Raising money can be daunting for most entrepreneurs. When do you start? How do you access capital throughout the life cycle of the company? How much should you raise and how do you balance that with valuation and amount of equity you give away? How do you stay informed on the new and emerging funding sources and vehicles (such as crowd funding and SAFEs)? How do you simultaneously chase down multiple funding sources, so you drive the process rather than be driven by it? How do you keep everyone interested and updated?
Raising capital to fuel your startup business is a top priority for the CEO. And you need to do this concurrently with developing your product, marketing, selling, building your team, among many operational tasks. It’s a delicate balancing act. Drop the operational ball and focus too much on fund raising, and you won’t survive the due diligence process and competitors will eat you for lunch. Focus too much on operations and ignore fund raising means you’ll run out of the cash fuel for your business and you won’t make payroll.
Here’s Where You Start….
Bootstrap by using sweat equity, accelerate customer payments, get favorable terms from vendors and asset financing for equipment, PO or inventory. If you need to raise capital beyond this, look to friends and family first, because the next steps require a concerted effort, take significant time and major support……
Joining an accelerator programs is a very effective way to have a built in support team in place to help with your fundraising.
You can waste a lot of time chasing the wrong funding sources (where there is no fit between their investment profile and your company in terms of industry or stage of development). You need to be targeted in who you spend time with, and methodical in your approach. Cold calling investors with no warm introduction is a waste of time. Accelerators can assist you with targeting the right investors, leverage your efforts and provide warm introductions.
You need an inside track from accelerator leaders and mentors who know the right sources of capital and will make the right connections for your company.
Accelerators can help you qualify for government grant or loan programs from your state. They can help you compete for prizes sponsored by startup organizations, universities and government agencies. They can get you on the right crowd funding platforms, know the right angel networks and individual investors. When the time is right, accelerators can help you identify, successfully pitch to and navigate the due diligence process of venture investors.
And not all accelerators are created equal in terms of funding assistance. The ones that focus on helping you build strong operations and a long-term fundraising plan are the most helpful.
The accelerators that focus on helping you build the engine of your company with strong content and mentoring will allow your company to withstand the scrutiny of that first one hour meeting with a prospective investor and their lengthy due diligence process. Developing and executing a fund raising plan with a well thought out long term view, will help you drive the process and access all the different forms of capital you will need until you are cash flow positive. Investors won’t invest in you if your underlying business engine is faulty and you are “building a bridge to nowhere”.
In sum, accelerator programs can significantly increase the odds of your company being funded, improve your ability to locate the right funding sources, secure the best terms and help you create a long-term funding strategy that will finance the growth of your company throughout its entire life span.
Jennifer Gabler is the co-founder of The Refinery, an accelerator for women-led companies. The Refinery combines an intense content-rich program with one-on-one mentoring by experienced and successful entrepreneurs. Applications are now open for its third twelve week program which begins September 9th, please go towww.refineryct.com to learn more and apply.