May 19, 2014
Steps to Successful Funding (Part 1)
It’s one of the most common questions I hear and one of the most challenging parts of any small business looking to take the next step. How to get funding?
I want to start by saying I’m certainly not an expert in this field. There are many more wildly successful entrepreneurs and start-ups who have successfully navigated the world of angel investing, small-seed rounds, and venture capitalists. I only recently joined this group and have much still to learn!
I’m thrilled (and slightly relieved) to share that only last week one of the start-ups I co-founded successfully raised its initial seed round funding through angel investors. This was an incredibly exciting time for the start-up team and for me as well. Personally it was my first successful round of funding and it was a learning experience to say the least. I’ll share below some of the process and some of the lessons I learned along the way when seeking that initial investment.
Don’t Chase Money
The first and most important lesson is simple. Don’t chase money. This is a strange concept. As a start-up looking for investors obviously you’re looking for resources, for capital, for an investment in your company to allow you to continue to grow and expand. So why shouldn’t you chase money? Because chasing money is hard. Chasing money means finding the wrong type of investor.
What type of investor are you looking for? If you’re interested in finding shrewd business people intent on maximizing their profit, and the return on their investment, focused solely on how your start-up will benefit their portfolio and generate more money for them – then chase money. These investors are not evil – but they are not the type of first round investors you need. If you are chasing the money only, this is the type of investor you will find. You may think you only need the money and you can do the rest. Be smarter.
If you’re involved in a start-up you need to be talking (and listening) constantly. Building relationships is critical. The saying, “It’s all in who you know” does ring true to an extent. The connections you make with others is vitally important. A word of caution though – do not be just a “taker”. A strong relationship is a two-way connection. Not only should you be looking for connections which are beneficial to you, but you should also be seeking out ways in which you can provide value to others. Be willing to give of your time and your knowledge.
Stop. Let’s take a quick timeout on this point. Here’s something I heard from a good friend and is extremely applicable here. Always, always, be yourself. Be genuine, don’t try to fake interest, or try to fake a connection. People will always see through it – no matter how good you think you are at faking it. The best possible scenario is when someone believes in you so strongly they’ll invest in what you’re doing no matter what it is. Because they believe in you.
When connecting with others, remember you’re making a friend.
Be genuine. Be yourself. Be transparent.
Share Your Story
As a start-up you should be talking and sharing your story. Don’t be the obnoxious person who never stops rambling on forever about how great they are and how their idea is the next big thing. But don’t be ashamed to share what you’re doing either. Admittedly it can be a fine line. The point is you want others to be aware of what you’re doing. You want to communicate effectively. This means both talking and listening. Find out what the interests are of others, and when they ask, share yours as well. Don’t be afraid to ask for help. Listen to their advice and their opinion on your ideas. Thoughtfully consider what they say and improve your start-up’s goals.
Remember, you’ll never find people interested in investing in your start-up if they don’t know anything about it. You should refine your “pitch” so it’s clear, concise, and catchy. Don’t be overly wordy and don’t label yourself as Google for XYZ. You should be prepared to share your idea in a single sentence AND in a short paragraph. There will be times when you may sense that someone is semi-interested but time is limited at the moment. Don’t try to cram too much information down their throat. Instead, give them a short tidbit and wait for a better time.
You’ll never find people interested in investing in your start-up if they don’t know anything about it.
As you find yourself making friends and connecting with others you’ll find those individuals who are genuinely interested in your idea and what you want to accomplish. Remember, you’ll never reach this point if you don’t make friends and share your story. Talk with these new friends and be open about the position you’re in and what your needs are.
Be smart and share your true start-up needs. If you need money, explain the reasons why you need funds. What is it that requires money and why would an outside individual, or investor, be the best solution? If you need help with getting the work done tell them. This comes back to an earlier point I made. Be genuine and be transparent. If you’re trying to hide the reason why you’re looking for help from others you’ll look shady. (More accurately – you are shady).
Along the way you may hear from people ways in which they can help. You’ll find advice comes easy and everyone has an opinion. Be polite and considerate and take everything you can. Filter the advice and apply it to your start-up. If someone mentions they are interested in becoming more a part of your business (because they believe in the idea, or because they believe in you) then you’ve already laid the groundwork and it’s clear what you need. Don’t push the issue. Allow the conversation to unfold and and mature. Be patient.
When seeking funding for your start-up it’s important to be patient.
I will pause here and continue in the next article with what you can expect after you’ve discussed things casually. (See, I’m helping with your patience already!) We’ll look at getting serious, respecting the process, planning for delays, and more. If you’re interested in this set of posts please feel free to tweet me. I’m certainly interested in feedback and thoughts. If you have suggestions for ways I can improve, or questions on how particular things happened, don’t hesitate to ask.
Remember, we’re all in this together!