Hey guys, I’m back with a topic a lot of rodinhooders have been showing interest in – How do I raise money from VCs/angels – How do I get capital into my company?!
So, in this video I’ll talk about RAISING MONEY! There is this line I often repeat: “Capital chases entrepreneurs. Entrepreneurs never chase capital.”
There are lots of important points to keep in mind – I have tried to share some of things that I believe in strongly and that have worked for me.
Ps: Can anyone guess how many times I said “FINALLY” 🙂
Check it out and tell me what you think in terms of content, ideas for improvement and MOST importantly topics that you want me to cover! Just add a comment and I will add it to my list!
[Highlights of the video added by Asha]
First and foremost, do you need capital in your company? If you run a services biz, you don’t need Venture Capital, you probably need a loan, a line or credit with which you can pay salaries, buy some equipment, etc. Post 3-4 months you’ll have some money you can start churning things around.
Venture/angel capital is meant for a long term investment in a business before it starts to return any yield.
“Raising money is a dialogue. Raising money is NOT a transaction.”
Understand that the people who will eventually give you money, are not dying to give you money – they are pretty conserved. So learn the skill of communication – meet them, talk to them, and keep the expectation of raising money at the back of your head.
You should be completely consumed by explaining to them what you do, why you do, how you do and why that money can completely blow up your business. Focus on telling them what can happen when the money comes, and not on “are you gonna give me the money or not”!
Dialogue is most important!
ii) CAPITAL CYCLES
Raising money and raising money after you’ve raised money (yeah, read that again!!) is a long and never ending, never really finished business! You might need to raise money over and over again! (phew!!)
Understand that capital cycles and the first money in will typically take 3-4-6-9-12 months. Therefore you not only have patience but plan your business such.
Capital takes a long time so remain vested in the process of raising money.
Instead of sending a business plan and asking for a cheque, (no one opens/downloads attachments and reads them!) send a nice email with a small para or two about your business. In this email say things like, I want to meet you, talk to you, discuss my business with you, gain wisdom from you, I think you have a few portfolio companies from whom I can learn from and I want to just be in touch with you…
VCs, angels, financiers love meeting people who are interested in meeting them with an agenda that is more business discussion than money. Be very friendly in the way you approach the providers of capital – that’s when they will respect you rather than avoid you.
People early on get fixated by dilution, equity and then the tug-of-war of who gets what begins. Be very clear about the money you want – don’t be stupid! If you need US $1 million don’t ask for 10. This is not the sabzi market where you can bargin! If the VC needs a certain %age – be open about it! No one wins in an ego war.
“Be practical about how you take money in and give equity out.”
v) REACHING OUT TO VCS:
People are not unapproachable. Write to them. Look them up on their websites. Reach out to them on linkedin rather than pouncing on them at conferences where they are going to meet many others like you. Write stuff that they can relate to. Quiet private dialogue is much better than in-the-face, “I’m God’s gift to mankind and you need to fund me” approach.
vi) BECOME A DOMAIN EXPERT
What attracts VCs is your knowledge, domain expertise and your authority on a subject. Write, blog, talk about your knowledge about your domain, share and spread it around. Whoever gives you money wants to give it to the expert on the subject. You need to become the go-to person for that domain so that the people who want to fund that domain come after you. Always remember, some people like themes!
vii) BE HUMBLE
Don’t be arrogant. There’s nothing worse than an entrepreneur who thinks no end of himself. Don’t lose self-respect. Just constantly be in conversation with investors instead of being in a begging/receiving mode and things will work out! If you are doing the right thing and doing it well, people will come running after you with money, and not the other way around :-).