Tips on Raising Money for Your Startup
A successful entrepreneur that I invested in several years ago recently posted this very succinct list of tips on how to raise money for a startup:
In as few words as possible, here are 20 ideas to help with the money-raising process:
1. Research the process. Others have done it.
2. Assuming you'll have outside investors, get legal help.
3. Sell common stock in the first round or two.
4. It is YOUR job, and it is full time.
5. Money is out there—from angels. It's your job to find it.
6. People buy you, then the passion, then the idea.
7. It takes 4 times the time and money, so allow for that.
8. Be realistic in your valuation.
9. Keep changing your pitch until you get potential investors vibrating with your passion.
10. At the end of your pitch, directly ask them to invest.
11. If someone offers help, take it. But don't stop doing the work yourself.
12. Send out a monthly newsletter after a successful raise. You might need those investors again. Plus, it's the right thing to do.
13. Plan your exit, but remember: You are building a company and creating customers, so talk like it first.
14. Investment club presentations are fun, but breakfast meetings get you the money.
15. If you don't get the check within a week, it's not coming.
16. Every potential investor will ask someone not at the meeting what they think about your idea. Can they sell it for you?
17. Some investors are not worth it. Trust your instincts.
18. Don't tell anyone the names of your investors.
19. A $25,000 minimum is better than $100k, and $1 per share is better than $5 or $10 at this point.
20. Use each round to make measurable progress, thereby ensuring more financing.
By: G. L. Hoffman
Source: U.S. News and World Report
- July 9, 2008
- Raising Capital
Jordan Muela July 21, 2008
Wow, succinct was right. This is very helpful. Could you expand on the potential implications of #18?
Wade Myers July 29, 2008
The issue is one of privacy. Angel investors would rather not be contacted by someone that "heard" that they had invested in a particular deal.
My recommendation is to profile your investors so that other investors get a sense for the type of investors you already have involved in the deal, but to leave their name off of your printed fund-raising materials.
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