Despite its shortcomings, 2021 will be remembered as a year that brought unprecedented numbers of new small businesses to the U.S. economy. Fundraising, whether from friends and family or venture capitalists, is an integral part of starting up a new venture.
So as part of a Best Advice series running throughout November, our staff selected the best fundraising advice we’ve heard in interviews and from our Entrepreneur contributors over the past 10-plus months. Read on for these founders’ valuable insights on fundraising.
Be open about your shortcomings
“Even if you have a fantastic-looking deck and great numbers, and you’re the best of the best on paper, the investors know it’s not all perfect. I’ve been on calls where founders are honest about their disadvantages and some of the qualities they’re lacking, and it’s almost like they’re doing the investors’ homework for them. It builds an initial trust. That’s important in every type of relationship, personally and professionally.” — Maria Sharapova, tennis champion, founder and investor, from “Maria Sharapova’s Winning Secret: ‘I Hired People I Could Lose With'”
Plan for the best- and worst-case scenarios
“Being a realist will win you a lot of friends as you work your way through any community of investors. By offering a complete spectrum of possible post-investment outcomes, you allow your VCs to assess the risks and rewards for themselves.” — Peter Daisyme, co-founder of Hostt, from “10 Dos and Don’ts When Raising Capital for a Fast-Growing New Business”
Be brutally honest
When John Berkowitz needed to raise funds to acquire a company in the middle of the pandemic, he had to learn to be upfront with potential investors from the start. It took 150 failed pitches, but he finally found the right partner. “It wasn’t much of a pitch. I was like, ‘It’s a crazy situation. It’s an incredible value. I don’t have any premium investors. I don’t have great options.’ Which meant he smelled value.” — John Berkowitz, founder of OJO Labs, from This Founder Raised $68.1 Million Last Year, But Only After Admitting to Investors: ‘It’s a Crazy Situation… I Don’t Have Great Options’
“Always start with your own network and see if you can get a warm intro. If you’ve tapped your personal network, I found success targeting channels where we had a commonality, whether that is an interest in plant-based/ wellness, or the university I attended. Any type of connection helps.” — Kailey Donewald, founder of Sacred Serve, from “This Food Entrepreneur’s Advice to Dreamers: ‘Don’t Wait for Perfection, Launch Now!'”
Only do it if you really need to
“When it comes to raising money, my first piece of advice is don’t. Not unless you really need to! Obviously, for high-growth companies, it’s difficult to scale without outside funding, but if you can bootstrap, do so for as long as possible. If someone is looking for outside capital, I advise founders to thoroughly vet their potential angel investors/ venture firms almost as if they were to be a partner. Not all investors are the same. When it comes to choosing someone who will sit on your cap table, avoid the pitfalls and heartache by ensuring they are a good fit for you and your company. Look for investors familiar with your industry, or those who have relevant experience. Financial capital is one thing, but financial and intellectual capital will help you outpace your competition. You can find most of these individuals or investors with a simple Pitchbook or Crunchbase search.” — Steven Werner, co-founder of Lawn Buddy and Blyss, from “Being an Entrepreneur Is All About Punching Today in the Face, Says This Co-Founder”
Build your business so you can say no
“In the early phases, you take what you can. I built as sustainable of a business as I could so that we could say no [to funding] if necessary.” — Denise Woodard, founder and CEO of Partake, from “Her Daughter’s Food Allergies Made Finding Healthy Snacks Impossible, So This Mother Quit Her Corporate Job to Change That”
Don’t be afraid to pressure investors
“Realize there’s one of your startup and thousands of investors, and that good deals are very hard to come by. Regardless of how investors make you feel, they’re dying to get into good deals, and can’t afford to miss out on a deal that could have a significant outcome. When considering your startup’s success, you need to think about your organization’s goals and longevity, as well as all the employees who are giving their time to follow your dream. There is no shame in pressuring investors to make a decision, but you need to strike that balance by being assertive and being professional. Also, investors are more global than ever before, it’s easy (and cheap!) to find investors in different regions not bound by geography.” — Andrew Reiner, CEO and co-founder of Grapevine AI, from “5 Fundraising Rules That Led to My Company Having a 10x Oversubscribed Pre-Seed Round”