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For a Fee, I will Fundraise for You
Although you spotted an opportunity and an exciting solution, fundraising is often an unknown and somewhat intimidating responsibility for first-time entrepreneurs. This makes you vulnerable to offers of “help” that are not really.
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Stock Option Grant Planning
Because the stock option pool size is a subject of fundraising negotiations, this is often the point at which the early-stage founders/CEO is first confronted with the need to develop a stock option grant plan.
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Management. Management. Management.
In startups, the fundamental principle, “management, management, management,” emphasizes that building value depends most on the skills and experience of the startup founders/leaders, with the leadership team often being more instrumental in success than other factors like the idea, the funding, and the industry.
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Dysfunctional Investors Are Real
Private high-potential startups often need to raise capital to fund the development and commercialization of their visions. Yet, too often, what causes the disappointingly large failure rate for such startups is not the technology, the market, or the need but dysfunctional investor behavior.
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The Power of Professionalism
Investors excited about funding high-potential startups are also eager to mitigate their risk by ensuring that the startup founders and leaders are experts in their domain with the professional expertise to build a high-growth company. That often unspoken reality puts a premium on startup leaders' reputations for professionalism.
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Planning Time Horizons
Especially essential when fundraising, startup leaders must be agile planners who can envision a whole array of plan options in progressive time horizons.
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The Power of Sales
Founders and startup leaders, never lose sight of the power of commercial sales (a.k.a. revenue) to solve many of your problems. There are good reasons why investors are eager to jump on board a scaling commercial startup while moving cautiously on those still pre-revenue. Let’s explore why by unpacking the magic of sales.
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Fundraising Help
Founders are excited to build their high-potential startup. Raising money to realize that dream is rarely viewed as a favorite way to spend their precious time, so a first-time founder often casts about wondering who might help them navigate the complicated, nuanced, and confusing world of fundraising.
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Hard Fundraising Market Drivers
When fundraising, it is easy for startup leaders to focus intensely on their stories and arguments for why their startup is a great investment opportunity. While a cogent case must be built and delivered, exogenous factors often play a critical role in fundraising success and failure.
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Careful What You Wish For
High-potential startups are practically defined by their ability to rapidly grow their revenue, so naturally, startup founders and CEOs feel tremendous pressure to get on the revenue train. However, be careful what you wish for!
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Talking Entrepreneurship on Invisible Ink
Listen in to this wide-ranging discussion on many things startup! Starting, team building, fundraising, financial planning, and more.
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Considering Grants
Securing grants can aid startup funding without dilution, but involves strict restrictions, extensive effort, low success rates, and potential investor concerns.
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Walking Away from Potential Investors
Fundraising entrepreneurs should sometimes walk away from potential investors. Here is a list of examples of when that was the right call.
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Due Diligence Data Rooms
A due diligence data room is an electronic repository used in startup fundraising to provide potential investors with detailed, confidential company documentation for evaluation, helping to secure investment.
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The Nature of Warm Introductions
Warm introductions are vital for fundraising, leveraging trusted networks to efficiently connect startups with investors amid a crowded market, enhancing deal screening and investment opportunities.
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Negotiating Power in Startup Fundraising
Negotiating with investors is tough for startups due to information and power imbalances.
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Know Your Numbers
Investors prioritize startups led by individuals with strong business acumen, essential for translating technical innovation into successful, scalable businesses. Demonstrated financial management skills, including understanding financial statements and core business drivers, are crucial to gaining investor trust.
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Fundraising Seasonality
Understanding market fluctuations in fundraising is crucial for startup CEOs. Recognizing patterns helps manage efforts and expectations effectively across different seasons and investor behaviors.
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Looking through the Keyhole
Investors and Board members can't fully understand a startup's intricate operations, akin to viewing through a keyhole. They should focus on crucial aspects rather than all details.
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Investing in First-time vs. Serial Entrepreneurs
First-time startup founders bring passion and unique insight, but face steep learning curves and skepticism from investors who prefer experienced CEOs for reducing investment risks.
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The Challenge of Raising Money as a Solopreneur
What is the minimum team size when raising capital for your high-potential venture? Greater than one.
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VC Intro Call Playbook
For first-time VC fundraisers, when the invitation comes for an initial intro call to learn more about the business, the questions arise. What to expect? How to approach the conversation? When to follow-up? While every situation is unique, this post lays out a playbook to help get you started in successfully navigating introductory calls with venture capitalists.
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Interpreting Fundraising Market Statistics
Fundraising startup CEOs only raise money every one to three years. In parallel, they are moving through the stages of growing their company. So it is always a challenge to gather intelligence on the fundraising market conditions.
