If you have any opportunity to avoid raising a dollar of outside money, take it. Not only are you giving up equity, potential control, etc. the process will take ALL of your time and focus, taking you away from building a great product and company. Most people grossly underestimate how much time and energy fundraising takes. When you start running out of cash you will be desperate and jump at any potential meeting, which will lead to unqualified “opportunities” and you creating false-positives. This will actually create a death spiral, whereby you are taking the MOST precious resource you have, time, and will waste it on prospects that will go nowhere. Prepare for hard work.
Like anything worth doing, you need to prepare. The basic steps are outline above, but this is highly iterative, so as you start your research you will update your strategy. As you execute, you will also learn and adjust your strategy and research. This may ultimately lead to several pivots, which is a good thing. To quote a famous startups guru: the art is to pivot as many times possible before running out of money.
Create an operating model (Excel) whish details by month: how much you need to spend, how and when you will make money, when you need cash infusions, etc. Most startups raise more than one round of financing, and the early ones are the most expensive (because of the risk premium to the investor). Raise only as much as you need to get to significant milestones (i.e. product market fit validation, shipping product, signed customer, etc.) but have a longer term view as well. Understand the various forms of financing and the different sources. Each will have its own pros and cons. Depending on how much and what type of money you are raising, there are better fits for the source (i.e. if you need $2M don’t waste your time with Friends and Family or angels, go straight to VC’s).
In my experience, here are the things you can do to give yourself a better shot at getting funded (note: others will disagree, this is my POV): NEVER SEND A POWERPOINT DECK AHEAD OF TIME. A junior person will read it (less than 20% of the time) and toss it. If they want to meet you need to figure out a way to do so without sending a deck. If you have a product, even a wireframe or prototype, get straight to it and tell a story. PowerPoints are for consultants and investment bankers. Investors are investing in the team and their vision. They know your product will change and you will make mistakes. Do what you can to sell them the vision. I think a story anchored by the product is better than a PPT. Find the people you don’ t want money from and pitch them first. Its good practice, and you don ’ t get a second shot at the ones who you really want. Pitch, all day, everyday. To A/B testing with your pitch, collect feedback, iterated, improve, and do it again. I have done my pitch over 500 times in 18 months (I keep track), and I’m still learning and changing. Also, depending on who you are talking to (based on your research), you will need to adjust your pitch. Know who you are pitching better than they know themselves.
Don’ t get desperate. Don ’ t qualify in. If you know the investor you are talking to hasn ’ t written a check in over a year, move on. Keep smiling. Keep dreaming. Keep hustling.
Fundraising 101 shervin talieh
Fundraising 101 Shervin Talieh
Level Set <ul><li>Don’t raise money. Period. </li></ul><ul><li>Its hard, hard work, and will take 6-12 months </li></ul><ul><li>You will get desperate, and “qualify in” </li></ul><ul><li>This will start the “death spiral”: false-positives as the clock runs out </li></ul><ul><li>Unless you are on your 2 nd or 3 rd successful startup, went to Stanford, or dropped out of MIT, this will consume you </li></ul>
Research <ul><li>One you know how much, when, what type, and from whom, identify all sources of money </li></ul><ul><li>Know who is raising money, who is investing, what terms, etc. </li></ul><ul><li>Know your market and competition (I spend 3 hours a day reading) </li></ul><ul><li>Find people who can connect you </li></ul><ul><ul><li>lawyers, organizations, other startups, banks, LinkedIN, events, conferences, Quora, AngelList, TheFunded, OCTANe, startup camps, co-working facilities </li></ul></ul><ul><li>Incubators, grants, tech companies with programs, paying customers, rich relatives </li></ul><ul><li>Document in a spreadsheet, and prioritize </li></ul>
Execution <ul><li>Raise money when you don’t need it, but when its available </li></ul><ul><li>Ideally, raise money when you have momentum, but before you launch </li></ul><ul><li>Raise money from multiple sources, at once, but identify a lead </li></ul><ul><li>Set the terms, unless the lead comes strong </li></ul><ul><li>Be prepared to walk away, while knowing what your “zero hour” is </li></ul><ul><li>Create deal heat, play the game </li></ul><ul><li>Get to NO quickly, demand an answer, and don’t mess with associates </li></ul><ul><li>When they go dark, you move on </li></ul>