Nothing will help or hurt your company as how well or poorly capitalized you are. Money will let you invest in those areas that require attention, it will help you grow, and growth is what we’re all here for. But, if you’re a first time entrepreneur you may not know how to raise money. This is why we’re here, a glance at three proven strategies that startups use to raise seed, angel, or venture capital.
Tap your Network
Chances are you don’t have a network. If this is the case, start building one. Intros from other founders are seen much better than intros from other investors. Why? The question is always going to be | “Why didn’t they invest in the startup if they’re so good?
If you have a solid and strong network within the community, use it. It’s your best resource, ask for intros, and always ask the person into’ing you for a double opt in. There’s nothing worse than getting an email in your inbox “Hi Jace, Tom here, wanted to intro you to Bill from Startup.io, he’s looking for $80k”
If you’ve exited, did it as something more than an aquihire, and haven’t burnt bridges, the odds are in your favor.
Take the following example, in 2011, AdKeeper, raised something like $38 million for a webapp that let you save ads for later viewing. The founder had exited twice. Not surprisingly, Ad Keeper failed, and AdAge even wrote a piece on what you can learn from the company’s failure and pivot.
I don’t know, business models that rely on people going the extra mile to be advertised to make no sense? CueCat anyone? The founder however had exited twice making his investors and himself money. We even wrote about this company back in 2011, but the piece is lost.
Let’s assume however that you’re not in this group.
Ride the Hype Train
At the end of the day investors are people, and people are swayed by hype. It happens on Wall St., it happened in Crypto Trading with Bitcoins 2018 bubble, and it happens with startups, albeit, a bit less now than it did in the early to mid 2010s, i.e. Color raised $41 million on hype alone.
So how does one tap the hype machine? Get press, get people talking about you, partner with someone big, become the topic of conversation.
You may have missed product market, but if it’s talked about – there has to be something there? Right? Mostly wrong.
Hype is spectacular if you’ve reached product market fit, and can leverage it to get the terms you want from your investors. If you tap the hype machine too early, you’re pretty much signing your own death warrant. Hype is great, but it has to be timed, like much of start-upping. Use it as a tool, don’t make it a pillar of your capital raise strategy when the house is made from cards.
Let them come to you
At the end of the day VC’s are in this game to make returns. They need to not only get excited but need to trust you as a founder.
Keep them in the loop, talk to them about the things you’re working on, show them you’re hitting your milestones, present your best self, be smart, and you may have funding in no time.
Don’t talk to people like they owe you something because you think your startup idea is awesome. Ideas aren’t worth the paper they’re written on.
And if you can, build revenue. In my most humble of opinions, you should be designing your business to generate revenues from day one. None of this, “When should a startup look to start generating cash flow?” bullshit, because, and I reiterate, you should start generating cash flow from day one; anyone who tells you otherwise is delusional. Businesses need sustainable models.
You see, revenues do a funny thing for your startup, they make you sustainable, they lower, or nix your burn rate and they allow you to start paying yourselves salaries, and depending who your clients are, start generating industry buzz, leveraging that buzz into a little pr here, some there, and the next thing you know, you’re blipping on the hype radar, and then they’re looking to get you into their offices, and not the other way around.
You prove product market fit, better yet, market traction, business model, and actual revenues; just about the sexiest things ever.
A friend of mine, Brent (who, funny story, once sued Ted Cruz) once said, “I don’t need your money. But I’ll take it”, and that – is about the best position you can be in when seeking capital.
