10 Steps to Angel and VC Funding in Uncertain Times
Naturally, when there is a lot of uncertainty about the economy, some investors hold more capital in reserve and others focus on less risky investments. So less cash is available for risky investing like angel investments and VC funding. That explains why it’s been more difficult for emerging growth companies to raise capital this year. So as an entrepreneur, how do you take advantage of this situation?
First, some quotes from J. Paul Getty, billionaire industrialist named in 1957 by Fortune Mag magazine as the “richest living American,” confirming what you already suspected:
“The man who comes up with a means for doing or producing almost anything better, faster or more economically has his future and his fortune at his fingertips.”
“The one guideline to success is you must be in business for yourself. When you work for someone else, you sell your time at wholesale to your employer, who then re-sells it at retail to the customer.”
“Without the element of uncertainty, the bringing off of even, the greatest business triumph would be dull, routine, and eminently unsatisfying.”
“A man may fail many times, but he isn’t a failure until he begins to blame somebody else.”
And for investors:
“My father said, ”You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.”
“I buy when other people are selling.”
And my favorite: “Money is like manure. You have to spread it around or it smells.”
What you may not know is that angel investors like myself and Getty are incurable romantics about innovation and technology. * When presented with a truly compelling innovation, it’s hard to resist. Sometimes, we go through all the rigors of due diligence just to convince ourselves that it’s OK to do what we already want to do, and be a part of your venture.
So when economic uncertainty is the zeitgeist, understand that some investors like myself are more inclined to invest, knowing we may be getting a better deal than at other times.
- Right motivation: In creating a business, make sure you’re motivated by passion for your business or the desire to make a difference in the world (as well as the desire for wealth), and NOT just because you need a job. If you just need a job, get over your reluctance to work for others and then … get a job.
- Right support: Make sure your immediate family (and spouse in particular) is supportive of your business efforts, including the time it will take. As for other family members, don’t let them discourage you. If you have any friends left, seek their support and counsel.
- Right team: Reduce perceived risk by creating a powerful and balanced executive team, advisory board and board of directors. Figure out your strengths and weaknesses as a leader and fill in the gaps with others. I’ve written a great deal about this in the past and will write more in the future.
- Right alliances: Establish industry alliances that will give your business credibility and help you bring your product or service to the market quickly.
- Right market validation: By actually delivering products or services to clients, if possible, demonstrate that there really is a market for your product or service, at the price level you have to charge.
- Right investors: Figure out exactly who are the ideal investors for your venture at its current stage (friends/family, casual investors, organized angels, private lenders, or different kinds of venture capital firms). You have a lot of options.
- Right communication: Learn how investors think and how to speak their language; create presentations of various lengths that speak to them;
- Right structure: Determine the right business structure and offering, given the ideal investor for your business.
- Right score: Ask some trusted investors to rate you as an investment using their standard scorecard, and study the details of how they rated you in each category; then make the changes that will raise your score sufficiently.
- Right roadmap: With help from advisors, create a roadmap, in the right sequence, to accomplish these steps.
Shameless plug: Through Intelliversity, ”the leadership academy for entrepreneurs – led by investors,” I can help you with each of these steps. I am strongest on #1, #4, #5 #7 and #8. You can also get help from other organizations like Connect’s Springboard and Commnexus’ NextStage.
P.S. In addition to being an incurable romantic about innovation, I’m a rational believer in innovation. I believe the worldwide economy is driven by innovation. Lots of new exciting products and services will instantly cure the economic malaise. There are many statistics to support this. Remember this: Innovation drives consumption. What drives consumers to buy more than necessities is not the desire to consume more, it’s the desire to consume better. We want our lives to be ever more healthy, fun, rewarding, meaningful, exciting, or interesting, not just fill our bellies. Innovators like you serve the world by making it better in these ways.