Raising Capital: 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, 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 your startup 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 App Store, Github, and Product Hunt.

He’s very accessible; most seed and early stage VCs are out of necessity for a simple reason: deal flow. Later stage investors enjoy the fruits of the seed stage filter; if a startup is posting successes, it’s worth considering for a later-stage investment. If not, well, thank you for the data, and “we’re going to sit this one out and cheer from the sidelines.”

Passed on Uber? No problem, it happens. Refused to meet with them? The ultimate sin.

I’ve had a number of companies approach me about raising money for them, as opposed to with them as a team member; some even 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. Show some commitment, show some results, show some drive.

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

Investors want to invest in smart, ambitious, and most importantly, tenacious entrepreneurs who can endure and recover from adversity, learn from their mistakes, refine their approach, and take another swing 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. Engage on Twitter. Know where they’ll be and introduce yourself (stalk without seeming like a stalker. Find someone who knows them.

Just be your energetic, kind, ambitious, tenacious self and you’ll likely get the meeting. And then comes the next stage: the waiting.

1 Comment

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