Minutes before the first venture capital pitch meeting of my startup’s seed round, a wise business advisor pulled me aside. “This is going to be wild,” he warned, with a knowing smile. “Brace yourself!”
Several months later, after raising $850,000 for my startup, ReelGenie, the ride has stopped (for now). I hopped off the fundraising roller coaster with memories of unexpected thrills, a few bruises, and many small business lessons for the future.
Here are eight things I know now that I wish I’d known then:
Network like a pro.
You never know where you’ll meet a future investor. ReelGenie’s investors include prior professors from years ago, former co-workers, and individuals who I met at an event. Put yourself out there. Unless you’re already rich or famous investors won’t just flock to you.
Cast a wide (and targeted) net.
Most people you talk to will say no. So play the numbers game. The more potential investors you speak with, the higher your chances of success. But I say that with two caveats. First, do some homework so you’re targeting people who are likely to love your deal, rather than wasting time with those who won’t. Second, stay organized. Keep track of every communication. If you can’t convince an investor that you’re equipped to handle fundraising, good luck convincing them you can run a company.
Seek out points of validation.
If I never hear the phrase herd mentality again, I’ll be a very happy man. But the reality is that’s how fundraising works. Investors don’t want to be alone if the ship sinks. Lock down a few smart investors early. Get early adopters and evangelists, then find a lead investor. He or she doesn’t have to put in the most money, but a respected investor running the process will give others more confidence in your deal and help speed things up.
Find more than just a check.
Chances are you’re relatively inexperienced and going up against competitors with deeper pockets. So how do you tip the scales in your favor? Use the fundraising process to find helpful advisors. The best investors are those who can give you strategic guidance, make introductions, and write a big check (today and in your future rounds). Not all investors are good for your company. This is especially true in the current environment of the Series A crunch. Plan a few steps ahead. Your fundraising goal should be to find long-term partners, not short-term cash.
Consider what the market will bear.
Just because your friend raised $5 million at a $15 million pre-money valuation doesn’t mean that you should too. Investors are willing to pay what they think the company’s worth, so don’t set yourself up for disappointment. Securing ample funding for your company should be a higher priority than your dilution. With that said, shop around. Don’t accept the first offer. The earlier you start fundraising and the less desperate you seem, the better your chances of getting multiple bids — and a valuation you’ll be excited about.
Don’t let fundraising rule your business (or your life).
As the CEO of a company, your first priority is running the company. It’s not rocket science, but it’s hard to keep that perspective when fundraising season rolls around. The emotional strain is inevitable. One day you’re riding high off a great meeting, the next day you‘re sadly marveling at how many different ways someone can tell you no. It’s important to put your blinders on. Set aside time for fundraising each day. If you do, you will get things done. Finding customers and motivating your employees will come more easily. As your metrics improve, so will the odds of raising money and your valuation.
Fundraise outside of Silicon Valley.
Most of our investors are on the opposite side of the country, in Washington, D.C. Listening to entrepreneurs, you’d think raising capital is harder than getting a bill through Congress. It’s not. As Tech Cocktail reports, the D.C. angel scene is alive and well. And there’s money to be found in your city, too. You don’t need to move to the Valley. But you do need to be tenacious in networking (see tip No. 1) and understand what investors in your area are looking for. Tailor your pitch to your environment. And if that doesn’t work, hop on a train or a bus to meet with investors in other cities. Now more than ever, capital is mobile. You should be too.
Say “Thank you!” A lot.
One of my favorite books is Robert Fulghum’s All I Really Need to Know I Learned in Kindergarten. Twenty-five years (and two degrees) after I graduated kindergarten, it’s amazing how the simple lessons of life haven’t changed. Remember, investors are deciding whether to give you money. A great business plan is worthless if you’re a jerk. So be thoughtful. Say thank you when someone makes an introduction or takes a meeting. Follow up. Be a giver, not a taker (i.e., read Adam Grant’s fascinating new book, Give and Take: A Revolutionary Approach to Success, to learn what that means). Put a personal touch on every call or email. By simply being polite and respectful, you’ll give yourself a leg up in fundraising, if not in all aspects of your business.
David Adelman is the Founder and CEO of ReelGenie, an online video company that revolutionizes the way experiences are told and shared. David is also Founder and CEO of Reel Tributes, the premier producer of high-end documentary films. David graduated with an MBA from Wharton and a AB from Harvard, and lives in Washington, DC, with his wife Melissa and Shih Tzu puppy Samson.
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