed, including two that haven't gone live. Revenue in the books is recognised on invoice, including annual prepaid plans booked up front. The monthly MIS sent to existing angels uses a third definition. Each fund's analyst spends a week trying to reconcile them, then the conversations cool. Nobody says no. They just stop replying quickly.

Six months later, the company has fixed its numbers. But those 40 funds have already seen it, and the partners at the three that went deeper remember why they stopped. Going back is possible. It's much harder than going the first time.

The finance work would have cost a fraction of the time lost. Done first, it would have made the boutique's introductions far more valuable.

Questions to ask a fundraising consultant before signing

• ·What exactly is the success fee calculated on? Does it apply to money from investors you already knew, or who approached you directly?
• ·Is there a tail period after the engagement ends during which the fee still applies, and how long is it?
• ·Is the engagement exclusive, and can you end it if it isn't working?
• ·How many rounds at your stage and in your sector did they close in the last year, and will they name the companies so you can call the founders?
• ·Who will actually do the work day to day: the partner who pitched you, or someone junior?
• ·Do they stay involved through diligence and closing, or does their work effectively end at the term sheet?
• ·What will they need from you, and what happens if your numbers aren't ready?

Also check what they're permitted to do. Raising money from investors in India involves securities and company law rules about how offers are made and to whom. Your lawyer should look at the engagement letter before you sign it.

Questions to ask a finance adviser

• ·What will you hand over at the end: a model, an assumptions note, reconciliations, a data room structure, written definitions?
• ·Who does the work, and have they done it from inside a company preparing to raise?
• ·Will you tell us if we aren't ready, and what would you do about it?
• ·Do you take any fee linked to the round closing? If so, how do you manage the conflict?
• ·Can we speak to founders you've worked with?

The third question is the one that matters. An adviser who can't imagine telling you to wait is not really advising.

Red flags, whichever kind of help you're hiring

• ·Guaranteed outcomes. Nobody honest can promise a round will close, at a valuation, by a date.
• ·A large fee up front with little defined work behind it, particularly for introductions.
• ·Reluctance to name past clients or let you speak to them.
• ·An investor list that turns out to be a public database, sent in bulk.
• ·Pressure to sign quickly because an investor is supposedly waiting.
• ·Advice that never includes the word 'wait'.
• ·No clear answer to who owns the work: you, or them. Investors want to hear the founder explain the numbers, not the adviser.

That last point deserves emphasis. However much help you hire, investors are backing the founder. A consultant can open the door and an adviser can make sure the numbers hold, but the person who has to explain why revenue dipped in March, why churn improved in the second half, and what the money will buy, is you. Any arrangement that leaves you unable to do that without someone else on the call is working against you, however good it looks on paper.

When you need both

Plenty of companies do. A founder with clean numbers but no institutional network may need a consultant for access and a finance adviser to keep the numbers ready through a long process. A company going from seed to a large Series A often benefits from someone running the process full time while the founders keep running the business.

In that case, sequence them. Get the finances ready first, which usually means the model, several months of consistent MIS, reconciled metrics and a data room that exists before anyone asks for it. Then bring in the consultant, and give them a company that holds up when an analyst starts pulling threads. They'll close faster, and the terms will usually be better, because investors price uncertainty.

Where Simplify fits

Simplify sits on the readiness side of this line. The work is the financial model, the metrics, the reporting and the preparation that happens before diligence. It doesn't make investor introductions or write pitch decks, and that's deliberate: an adviser who also earns from the round closing has a harder time telling you the truth about whether you're ready.

If you're deciding this week, start with a simple exercise. Take the three numbers in your deck that matter most, usually revenue, growth and a margin, and try to reconcile each one to the books and the bank without help. If you can, access may well be your problem. If you can't, you know which kind of help to call first.

Who wrote this

Shafneed is the founder of Simplify, a finance clarity and investment readiness practice working with founders across India. He writes about the questions founders bring before a decision, not after it.