The fundraising process is valuable in honing your strategy

The fundraising process acts as a catalyst in a number of valuable ways that are worth exploring:

• The fundraising process forces you to better define and defend your business strategy.  While an executive summary may allow you to speak in generalities, face to face fundraising requires specificity.  A defensible strategy is not something you can fake.  Potential investors will dig into your assumptions in ways that you may or may not have considered.  No matter what the outcome, the conversation is a valuable one.

• The fundraising process allows you to hone your strategy and your pitch.  Great entrepreneurs (when they have the luxury of doing so) will often pitch second tier investors first, in order to practice their delivery.  The pitch will get better with time and practice, as will the strategy.  And it isn't just rhetoric.  You'll learn a great deal about your business defending it to a bunch of smart people.

• The fundraising process will disabuse you of your misconceptions.  Entrepreneurs and VCs are invariably optimists.  And, thus, they are prone to drinking their own kool-aid.  Potential investors do not share your malady.  They will work hard to determine if your kool-aid is in fact delicious, and if it is not, they will let you know.  Now not everyone's taste buds are the same.  Your kool-aid may not be delicious to everyone.  But if it is delicious to no one, it is time to reassess. 

• The fundraising process will provide you with valuable market intelligence.  Think what you may of investors (whether they are VCs or the folks investing in VCs), they hear a lot of pitches.  And all of those pitches can provide beneficial context for your own fundraising process (as well as your business in general).  It is an investors job to compare your business with all other opportunities that come before them and to determine the relative value of what you are selling.  If an investor has seen something better, it is invaluable for you to hear what it is and why (even if you ultimately think they're wrong).

• The fundraising process will help you determine if you have the right team.  For venture capitalists this is extremely important because, in many ways, a VC fund is nothing more than the aggregation of that fund's partners.  But the same holds true for startups.  Investors, by and large, are betting on teams, not ideas or markets.  If you don't have a credible team, potential investors will let you know.