6 Fundraising Tips Most Startup Entrepreneurs Don't Know
In reading the start-up and tech blogs these days, one would think investors are chomping at the bit to fund startups like yours. But as is true with most situations in life, you shouldn't believe everything you read.
There are certainly examples of big and fast rounds and companies
where money landed in a founder's lap. But this isn't the norm, nor should it be expected. Fundraising is hard, no matter what anyone tells you.
Here are some tips to make raising money for your business a little easier:
1) Time is not your friend.
Fundraising is in many respects a full time job, and the inertia of your company won't take a vacation. Your customers, users, employees and everyone else involved will continue to require your attention even though you're in the midst of a draining and consuming fundraising process. So the shorter this process takes the better. Moving fast and efficiently can also help stave off second thoughts among investors. Similar to a house that sits on the market, the longer a deal sits, the more questions and concerns are raised. Why didn't XYZ fund do it? What have others seen that I'm not seeing?
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2) Know who you want to work with.
Long before you're ready to raise your round, think about the funds and people that you'd eventually like to work with. Begin to build relationships with these people and funds well before you need to ask them to participate. When it comes time to formally begin fundraising, the conversations will be much smoother and simpler since a previous relationship exists.
3) Stay in the driver's seat.
Don't start fundraising until you are ready. No matter who comes knocking or expresses interest, the process should be on your terms and when you're ready.
4) Coordination is critical.
It's vital to have answers to simple questions like how much you're raising, why you're raising it, how you plan to use capital, other players in the market, etc. Once the process moves forward into deeper diligence, you must make sure your business' other stakeholders are aware of your fundraising effort. From customer calls and potential customer calls to tapping internal resources, you'll need their cooperation to get things done.
5) The flow of information is absolute.
For better or for worse, you need to assume that once your deal is on the market, everyone knows about it. What you tell one partner or fund can quickly circulate across funds -- and even coasts for that matter. If one firm passes on your deal, others will quickly find out. This isn't to say that investors are conspiring against entrepreneurs -- that's certainly not the case, however, people talk and you need to know that.
6) Deadlines are a must, but flexibility is key.
If given the opportunity, many investors will take more time. Time means results, data points and additional proof points by which to make an investment decision. So you need to build in that urgency to keep the process moving forward. Find a meaningful event that will drive the firms involved towards a decision and, ideally, a term sheet. Still, if you have an investor or firm that you really love and they need a bit more time to get their partnership or work in order, don't hesitate to honor that request. Nothing replaces a great long-term partner.About 40Billion.com
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