Top 12 List of Advice to Entrepreneurs that are Raising Money
1. Get introduced through an entrepreneur or attorney to a VC they have worked with in the past. A good law firm can be very valuable for investor introductions if you can convince them your business would be a good investment.
2. Talk to multiple firms at once. Create a competitive process and seek multiple term sheets if you are able.
3. Read up on term sheets and have a good understanding of them before you start talking to investors. The key terms are pre-money valuation, liquidation preference, participation, share revesting, dividends, board size and protective provisions.
4. Be upfront about the general terms you are seeking to save yourself and the investor time.
5. Know that the pre-money valuation is only one of the most important terms.
6. Get involved with organizations in your community that can connect you to other entrepreneurs who have done it before and then have lunch with those entrepreneurs.
7. Realize that it will probably take at least 9 months to raise money from start to finish your first time doing it.
8. Realize that until you have at least $1 million in annual revenue it may be difficult to get most VCs interested.
9. Know that it may take 6 months of sustained product and revenue progress after your first meeting before a VC will consider your deal seriously.
10. Know how much money you are trying to raise before you begin discussions.
11. Know that it may be easier to seek angel funding or debt funding instead of venture capital early on.
12. Know that once you sign a term sheet it will be at least 30 days and up to 90 days before you actually close on the funds.
Courtesy of Ryan Allis. Follow the journey of entrepreneur Ryan Allis as he builds his company iContact into the worldwide leader in on-demand software for online communications, publishes his book Zero to One Million, travels the country as a speaker on entrepreneurship, explores the worlds of public policy, technology, marketing, management, leadership, venture capital, and organizational behavior, and lives a passionate life as a North Carolina entrepreneur and CEO.
The Sacramento Executive