Entrepreneurs · Entrepreneur

What advice would you give to early founders looking to secure their first round of funding?

vinod kumar QA Engineer and Team Lead at Code Brew Labs

November 18th, 2016

Early founders are the ones needing the most advices and help. There are more and more teenagers with great ideas starting companies but no education and experience. Without guidance they are in most cases destined to fail. I would like to hear it from successful entrepreneurs who were in their shoes when they were young or even better from the ones who are young and already successful. What would your advices be to them? How will they secure the first round of funding?
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John Read

November 19th, 2016

It probably depends a lot on what you want to get out. Here is a well known startup founder speaking to that topic:

https://www.youtube.com/watch?v=MlhAkNWC1qo

Martin Omansky Independent Venture Capital & Private Equity Professional

November 19th, 2016

Yours is a constant concern. There is no single answer. I have been addressing this topic as an entrepreneur, fund manager, and teacher for many years. Here is my summary advice: (1) prepare yourself by cold-blooded analysis of the technical and marketing realities; (2) appreciate the financial and psychic risks involved; (3) plan carefully, including writing cogently and concisely; (4) get professional help; (5) use your own money and forms of non-dilutive financing first; (6) advance your idea to the point where actual cash sales take place; (7) try to raise money from strangers only after you prove the market (otherwise, their $ will demand a lot more equity); (8) have enough money in reserve to sustain your life for two years; (9) do analysis of the business constantly, and experiment with different approaches; (10) understand that most businesses do not meet their founders' goals; (11) know when to hold 'em, know when to fold 'em. Sent from my iPhone

Henry Daas Coach-Approach Strategic Advisor

November 18th, 2016

When I started my first business 25 years ago, my partner's dad parked a T-bill at a bank who then gave us a secure line of credit. Had we defaulted, bye-bye T-bill. We didn't and after a couple years in business, we were able to retire that line and replace it with one of our own. He charged us nothing - call it a friends and family round.

Only certain folks will give you money on your good looks - most share DNA. Based on my experience, the debt markets are an easier nut to crack than equity and they're not easy. But as a rule, I have always exhausted all debt options before considering equity. Hope this helps!

 

Rob G

November 18th, 2016

Do what you know. I prefer selling to companies over consumers because that's what i know. Just because you are a consumer doesn't mean you are a b2c expert. If you don't know much, and you don't until you get some real-world experience, then get some experience on someone else's dime, i.e. get a job in an industry that interests you.

If you are technical get some sales experience. If you know how to sell get some technical experience. A MVC (min. viable company) is sales and product so be sure you have those skills IN HOUSE before you start.

When you are ready to start your own company then build something people want before you think about raising a "first round of funding". How do you know people want what you plan to build (notice i said "plan to build" NOT "what you have already built")? Go talk to prospects. Get off the couch, put down the iPhone, turn off Facebook and go sell it. Look people in the eyes, understand their needs, confirm that you really understand their needs and get commitments. Then confirm their needs again. People signing checks and contracts is a very good sign, but very hard to achieve if you are young and have no experience or track record. Also remember, if you take their money you have to DELIVER. It's not a good idea to take customers' money unless you know you can deliver. Companies committing resources to your project is a good sign that they want what you are planning to build. Signed contracts to pay when you deliver is a good sign. Words of encouragement, smiles, nodding heads, pats on the back are all nice to have, but don't settle for less than real customer commitments. Confirm needs again. Build a MVP then confirm needs again. Go sell it for real money. Confirm needs, sell some more, build some more. Then go raise money if that's the best way to meet/exceed your goals (usually to scale what you have already proven the market wants). Raising money when you don't need it is much easier than when you are desperate.


Martin Omansky Independent Venture Capital & Private Equity Professional

November 18th, 2016

Too much to say here. Best quick advice is to find, hire, and listen to a very experienced mentor. Contact me at crucibleadvisorsatgmaildotcom for long-winded advice about start-ups and early-stage financing. Sent from my iPhone

Stan Podolski CEO at Nimble Aircraft.

November 19th, 2016

You know the mantra of RE? Same here, the only 3 things matter: traction, traction and traction

Renee Zau Founder of DonationMatch and SamplingforGood, Cause Marketing Guru, Startup Mentor, Fundraising Event Consultant

November 28th, 2016

Unless you are in an industry that is very capital-intensive (in which case your connections, reputation, and expertise will drive your ability to fundraise), my advice is to create a business that a) solves an acute, time-sensitive pain, b) as a result of being paid to solve that pain can sustain yourself, and c) automate what you can (which may be based on your customers' needs) to make it easily scalable. 

Focusing on self-sustainability instead of relying on funding to determine whether the company lives or dies can save many months of early/premature fundraising effort that would have distracted from creating traction and income, i.e. proof of concept. By the time you fundraise to scale, you will be much farther ahead, less risky to investors, and less desperate, giving you time to find the right investing partners. 



Martin Omansky Independent Venture Capital & Private Equity Professional

November 28th, 2016

Well put, Rene! Our angel group looks for all the usual fundamentals, but in general, usually invests in projects that have a fully-developed product and some "traction" ( translation: revenue from sales to careful customers). We see a lot of projects that lack these criteria. We have looked at them and take seriously only those that address very large markets and demonstrate significant improvements over the current state-of-the-art.4 Sent from my iPhone