Raising Capital: Some Things Not to Do

I met with one of my favorite venture capitalists this week for about a half hour just to catch up. I made the mistake of not really having an agenda, so it was a bit all over the place, and there was that moment when you know it’s time to wrap it up and move on.

Two things I asked about were his views on third parties raising money for startups–when you hire someone to raise capital for you–and angel conferences, incubator boot camps, and venture financing conferences.

As I’ve suspected for a long time, he and a lot of VCs don’t think very highly of companies that use agents or brokers. It says to them you don’t have the drive, ambition, and curiosity to find and pitch VC yourself. And that likely means you don’t have the drive, ambition, and curiosity to push you company the way it needs to be pushed to get from seed stage to exit.

What he’s saying is something I’ve believed for a long time: tenacity is more important than opportunity, differentiation, intellect, or innovation.

The USPTO is littered with patents that represent the broken dreams of tens of thousands of inventors who lack the drive or ambition to figure out how to get from invention to market share. So is the Apple App Store. And the Microsoft ISV program. And Techcrunch.

I’ve had varying degrees of success, but I’ve always been tenacious, and while I look at CircleDog as a failure (though recoverable), tenacity–not invention or intellect–has served me best.

He made a great point–he’s very accessible. Most VC firms are. While they are in the business of saying no, they want the chance to make the judgment.

Passed on Skype? No problem, it happens. Refused to meet with Skype? That’s the greater sin. If you fund 10 to 20 deals a year, you’re likely turning down about 200. There are about 250 work days a year, which means you have about 1200 opportunities to schedule a meeting with each VC.

I’ve had a number of companies approach me about raising money. One didn’t want to build out their product without funding in place. I already knew my friend’s response, but I wanted to see his reaction, so I mentioned the general category to him and the fact that they didn’t want to build before funding. He just shook his head.

You gotta have skin in the game. If you haven’t invested in your vision, why should VCs? If you haven’t convinced friends and family to invest, why should VCs? If you haven’t built the application and won over a few customers, why should…you get the idea.

When I start something, I’m all in, perhaps by nature. It’s hard for me to believe in something and only go half way. I can’t really raise money for someone else’s dream if I don’t believe in it too–and in them.

But I can and will coach them. I won’t write your business plan, but I’ll help shape it. Most investors won’t read most or even any of your plan, but it’s important for you to go through the process of writing the plan because it forces you to envision how you’ll build the business. And you might learn something and change your tactics or strategy–which is absolutely fine.

Investors want to invest in smart, ambitious, tenacious entrepreneurs who can recover from failure, learn from their mistakes, refine their approach, and take another crack at it. One of the ways you can show that is by picking up the phone and trying for an appointment.

Send an email. Connect through LinkedIn. Attend conferences where they’ll be and introduce yourself. Find someone who knows them.

Just be your cool, kind, ambitions, tenacious self and you’ll get the meeting.

3 responses to “Raising Capital: Some Things Not to Do”

  1. charles-i am very appreciative of your help in all areas w/ the biz but especially lately the site. it is very cool to work with somebody who gets it from top-line strategy all the way down to code optimization. as our exposure and volume grow in an already crowded category, being able to articulate our market position quickly and fully becomes more critical the further we go.as a business owner who hasn't brushed up on his html since 1994, and who is confronted daily with sales pitches for submittal and SEO products that will elevate the company's profile on line, i appreciate the approach you are taking of optimizing what's already there first. not only does it improve the ROI of our current overhead, it forces us to bring the message into focus.you still turn your guitar up too loud, though.-t

  2. Thanks Theo, it's a pleasure working on it. (disclaimer: Theo's a friend)

  3. Mr. Crystal-My coworkers and I truly enjoyed reading your post in regards to the things not to do when raising capital. We, like many, are trying to start a small business that will serve many SME's throughout South Central Pennsylvania with equity funding however it has been very difficult to find foundations and private/public organizations to help. We'd love to get in contact with you and send you our 5-page concept paper and seek your advice and recommendations in order to make this project work.Thank you for your time and we hope to be hearing from you soon.Best,Claire Meyers(email deleted)

Leave a reply to Anonymous Cancel reply