L. Blake Harvey is the Founder of Lawrence Blake Group Int’l.
I regularly work with startup founders who are looking for new and creative ways to raise capital for their ventures, so I know how intimidating and challenging this aspect of starting a business can be. The truth is, with a goal to focus on, and some thoughtful planning, I think fundraising can be an exciting way to build your network, develop a wide array of partnerships, and discover wonderful ways to collaborate with other like minded entrepreneurs. To help you dive right in, here are a few tips:
Formulate a plan: Once you decide to raise money, your first step is to make a plan. It's really important that you clearly outline your goals in your business plan. Here are some wonderful resources on planning your business from Harvard Business School.
Mix and mingle: Join industry networking groups, schedule informal meetings with like minded individuals, and take advantage of social networking websites. When ready to spark discussions on investment, undoubtedly the best outreach method is the warm introduction, i.e. an introduction from a mutual friend or acquaintance. An investor is significantly more likely to give up his time to talk to you if you come vetted and approved by somebody he knows. Keep this in mind and expand your network to people other than those whom you may immediately notice avenues for collaboration.
Create an AngelList profile: AngelList is a matchmaking service for early stage investors and entrepreneurs. It is the most powerful online tool available for meeting investors. It allows you to search a huge database, filter as you please and reach out. AngelList’s popularity has grown so significantly that your startup’s AngelList profile is frequently the first place an investor or candidate will look when trying to learn about your business.
Each investor’s situation is different: Early funds don't need to come from venture capitalists. In fact, it is more likely that your first investors will be friends, family, and wealthy associates. Therefore, you must structure a deal that is appropriate to your potential investors. Create terms that include how much you want to raise, the investors’ rights, whether the deal is debt or equity, the valuation, etc.
Cold emailing: Out of all the methods of outreach, cold emails are one of the poorest uses of your time. They can work, but asking for introductions to investors is the highest ROI networking activity in which you can engage.
Practice your elevator pitch: Ask your friends and coworkers to listen to your pitch and give constructive criticism. The more you practice, the better you will be.
Don’t forget about your business: Raising capital will not only take some time, it will also take a lot of effort. Just because you’re spending a considerate amount of your time on fundraising, doesn’t mean you should ignore other important work. You still need to continue building your startup.
Understand the value in good advice: Investors see lots of deals. Many have launched successful businesses, some have even had successful exits, and they have seen lots of mistakes as well as lots of things that work. Sometimes it’s best to ask for advice before you ask for money; a good investor will let you know if they are interested.