Strategic Capital Raising and Exit Planning with Tom Dillon

In this episode of the DealQuest Podcast, I'm excited to welcome Tom Dillon, CFA, a seasoned financial strategist and the driving force behind frac finance. With years of experience as a fractional CFO, Tom specializes in helping small businesses unlock growth through data-driven financial management, cashflow optimization, and strategic investments. His mission is to demystify complex financial concepts, empowering entrepreneurs and executives to make confident, informed decisions that fuel long-term success.

Tom's journey from investment banker at William Blair to CEO of a PE-backed company to fractional CFO gives him a unique perspective on the entire business lifecycle. From his early work on capital raises with Mike Evans (co-founder of GrubHub) to his current focus on helping companies navigate buying, growing, and selling businesses, Tom brings both the strategic thinking of investment banking and the operational reality of running companies.

Whether you're considering your first capital raise, evaluating different funding sources, or planning your eventual exit, this conversation provides practical frameworks for making strategic financial decisions that align with your long-term goals.

FROM PONTIFICATOR TO OPERATOR: WHY EXPERIENCE MATTERS

Tom's path wasn't linear. After eight years at investment banking firm William Blair, he realized he was what he calls a "pontificator" - analyzing other people's business decisions without making his own. "As an entrepreneur, that bug it wants you to be the operator, it wants you to build," Tom explains. So he took a hard look in the mirror, realized he didn't have operational experience, and deliberately took a CFO role at a private equity-backed company where he was later promoted to CEO.

This intentional career pivot gave Tom something most financial advisors lack: real operational experience. He's been on both sides of the table - analyzing deals as an investment banker and executing them as an operator. That combination of analytical rigor and operational reality shapes everything he does with his fractional CFO clients today.

UNDERSTAND THE ASSUMPTIONS BEHIND EVERY FUNDING ROUND

One of Tom's key insights from working with startups is the importance of thinking beyond your current funding round. When he worked on a capital raise with Mike Evans at Fixer, the conversation wasn't just about how much money they needed right then - it was about understanding "the assumptions of how much and what did that mean in terms of burn and the amount of equity that might be given up on a second, third round."

Tom's approach focuses on reverse engineering the path to your next raise by working with department leaders to understand your sales conversion and marketing funnels. "Building it in the context of those department leaders that give you the best indication of where we are today and what do you think we can get to grounded in the realities that you know are gonna really come and face these extremely optimistic founding teams."

The key is balancing the "ridiculously optimistic" mindset required to start a company (because "if you're not just ridiculously optimistic, and have the exuberance, you know your best off, not even starting") with the grounded planning needed to actually execute successfully.

NOT ALL MONEY IS CREATED EQUAL: MATCHING CAPITAL TO GOALS

Tom's experience has taught him that venture capital isn't right for every business - a perspective that might get him some backlash from VCs, as he jokingly admits. The reality is that VCs are playing a specific game: they need portfolio companies that can achieve IPO-level returns because that's how their math works.

"For a lot of VCs, they kinda look at things in terms of roulette table, and if you look at the math, they really need one of those to hit big. They need an IPO effectively," Tom explains. If your business is more likely to have a successful but smaller exit through M&A, or if you're not committed to the exponential growth curve VCs require, you might be better served by other capital sources.

Alternative funding options include SBA loans, term loans, lines of credit, private credit, or even sale-leasebacks for more established companies. The key is matching your capital source to your actual business goals and exit strategy.

THE MINDSET FACTOR: WHY SOME FOUNDERS SUCCEED AND OTHERS STRUGGLE

Working with dozens of business owners has given Tom clear insights into what separates successful founders from those who struggle. The two key characteristics he sees in successful clients are open-mindedness and abundance mindset.

"Clearly open-mindedness where there's, they check their ego. It's not that they're not confident, but they'll check the ego at the door knowing that they're smart people at the table and that they're paying these people," Tom notes. The best founders listen to advice they're paying for and can adapt when presented with data that challenges their assumptions.

The abundance mindset shows up as "hiring ahead of growth, which is one of the most difficult things to do in business ever." It requires confidence in your projections and track record, but founders with this mindset invest in capabilities before they absolutely need them, positioning their companies for sustainable growth.

THE ETA REVOLUTION: ENTREPRENEURSHIP THROUGH ACQUISITION

Tom is seeing significant growth in the ETA (Entrepreneurship Through Acquisition) space - people buying their first business rather than starting from scratch. "That market is really hot right now," Tom observes, with many buyers using SBA loans to finance acquisitions.

This trend is creating new opportunities but also new challenges. Buyers need to be more sophisticated in their approach to business owners who are considering selling what they've spent their lives building. "Your ability to become prepared and have a plan to approach owners, that they're entrusting you to take over their baby, their business to continue to run and grow. It has never been more paramount."

The space is getting more competitive, which means buyers need to come more prepared and professional than ever before.

THE REALITY CHECK: VALUATION EXPECTATIONS VS. MARKET REALITY

One of the most difficult conversations Tom has with business owners revolves around valuation expectations. Often, owners have read about high multiples online or heard about big exits in their industry, but these are typically based on public markets or large private equity deals that don't apply to smaller businesses.

"There might be a discrepancy here in terms of what they think the business is worth and the reality of what they can get for it," Tom explains. The conversation becomes: "Hey honey, you know, we're not buying that villa in the south of France. We're gonna be Airbnb in that thing."

But Tom doesn't just deliver bad news. His approach is to reverse engineer a path to higher valuations: "You thought it was 12, but maybe it's two and a half. How could we get there or close to it so that this is a little bit more palatable?" This involves analyzing what drives higher multiples in their industry and creating an actionable plan to get there.

THE FULL LIFECYCLE APPROACH: BUYING, GROWING, SELLING

Tom's firm differentiates itself by understanding the complete M&A cycle and focusing on the full lifecycle of SMB ownership. Their services are organized around three core areas: buying a business (quality of earnings, financial due diligence), growing a business (fractional CFO and accounting services), and selling a business (M&A sell-side advisory).

This comprehensive approach means they can help a client evaluate an acquisition opportunity, provide ongoing financial leadership during the growth phase, and eventually help position the business for a strategic exit. It's a cradle-to-grave approach that builds long-term relationships and provides continuity through major business transitions.

The key insight is that strategic financial thinking shouldn't be episodic - it should be integrated throughout the business lifecycle.

Tune in to this episode to hear Tom Dillon share his insights on strategic capital raising, the realities of different funding sources, and how to build a business with the end in mind. From understanding VC expectations to exploring alternative funding options, this conversation offers practical frameworks for entrepreneurs and business leaders navigating critical financial decisions.

• • • Listen to the full DealQuest Podcast episode here • • •

FOR MORE ON TOM DILLON
Tom Dillon CFA on LinkedIn
fracfinance.com

FOR MORE ON COREY KUPFER
Corey Kupfer's LinkedIn
Corey Kupfer's Website

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

Get deal-ready with the DealQuest Podcast with Corey Kupfer, where like-minded entrepreneurs and business leaders converge, share insights and challenges, and success stories. Equip yourself with the tools, resources, and support necessary to navigate the complex yet rewarding world of dealmaking. Dive into the world of deal-driven growth today!