Fundraising · Equity

What do you wish you knew before raising money?

Anonymous

September 11th, 2014

I’m about to start my own startup and, as we all know, the startup life is a roller coaster. But, now that I am willing to jump on it, what are the things I should know before starting my startup and/or the things you wished to know before?
As a founder, you’re always in fundraising mode (whether active or passive). In this course, we’ll teach you how to successfully raise follow-on capital, establish a valuation for your company, build an investor pipeline for your next round, and more...

Corey Blaser Sailor. Mormon. Entrepreneur.

September 11th, 2014

My word of advice is to remember that no one is going to steal your idea. No one cares enough at the early, pre-pivot, pre-big-money stage to care. It is not until you are making real money that people see illportunity (Dishonest opportunity. Yeah, I just coined it.) But by then you will know for sure that you have actual secret sauce you will want to protect.

Understanding and trusting that opens the way for you to blow your own horn and talk through your business hundreds of times with different people and refine your product/service idea. You don't have to worry about giving too many details away. You will not even know what is important and what's not, but questions and comments from other entrepreneurs and even investors will help you find it. Being open to discussion also gets people excited about your project and the confidence you bring.

Jessica Alter Entrepreneur & Advisor

September 12th, 2014

Here are the three things I tell everyone about raising money that seemed obvious but I've learnt are not if it's your first time raising: 
*1. Urgency matters *- Do not do it slowly. Get all the meetings you want in a short period of time so you can have a lot of leads and have people feel like there is urgency to get in on your deal. 
*2. It's a full-time job* - plan to have fundraising be your full-time job. It's time-consuming and you should prepare for that. You can not do it well part-time. 
*3. It's about social proof *- unless you're @ev (or the like) it's all about social proof. You need to have people say yes for others to say yes and then that helps you with #1. So, find a few angels or friendlies to say yes first even if it's a small amount of money. 
*4. Iterate *- treat your pitch like a product. If you hear the same reaction over and over, change it. No chance it's perfect the first time around.

Jonathon Shaevitz Founder and CEO, Shoulder Tap Advisors

September 11th, 2014

The most important thing I wish I had known was that the terms of a offer are often more important than the valuation.  Negative covenants, Payments In Kind (PIK), liquidation preferences, shareholder rights, all of these tend to much more impactful than a slightly better valuation.  

Second, that VCs are a business.  I know it is obvious, but that reality drives them to make decisions and recommendations that are in the best interest of their business, not necessarily your business,

Phil Strazzulla

September 12th, 2014

You'll get a lot of advice from investors who are impressive, but that doesn't mean it's good advice...they are only looking at your company for a few minutes.  It's your job to parse what they say.

Ilya Zatulovskiy Engineer and Entrepreneur

September 12th, 2014

Corey gave perfect advice!

Joanne, it's time to get a lawyer that understands start-ups and the ecosystem. Otherwise this lawyer will steer you down wrong directions with many other more complicated considerations.

Mike Moyer

September 12th, 2014

When I was first starting out I didn't have much cash and I needed a lot of help. I wish I would have used a dynamic equity split with my employees and I wish I never joined a startup that didn't use one. A dynamic equity split will ensure that everyone has the equity they deserve. No more and no less.

Here is a link to an article I wrote no the topic for Founder Dating: http://founderdating.com/formula-for-the-perfect-cofounder-equity-split/

-Mike

Erik Moon Co-founder at Hinted / Co-founder at MakerPair.com / Stanford GSB Sloan Fellow

September 12th, 2014

Joanne-

I generally agree with Corey - if you can't talk about your idea openly, you're only hurting your chances.

That said, if you have tangible protectable intellectual property, you need to take some protective measures and simply asking people to sign an NDA is probably not the best choice. Yes, signing an NDA does protect the "disclosure status" of your invention - as long as you ask recipients of your IP to sign an NDA, you have not disclosed your invention to the public, thus ensuring that your IP is still patentable.

However, keep in mind the NDA does not protect you from theft of the IP...

You really should talk to an IP attorney about filing a provisional patent (or just file your utility patent application). Once you do that, your filing date is established and you can talk freely about your idea for a year, prior to filing your utility patent application.

If your IP is not patentable and your business concept only has a time-to-market-based advantage, I think Corey's advice is more pertinent. The winner will be who can execute faster and with a product / service that customers find more attractive. So asking everyone to sign an NDA only hurts your ability to reach potential partners and customers.

I'm not an attorney, but recently filed my first utility patent (see my blog post about this process: http://wp.me/p4V9X1-3E) - so this topic is fresh in my mind.

Andrew Lasota

September 12th, 2014

I'm very much with Corey on this one - he is right in my mind - talk, share and learn from discussions with people. No-one is realistically going to steal anything from you. Corporations have much more important things to worry about than stealing any idea that 'may' work out. 

My suggestion, biggest lesson, get on and actually do stuff! If you don't you will never be able to learn and refine! 

Don't worry if it is wrong or not perfect. Just get on. 

Good luck!

Nate T-bird Proposal Coordinator at Esri

September 28th, 2014

Having worked with several investors while in B-School, I'd say this:

Communicate clearly what the money will be used for.  Don't just pick an amount you think you need, particularly in early rounds.  Be really ready to justify the costs in the 2nd meeting with them.

Similarly, think like an investor and layout some milestones for your next round of funding.  How will you measure the output of what they invest over the next 3-6-9-12 months?  Investors will work with you on this, obviously, but coming at it proactively means that you recognize that this is RISK in the form of investment for them.  

Joanne Frederick Healthy people. Effective healthcare.

September 12th, 2014

Thanks, Corey for your advice about nobody wanting to steal the idea. Intuitively, I believe that to be true. And, I also have my attorney telling me I need to get NDAs from anyone I talk to because otherwise it becomes public domain. 

Thoughts anyone?