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Cap Table Housekeeping
Good housekeeping of a corporate capitalization (cap) table is an essential demonstration of a startup leader’s competence, yet it is full of potentially painful pitfalls when moving along the learning curve.
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The Complicated Logistics of A Close
Fundraising for a startup is hard work. But you have finally reached the moment when you have a term sheet and enough commitments to close. Now, time to spin the many plates and get that fundraising round across the finish line!
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Fundraising is a Means
Fundraising for a startup takes enormous effort over a sustained period. Companies that raise rounds issue press releases after closing. One might mistakenly begin to think that fundraising is an end instead of a means to an end.
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Aligned on Success
Startup fundraising is a grueling process. By the time the deal closes, a startup leader often feels embattled and exhausted, wondering if taking on investment is possibly the worst thing ever. Yet there is light after closing.
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Understanding the Waterfall
In the most common upside scenario, when an investor-backed startup gets sold, the distribution of the sale proceeds is called the waterfall. Understanding how waterfalls work helps startup CEOs and investors grasp the implications of various fundraising terms.
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Wait to Spend Until the Money is in the Bank
When raising money or doing a big corporate deal, it pays to remember that the deal is not done until the money is in the bank.
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Section 1202 Tax Matters
Recently, I was reminded of the “downside” of a successful exit, specifically, that capital gains earned on investment in a startup are, generally speaking, subject to taxes. In other words, the IRS wants its piece of that nice big check. Wouldn’t it be nice if you could just keep it all instead?
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Milestones
While building a startup, leaders must make critical strategic decisions about what to focus on to derisk and add value. One manifestation of this planning work is determining the key milestones that must be accomplished and the resources required to take each step. Because this is so important, it is a key focus for investors who are evaluating startup investment…
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Funding Foundations
A house built on sand is unstable, indeed. A house built on a solid foundation can support itself even when the winds howl, the rain comes, and the floodwaters rise. In business, cash is the lifeblood, and the source of that cash reveals the nature of your foundation.
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CEO = Chief Salesperson
Because a successful entrepreneur ultimately must build a business that profitably sells a product to meet a sufficiently sized group of customers’ unmet needs, selling is one of the keys to success.
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A Full Suite of Fundraising Decks
Fundraising decks come in various shapes and sizes to suit multiple purposes. There is no one-size-fits-all, so it pays to have a sense of the numerous sorts to make intelligent decisions about what to create and send in various circumstances.
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Founder – Investor Alignment
To improve the chances of achieving the best outcomes, it is imperative to establish alignment between the founding team and supporting investors in high-potential startups who raise money.
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Side Hustle vs. All-in
At the beginning of forming a startup, there is a phase where there is tension between doing the startup alongside whatever is paying the bills and committing to going all-in. Let's reflect on the factors that play into this decision.
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Reputations Matter
The right investors can make a world of difference in building a high-potential startup. Wise entrepreneurs will evaluate potential investors just as carefully as investors evaluate potential investments.
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The Double-Edged Sword of Competition when Fundraising
Sophisticated potential investors always ask about a startup’s competition. A well-developed answer is essential because “no competition” is not a good answer, and “too much competition” is also challenging.
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Investor Levers of Control
Just as I was zeroing in on the closing of my first equity investment in a startup I had co-founded, my corporate attorney said, "Once this investment is closed, they can fire you." What? The investors won't own more than half of my Company. How can that be?
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Drive, Intelligence, and Integrity
One of my favorite investors and mentors said that the essential characteristics he looks for in startup founders -- drive, intelligence, and integrity -- cannot be taught. That got me thinking about why those characteristics are essential to successful startup building and how we might recognize them.
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Startup Financial Modeling: Things to Know
What are some of the different uses of startup financial forecasts, and what is the one thing we know for certain about them? Financial forecasting is an essential business planning tool. For startups, financial models are critical tools that serve many purposes and ultimately embody the financial implications of a host of strategic decisions and assumptions.
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The Essential Fundraising Question: What is Your Plan?
When introducing your startup to potential investors, there is so much to cover. Remember that the most important question to answer is what is your plan? All else is context.
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When Fundraising, the Company is the Product
Building a novel product and bringing it to the world to address customers’ unmet needs is a big job. And simultaneously, building an innovating company to enable that novel product’s success is ANOTHER big job. The two are related – even overlapping – and that sets startup leaders (you!) up for getting the two confused and mixed together.
