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The biggest challenge for entrepreneurs with great ideas is getting their startups off the ground.
"If you can't execute, you don't have a company," Laura Sachar, general partner and founder of StarVest Partners, says on a panel at Business Insider's Startup 2012 conference. "A lot of people have ideas."
With so much competition in the market and numerous routes to explore at the beginning stages, every fundraising choice you make will have long-term consequences.
To help entrepreneurs make their startup idea a reality, we've interviewed a bunch of entrepreneurs and investors about the best ways to fundraise.
Entrepreneur A.J. Steigman says you to need to be able to defend your company because investors are 'going to attack all of your assumptions'
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The sneakerhead streetwear startup Soletron is currently in its seed round and co-founder Steigman says they're not "twiddling their thumbs waiting on investors."
We caught up with the former banker who shared with us some tips that he's using right now for his own round:
1. Make a list of all potential investors.
Steigman says that for your seed round, you should look to friends, family and Angels. For your Series A round, you need to brainstorm any VCs and super Angels.
"First, you need to get on the radar of anyone who's an Angel investor in your industry."
And Steigman says you need to "court" them because "very rarely does an Angel or a VC reach out to you."
It's up to you to engage their interest immediately, or you'll lose them.
2. Figure out what investors are going to attack you on.
"Every entity has weaknesses and you have to be able to say ‘Hey, we’re weak in these three areas' because investors are always looking for a way not to invest."
"Some companies have a lot of traffic and not a lot of revenue. Some companies have a lot of revenue and not a lot of traffic and you have to be honest with these investors."
3. It's all about momentum and snowballing.
"The first dollar is always tougher than the last dollar. It's important to have a prominent lead because that’ll snowball everything else."
But Steigman says entrepreneurs need to be apprehensive when raising money, because it may also "take the focus away from your business."
"You always need to have a bird's eye view. The more capital you raise, the more diluted your investment becomes. You need to know where the capital's going."
Founder Scott Hintz says the pitch is the most important part, but don't over-complicate it
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If you can't convey what your business is about, no one will pay attention to it, says Hintz, cofounder of travel organizer Tripit.
Specifically, you have to explain the product and experience well, along with why people are going to fall in love with it.
"You want to paint a picture in your investor's mind of this new company having Apple fanboys," says Hintz. "It fixes a lot of those other problems. You have to, of course, have some models of what the business could be worth. You have to have it, but I wouldn't over-think it."
It's important not to over-complicate things. Presentations have to be informative, but simple and exciting too.
"You kind of really have to dumb things down for VCs, so point to analogies — similar business that were really successful, to take away as much risk from the idea as possible," says Hintz.
It will be much harder for a first-time entrepreneur with no track record, because VCs will see that as more risky. There has to be some way to reduce the risk that the VCs are taking if you want them to buy into your idea.
One way you can do that is through your team. Going out and finding a partner that has had success can be helpful, explains Hintz.
Hintz is a staunch supporter of the strategy to take the money whenever the offer is there — forget about the valuation. He has seen people decline a term sheet and then waste months trying to find another offer. It often turns into just a big waste of time, and your time is valuable.
"You need the money," says Hintz. "I personally spent far more time than I liked on the fundraising process. I want to minimize that as much as possible. Don't be stupid, but if someone's offering you money, I'd be pretty inclined to take it.
"If the money was more expensive than you thought it should be, you just have to be smarter with the money that you have. That scrappiness is kind of a good thing."
Founder Alexis Tryon was surprised that raising capital is a full-time job on its own, and warns others to not accept every meeting offered
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Tryon, founder and CEO of art rental service Artsicle, spoke on a panel about fundraising at Business Insider's Startup 2012 conference:
"It took us a couple months [to raise capital] and I thought I could be working on the product and bringing in customers, but really I needed to be fundraising full-time," she says.
At the time, Artsicle was just a team of two. They both kept going to every meeting until they realized that they had to split up and start delegating more of their responsibilities to interns and others.
As a first-time entrepreneur, it was very tempting to take every meeting that was offered to her.
"I met with really late-stage funds. I met with some private equity funds. I met with all sorts of people who we were never going to raise funding from," says Tryon. "About halfway through that I got really strict and I only took meetings with people who I was very confident there was a chance I would take money from."
Tryon says that getting the very first person to commit and write that first check is particularly hard. Still, in today's market, there's more money to be found than ever.
"I think it is an entrepreneur's market. You can get in front of people who maybe you couldn't have otherwise gotten in front of," she says. "But you've still got to have something to say and you have to be passionate about what you're working on."
See the rest of the story at Business Insider
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Image may be NSFW.
Clik here to view.
Image may be NSFW.
Clik here to view.
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