Raising Venture Capital Funds for an Early Stage Startup
My startup is currently in the stage of raising more capital. In the past, we raised $25,000, received a few hours of pro bono legal advice, and were given an office space from a middle market VC for a 5% stake in our company. This was a great deal. Especially since we got the funds with a short pitch with a PowerPoint riddled with mistakes. Now we want to raise more capital. $125,000 more to be exact.
I spent the last two days writing a business plan (tip: start earlier). After putting the final touches on the document, we plan on submitting it with the email version of our pitch at 9:30am today morning. The VC is one that we are currently familiar with and can invest half of the capital needed.
The investment works to our advantage since I have learned it is in any company’s best interest to raise small amounts of capital from as many sources as possible. This strategy allows us, the co-founders, to utilize our diverse backer’s resources with little accountability to each one. The flexibility is important especially at exiting time. Additionally, I have learned that if your idea follows a current trend (e.g. mobile applications and sustainability) it is easier to raise money. Put another way, have a large market size.
That being said, I also think there maybe a bubble as far as startup valuations go (e.g. GroupOn, Facebook and LinkedIn). This trend makes it easier for companies like mine to raise funds. However, who cares, the issue of a bubble isn’t important to the VC or the founders. They will regardless invest and seek investment.
From my interaction with VC’s so far, I have notice they look for revenue/profit, good teams (i.e. talent, experience, ect.), a large market size, and a product that fulfills a “need” not a “want”. These items, in order of importance, have been priorities throughout our pitch materials. For more information on our pitch check out our financial model.
I hope the capital raising process goes along smoothly. I am looking forward to posting more pitch updates in the future.