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Feeling Nibbled
In the home stretch to close an equity financing round for an early-stage startup, it can start to feel like each refining interaction is just another hunk of flesh nipped away. The key to navigating this stage is never to take your eyes off your goals or let your emotions get the best of you.
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Fundraising in a Tough Environment
Lately, the startup headlines have focused on the tough fundraising environment. What is a startup founder to do when their startup is reliant on investor cash to advance?
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Screening for a VC Match When Startup Fundraising
Fundraising for your startup always seems high stakes and stressful, especially for first-time entrepreneurs learning the ropes and rules of the game. One key concept is to realize that potential VC investors come in many varieties, and finding the right match is critical to success.
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Wrangling a Fundraising Round
Accomplishing a fundraising round for your startup is often confusing and mysterious for new startup founders. Lately, I have been reminded that the path is not as obvious when you are venturing forth the first few times as it becomes after you have been around the track. To help, in this post, I am providing a roadmap to the significant…
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Things I Wish I Knew When I First Started Fundraising
For first-time entrepreneurs, fundraising for your startup is fraught with unexpected pitfalls. Here is a list of some of my key lessons learned over 20 years of raising over $75M for startups.
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Running the Hurdles
My father was a track and field hurdler in college. Just thinking about the challenge of trying to go fast while staying in stride to cleanly clear each hurdle in sequence reminds me of the challenges of complex, multi-party sales situations like hospital sales and venture capital fundraising.
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I Am Not Your Friend
Shortly after we closed our financing round, my investor sat across the table from me, drinking coffee, and declared, “I am not your friend.” Uh, what?
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The Risk of Idea Stealing
Inexperienced entrepreneurs often worry about sharing what they are working on with others, fearing someone will steal their idea. While there are a few circumstances one should be cautious about, generally, it is far riskier not to share.
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Startup Fundraising: Keep it Clean
When fundraising for a startup, keep your focus on your company's long-term needs by keeping your funding rounds on the straight and narrow.
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Structuring an Angel Round
If you decide to raise investor capital to fuel your startup, a common first step is raising seed funding from angel investors. Here are a few hard-earned observations and tips from my experiences raising millions in angel capital across several different startups.
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Qualifying Angel Investors
Angel investors – those who invest their own money in startups – are often an essential capital source in the earliest stages. Good angels are wise, insightful, and patient partners for early-stage founding teams. Qualifying them well is essential to setting your startup up for success.
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Helping VCs Understand Your Technology
The word to the wise in venture fundraising is do not spend too much time on the technology. While true, there is a balance to be struck in this.
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The Role of a Lead Investor
Raising money for high-potential startups is always a challenge. Finding the right lead investor is an essential step along the path.
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My Prospective VC Is Asking For Personality Tests?
“They want us to take personality tests?” My team looked appalled. “Yep,” I said, “And we might even learn something ourselves from the process!”
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Startup Fundraising is All About Trust
Some startup founders approach fundraising as a series of transactions. Think of fundraising as relationship-building -- and remember that the foundation of a good relationship is TRUST.
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Too Early. Too Late. Finding the VC Fund Timing Sweet Spot.
When raising venture capital, understand the venture fund timing sweet spot so you can align your startup’s needs with your potential investor’s needs, or at least realize when it will be hard to fit.
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Getting Baked for Fundraising
Building an investable business takes more time and effort than most people realize. Too often, I see people jumping the gun and trying to fundraise too early.
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How VCs Say “Yes”
When you are raising venture capital, a VC’s most common answer is ‘no.’ Sometimes, if you are lucky, they start to say ‘yes.’ Here is what that looks like.
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How VCs Say “No”
For a startup, raising venture capital is daunting. The numbers are not in your favor. Learning to recognize "no" gives you a chance to move on quickly to the next opportunity for a great fit.
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Maybe You Haven’t Asked Enough People Yet
The most underappreciated aspect of high potential startup fundraising is perseverance. This is the story of what it can be like for a first-time CEO to raise money.
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Picking a Lawyer for Your Startup
An expert corporate attorney is a critical asset for a high potential startup. But what factors should you consider to find the right one?
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Fundraising Differences Between Angels and VCs
Having raised $50M in angel and venture capital for my startups, I am often asked to compare and contrast the two. Let’s dive into the key differences and how both investor types can support a high potential startup.
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Should I Raise Venture Capital?
The short answer is NOT if you can help it! Having raised $50M in angel and venture capital personally, I recommend raising venture funding only as a last resort, and only if the type of business you are building absolutely demands it. Keep in mind that most startup businesses should not need venture capital and will not have the characteristics…
