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The Ultimate Guide to Raising Capital
stansburyweaver.com
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This is a guide to raising capital drawn from my first- and second-hand experience, and from the experience of veteran investors and entrepreneurs. I’ve done a lot of deals and seen and read about a lot more. There is great stuff on raising capital all over. I’ve highlighted a few excellent sources at the end. “Once you’ve found potential investors, it’s time for due diligence and with luck a term sheet.” Let’s go a little deeper.
This is a guide to raising capital drawn from my first- and second-hand experience, and from the experience of veteran investors and entrepreneurs. I’ve done a lot of deals and seen and read about a lot more. There is great stuff on raising capital all over. I’ve highlighted a few excellent sources at the end. “If that goes well you’ll be negotiating deal docs, closing the deal, and getting down to the real business of putting that capital to work building something great.” Let’s go a little deeper.
Just because you can doesn’t mean you should. “Raising capital will change your business so make sure it’s what you really, really want. Make sure it’s what you need.” More often, though, the business isn’t destroyed, the founders just end up living a lifestyle they never wanted. When you take money you commit to working like hell to generate a massive return for your investors in a relatively short amount of time—like, five to seven years.
Raising capital will change your business so make sure it’s what you really, really want. Make sure it’s what you need. I’ve seen good businesses destroyed by bad investors. “When you take money you commit to working like hell to generate a massive return for your investors in a relatively short amount of time—like, five to seven years.” Make sure this is what you really want to do and really need to do because there is no going back. And there is a lot to be said for bootstrapping a sustainable business that supports you, your family, and your team. If things go well, you can choose to raise capital and scale later. Yes, you’ll probably grow slower. But with no strings attached. On your terms.
Just because you can doesn’t mean you should. “I’ve seen good businesses destroyed by bad investors.” More often, though, the business isn’t destroyed, the founders just end up living a lifestyle they never wanted. When you take money you commit to working like hell to generate a massive return for your investors in a relatively short amount of time—like, five to seven years.
In the case of VC, know all about the firm, but also know the individual partners and know which partner leads deals like yours. “Research the partner’s connections to find a strong intro. Never talk without an intro.” Stay at it. Follow up. Do not forget that this is a sales campaign.
Talking with other founders is also a great way to qualify a prospective investor. Better still if it’s a founder of a failed venture. You can learn a lot about what the investor is really like. “Work your list to get intros. It may take a couple hops if you’re not already well connected.” Remember that this is a sales campaign, so you need to stay in touch and keep investors interested.
Now Work Your List “You want warm introductions from trusted resources.” Talking with other founders is also a great way to qualify a prospective investor. Better still if it’s a founder of a failed venture. You can learn a lot about what the investor is really like.
You also want to make sure that the investor does deals in your geographic area. It is of course possible to raise outside your neighborhood and hold future board meetings by phone or video conference. But that’s not ideal. If you go that route, make sure that your investor visits for an in-person meeting at least a couple of times a year. “There’s no better intro to a VC than one coming from the founder of a portfolio company.” The Right Investor Shares your Vision, Objectives, and Moral Outlook.
Research the partner’s connections to find a strong intro. Never talk without an intro. “Stay at it. Follow up. Do not forget that this is a sales campaign.” Most of you will need to flip his first and third steps—you’ll need to research investors, narrow down prospects, then create a list. There are a ton of resources available to find investor information. As Suster says: “There are enough data sources that if you can’t figure out the basics then don’t run a startup.” Crunchbase and AngelList are good places to start.
Talking with other founders is also a great way to qualify a prospective investor. Better still if it’s a founder of a failed venture. You can learn a lot about what the investor is really like. “Work your list to get intros. It may take a couple hops if you’re not already well connected.” Remember that this is a sales campaign, so you need to stay in touch and keep investors interested.
You do not want to meet with a potential investor without getting a proper introduction. You want warm introductions from trusted resources. This can be a little harder to dig up, but start by combing over the investor’s social media and reach out to the founders of other companies the investor has funded. “Talking with other founders is also a great way to qualify a prospective investor.” Work your list to get intros. It may take a couple hops if you’re not already well connected.
Now Work Your List “You do not want to meet with a potential investor without getting a proper introduction.” Talking with other founders is also a great way to qualify a prospective investor. Better still if it’s a founder of a failed venture. You can learn a lot about what the investor is really like.
Raising the Next Round Starts Now “Start networking and building relationship before you get close to raising your next round.” Three other things to be aware of on the technical side.
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