Year-end Top 10: Early Stage Funding

Always lots of ideas from entrepreneurs, angels, vcs about how best to raise Seed & Early Stage capital.

‘Tis the season for end-of-year lists.  So, if good enough for “Top 10 NFL GameDay Hits” — surely a list is good enough to help the cause of Building Founder Value.

Having spoken to a ton of folks who raised capital during 2011 (as point of scale, @dogpatchlabs had almost 2,000 folks apply for community residency over the last year) — here’s my real-time two cents on what can repeatably work well:

  1. Articulate a Killer Opportunity & a Great Company in the Making.   Kind of obvious, but lots of teams don’t spend the time to prepare a discussion about how to take a solid shot at being really great.  Not just really interesting — really great.
  2. Be Relevant.  Why the team is a dead-on fit for what you are doing.  And what the next several team members to-be are all about.  And where you’ll get them from.
  3. Have a Crisp Plan. Even the earliest of great technology Seeds should have a tight set of choices to develop about how money will be made & scale achieved.  And what the milestones are heading into Series A.  And “What Success Looks Like” beyond that.   
  4. Keep it Simple. Current & go-forward user growth, unit economics, revenue plans should be Comfortably-Grokked.
  5. Always Be Talking. Informally getting to know potential investors when not in raise mode can only help. Be careful to not be “too cute”.  It’s about getting to know folks over coffee & exploring common ground.
  6. Create a Sense of Urgency.  Investor competition is obviously helpful to the cause.  But more important (& more sustainable in any market condition) is the value of articulating a legitimate opportunity window that needs exploitation – now.
  7. Be Prepared. Think of questions that you’d have if someone talked to you about being an angel investor in their deal.  And go from there.
  8. What, Me Worry? Talk through how you will learn, adjust & iterate.  Product, model & team.
  9. Talk to Investors Like You’d Be Partners. There’s a time for selling.  And a time for Straight Talk.  The end of the meeting — on both sides of the table — should be about Straight Talk.
  10. Do Your Work.  This is the opportunity to really check into Investors Who Would be Partners. Ask around about what value they’ve helped to create already — with those entrepreneurs with whom they’ve already partnered. How they work. How they behave (when there are bumps in the road or worse). Bill Belichick says “Do Your Job”.  The best thing you can do before weighing a Term Sheet (or multiple Term Sheets) is to Do Your Work on whom you’ll be working with for years to come.

3 thoughts on “Year-end Top 10: Early Stage Funding

  1. This is very helpful as we get ready to start selling our start-up to potential investors

  2. These are all great points. The form the basis of a great company. It has always been one added incentive that has helped obtain an invesment: GREED. I have written about this in in the past. Investors are in this to make MONEY. Their need to make money is driven by possible returns to themselves or their partners. Find a way to show them that they will make money by investing in you and your new company.

    The management team is First Class, the Business Plan shows we know what to do, The market is real and we know how to capture it, The UPSIDE on the invesment is huge.

    Having the key points as you have prepared and driving toward the greed factor will help you get the invesment you need.

  3. If a startup has already obtained all of its angel investment then what milestones should the startup satisfy before going for a Series A funding round? I have some ideas about this, but I am also curious to know what others think about this question.

    Here is a specific example of such a startup named vCider – the first company to market with a fast, secure and scalable solution for “intercloud” computing:

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