Look how far you’ve come. Despite the ups and downs, twists and turns of the entrepreneurial journey, you’ve developed your innovation, raised initial funding and put your product/service on the market. Now, you’re seeking a second round of investment.
Let’s be brutally honest here, shall we?
Your job as an entrepreneur is not to raise money but to run a company, said Paul Singh, an investor and founder of Results Junkies. Singh recently participated in a panel at Co+Hoots, talking about how entrepreneurs can get more funding.
The major constrain on entrepreneurs’ success is not the quality of their product or service, the intellectual property that protects it, or the lack of funding, but rather their inability to leverage their powers and gain traction.
If you want to raise capital on your own, Singh’s advice is to prepare and be ready to have 500 meetings with investors in one week. Spending more time chasing the money would be a waste of your time. Singh explained, that the opportunities investors are looking to fund are the opportunities they are chasing. Not the other way around. The more you have to chase investors, the worse the deal. If investors are not returning your emails or phone calls, ask yourself what’s wrong with how you framed your opportunity, not what’s wrong with the investors.
Lead With Traction
If you are seeking additional funding for your venture, you have traction: customers, users, pre-orders, whatever the case may be. Edward Pizzarello, angel investor and serial entrepreneur, who was also a panelist at the Co+Hoots event said that when investors meet with founders, they hear all about the product but never about the traction a startup has.
In business, traction is the sign that something is working: customers are buying your product. If it’s still a freemium, you are capturing users, etc. For investors, traction means your business is a lower risk. With traction, the chances of your venture being one of the 20 percent to make a return has increased in an investor’s eyes.
If you don’t have traction but are seeking for a new round, your funding strategy is inherently flawed and you need to seek advice ASAP.
Be Directionally Right
You have to show investors how you will shape the future and remain relevant in the years to come. Investors will partner with you for about three to four years, usually, and at the end of which, they will collect their return. Make sure your company is exploring opportunities in the future instead of exploring a trend that’s popular today.
Round Up Your Team
When starting a business, you start operating on a very lean team with a founder and a few co-founders. As you get ready to ramp up, one of the crucial elements is to round up your team to cover the key areas of business.
Investors expect financial mastery from entrepreneurs, so it’s wise to add a chief financial officer to your team. Consider outsourcing that talent in the beginning, as your level of operations might not justify a full-time CFO.
With the addition of a CFO, the founder should still understand their startup’s numbers, even if that’s not their area of expertise.
Another part of the team which is crucially shorted, according to Singh, is sales. Without a strong sales team, you can’t build enough traction to ensure the investor’s return, which is what the investor wants out of your startup.
Silicon Desert Insider is a weekly blog published every Wednesday morning on azBIGmedia.com, about the local technology industry. If you have an idea for a piece for “Silicon Desert Insider,” please email AZ BIG Media Digital Editor Jesse A. Millard at email@example.com.