Why has startup fundraising turned into a multi-quarter exercise?

For Indian startup founders, obtaining funding has changed silently from a time-limited capital raise to a long, resource-draining process that can last six to nine months or even longer. What used to be expected to end in a quarter is now happening over several quarters, even for organisations doing well.

This isn't just a one-time thing or a short-term market slump. Investors are changing how they think about risk, invest money, and hold people accountable. This change is making it take longer to raise money at all levels.

From belief to constant review

The primary reason for the delay is that the way investment decisions are made has changed.

Before, the steps for raising money were rather clear: pitch meetings, a term sheet, due diligence, and closing. Today, due diligence has grown into a longer examination period. Bankers in the industry claim that due diligence is taking longer, with investors having enough time to see two full quarters of operating performance.

Monthly updates to the management information system (MIS) now work like a live audit. They include data on revenue, costs, recruiting, churn, and the pipeline. Investors might check to see if founders can truly deliver on the figures over time, rather than just relying on estimates that were talked about in the first meetings.

This allows investors to stay involved in the process without putting money on the line, effectively delaying the ultimate decision while providing them with a better understanding of how things are progressing.

The uneven cost of time

Longer diligence lowers the risk for investors, but it costs founders a lot of money.

When investors are raising money, they typically view it as just one of many tasks to accomplish. But for founders, it becomes the most important thing. According to industry estimates, a founder's productive bandwidth can be cut by 45–50% in a year if they spend six to nine months raising money.

During this time, important parts of the firm will have to deal with problems. Sales slow down, product roadmaps are pushed back, personnel decisions are put off, and strategic plans are placed on hold. This loss of focus can seriously hurt the organisation in sectors that require a lot of capital or move quickly.

Ironically, the longer a fundraiser takes, the worse the company's performance may get, which makes investors even more hesitant and extends the cycle.

The "maybe" issue

Another thing that makes long fundraisers stand out is that people often give unclear answers.

Founders typically hear the same things over and over: "maybe," "let's stay in touch," or "let's talk about this again after the next quarter." Bankers say that these answers are generally mild rejections, even though they are seen as signs of sustained interest.

A long string of these kinds of responses, usually 8 to 15 rounds of talks that don't lead to a decision, means the startup isn't on the same page when it comes to stage, time, or investor fit.

Clear "no" answers let founders change their plans. Ambiguity keeps them stuck in follow-ups and small updates, which wastes time without moving things forward.

The lead investor blockage

The increased difficulty of finding a lead investor is a key, but less obvious reason why fundraises are taking longer.

Writing the biggest cheque is only one part of leading a round. A lead investor needs to set the pricing for the round, work out the legal details, set up the cap table, join the board, and promise to keep an eye on things and help out for several years.

Most venture funds in India have tiny teams that work for them. Many general partners are on more than one board. When a partner is already spread thin over 8 or 10 portfolio businesses, they can't lead another investment, no matter how strong their conviction.

Because of this, many rounds get interest, but don't have a clear leader. Without someone willing to handle pricing and execution, talks go on forever, and transactions don't get done.

What founders don't know

Investment committees typically talk about things that founders don't often hear directly.

These include considerations about exit visibility—whether the company can realistically get a bigger investor in 18 to 30 months—the extent to which the business depends on individual founders, instead of scalable systems, and whether the cap table has room for future rounds.

If these issues aren't fixed, entrepreneurs are more likely to get polite delays than direct feedback, which keeps the uncertainty going.

Taking care of the clock becomes important. Both intermediaries and founders are changing as the way fundraising works changes. Bankers say that their job has evolved from simply setting the company's goals to actually managing timelines.

Founders who close rounds more quickly tend to set clear process boundaries, such as clear data-room schedules, clear decision deadlines, and communication that says operations will go back to normal if a round doesn't close by a specific date.

These kinds of actions limit investors' choices and make it easier to decide on whether to move forward or back off.

Final thought 

The lengthening of fundraising cycles is a sign of changes in how investors behave, not just how the market perceives it. Fundraises are going to take a long time as long as investors can get information without putting money down, and entrepreneurs have to pay for the delay.

The difficulty for founders is no longer only conveying stories or getting people to listen. It is protecting execution while moving through a system, where one side has little to lose by not making a decision, and the other side has a lot to lose.

Devansh Lakhani, Director and Investment Banker at Lakhani Financial Services