Fundraising Tips for Entrepreneurs
YoungEntrepreneur.com featured an article by Irving Fain on lessons he learned on raising funds for his start-up, CrowdTwist. Fain says you have to develop a relationship with people you want to work with. Begin building relationships well before you ask them to join you in your business venture. Raise funds only when you are ready. Do not be pressured by anyone. Be ready to answer questions on why you are raising funds, how much you need, where to use the funds, etc. Make sure your business partners are aware of your fundraising activities. Their cooperation and support of your efforts will be a big help.
- Time is not your friend.
Fundraising is in many respects a full time job and the inertia of your company won’t take a vacation. Your customers, users, employees and everyone else involved will continue to require your attention even though you’re in the midst of a draining and consuming fundraising process. So the shorter this process takes the better. Moving fast and efficiently can also help stave off second thoughts among investors.
- Know who you want to work with…
Long before you’re ready to raise your round, think about the funds and people that you’d eventually like to work with. Begin to build relationships with these people and funds well before you need to ask them to participate. When it comes time to formally begin fundraising, the conversations will be much smoother and simpler since a previous relationship exists.
- …Then, check them out.
As our world becomes increasingly connected and more intimate, there is more communication among founders than ever before. This is a good thing. Ask other founders if they’ve had experience with certain funds or partners. How did they behave as an investor in the good times and even more importantly, in the difficult times?
- Stay in the driver’s seat.
Don’t start fundraising until you are ready. No matter who comes knocking or expresses interest, the process should be on your terms and when you’re ready.
- Coordination is critical.
It’s vital to have answers to simple questions like how much you’re raising, why you’re raising it, how you plan to use capital, other players in the market, etc. Once the process moves forward into deeper diligence, you must make sure your business’ other stakeholders are aware of your fundraising effort. From customer calls and potential customer calls to tapping internal resources, you’ll need their cooperation to get things done.
- The flow of information is absolute.
For better or for worse, you need to assume that once your deal is on the market, everyone knows about it …
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