We have worked with corporations, start-ups, crowd-funds; technology, entertainment, education. Through these experiences, we’ve learned hands-on and from experts how to raise significant capital to fund your venture.
First off, you must understand the investor landscape. Who is really going to be interested in your startup, and how do you approach them? Then, we’ll share two pro-tips for getting ahead: leveraging strategic investors and building an advisory board.
How do you fund your idea?
There are five key types of investors, and you’re going to want to approach
them in a very specific order.
- You: Always start with yourself! If you don’t invest your
own resources, why would anyone else?
- Friends and family: First, pitch to those who are closest to
you. It may feel awkward, but if those who love you won’t
invest in you, neither will a professional.
- Angel Investors: Angels are investors with deep pockets
who are a bit risky at times, and usually have knowledge of
your industry. You can find them on angel.co as a start.
- Strategic Investors: These are individuals who have pull in
the industry and will therefore help you raise capital from
other investors. Think: industry influencers.
- Venture Capital Firms: These are the banks. They have
nearly infinitely deep pockets, though they will also ask for
the most in return. Tread lightly in these waters.
Ultimately, if you want to scale to serious size, you’ll need help from at least
a few Venture Capital Firms or The Banks. That’s where 99% of the money
is. At the same time, less than 1% of startups are backed by VCs.
The first three stages are not all that hard. For yourself, you just write a check. For friends and family, you talk over dinner.
For angels, you perfect your pitch at networking events and in online
communities. Once you have all of the above, plus strategic investors in the
industry, the VCs will be climbing on top of each other to get a piece of
Therefore, the key to getting from your own bank account to the VCs is
your ability to bring on strategic investors. But how?
First, you must start with a target. Pick someone in your business’s industry,
who as a part of your company, either as an advisor or angel investor, would immediately increase your credibility by 10 times what it currently is. Name them. Name ten of them in fact. Then approach them carefully.
Pro-tip: Be prepared to pitch on a moment’s notice.
Pro-tip: Become friends with a strategic investor’s assistant or friends
first. This is a backdoor to meeting them.
Another trick to getting in with the VCs is to build up a powerful advisory
board. Maybe your strategic investors are unwilling to invest their own
money into your startup, or maybe the angel investors you approached just
won’t pull the trigger to risk their own capital.
If this is the case (and it often is) then you’ll want to approach the same
people again, but this time with a different pitch…
Ask them if they would like equity in your company, and in return, they get
a seat on your advisory board. This may seem like you’re giving up a lot for
a mentor, but you mustn’t think about an advisory board like this. Instead,
know that by collecting a high-powered advisory board, you are that much
more likely to get the NEXT investor down the road.
Now you’ve built a powerful coalition around your business, building its
credibility and network in the process. With these names in tow, your next
round of pitches will be significantly easier.