You might be creating a new SaaS product that uses AI to analyze marketing data, or a social networking hub to foster teamwork in the workplace, or maybe a new way for medical scientists to share research data—whatever your project, every startup begins with a need for money. And the big question every founder faces is where and how to get it. Some founders are fortunate enough to supply the initial funding themselves, but many need to look elsewhere. Navigating the process of seeking funding can be confusing and intimidating, but when you listen to those who’ve already forged that path, they have a lot of useful thoughts to share. We spoke with dozens of founders and selected seven with great advice for those looking for outside capital. Each one had something unique to offer.
1. Understand the environment
Mark Fischer-Colbrie is the CEO of Strateos, a company that’s turning life-science into data-science. Mark understands there’s no uniform approach to raising funds, and one of the most important considerations is the financial environment of the times. Most everyone would agree that the world was quite a bit different in 2020 than it was in 2019—and your fundraising approach may require you to appreciate that change of climate.
“I think having raised over $500 million in my career, it all depends on the particular external environment—whether you’re dealing with a financial crisis in 2008 or with our current conditions. I think it’s a lot of being able to contextualize the opportunity for people and to connect with them and the value propositions of what can be done in a realistic manner. I’m the kind of individual that likes to hit his numbers, if you will.”
View our full interview with Mark:
2. Self-fund when possible
Peter Mahoney is the CEO of Plannuh, a company that automates marketing, planning, and budgeting so marketing departments understand if what they’re doing is working. Peter points out that as much as we may desire enormous outside investments to catapult our fledgling startup into the stratosphere of success, when you take in someone’s cash, you’re giving away your company. If there’s any way to avoid that, you should.
“If you can bootstrap, bootstrap. It’s a powerful thing to be able to do that. That’s not always possible—if you’re developing a pharmaceutical, you need tens of millions of dollars. If you’re developing hard technology, it’s difficult. But if you can get customers early on to pay, maybe with some services, the better off you’re going to be. And when you do need to raise capital, there are sources that deliver amazing value.”
View our full interview with Peter:
3. Don’t Fear the Ask
Nitzan Shapira is the CEO of Epsagon, a company that gives teams automated instrumentation and tracing for containers like Kubernetes and virtual machines. He offers an important reminder that investors want to invest. They’re hoping to find you as much as you’re hoping to find them. So don’t be shy—ask away.
“Investors need to invest their LP’s money. VC and angel investors may have different incentives, but still, they want to invest. It’s not like you need it more than they—both of you need it in a similar way. They do have to show return on the money. They can’t just sit on it without doing anything, right? You need to remember that and you need to understand what they care about, which is, typically, reducing the risk.”
View our full interview with Nitzan:
4. Build the Relationships First
Caren Maio is the Chairwoman and Co-Founder of Funnel, a company that gives property owners sophisticated tools for marketing and operations. Caren notes that as much as we may be focused on the goal of finding money, it’s best to lay the groundwork before starting to build. That means developing relationships first, asking for money later.
“If you approach an investor, whether it’s a VC or angel, and you say, “Hi, my name is so-and-so, nice to meet you, I’m raising money,” you’ve done something wrong as a founder. It’s about building relationships before the actual transaction happens, particularly in the case of fundraising. This is ideally someone who’s going to be with you for the long haul. This is going to be a very important relationship, and you’re going to have great conversations, and you’re going to have tough conversations, and there’s going to be hard decisions that need to be made. You need to know who you’re dealing with on the other end. It’s as much of an interview or dating process for you as a founder as it is for the investor.”
View our full interview with Caren:
5. It’s about the Money
Ben Hindman is the co-founder and CEO of Splashthat, a company that offers an event marketing platform that gives planners a cohesive, professional, and engaging experience from launch to wrap. Ben astutely points out that although investors are very interested in the great solutions you’re offering to society, they aren’t in the philanthropy business. They want to see compelling evidence your startup is going to return a healthy profit—and you’re best off getting to that quickly.
“The biggest unlockers for me were, number one, recognizing that investors are financially oriented. They like to speak money. If you’re talking product or you’re talking marketing, they’re just waiting for you to start talking about money. When I say money, I mean unit economics, bottom lines, or eventual growth. That’s what they’re interested in. Number two was realizing that at some point you changed from being a founder to being a CEO. You go from evangelizing, selling, and building to thinking about how do you connect finding the money and allocating it to the right departments who know what to do better than you, most of the time. It really does still come back to money. That’s what this is about—building a valuable enterprise that creates wealth for the stakeholders, employees, and investors.”
View our full interview with Ben:
6. Start with a Dollar
Dan Reich is the CEO of Troops, a company that offers AI assistants that bridge information between employees and software systems. Dan believes that the most important investment in your company may be the first few dollars you draw from your own pocket. Because if there’s no company, there’s no company for others to invest in. So give people—whether it be future investors or future staff—something real to believe in.
“When you’re just getting started, people often have ideas but they don’t make it tangible. If you have an idea, give it a name, create a company—a Delaware C Corp or LLC, whatever it is. Make it real, open a bank account, put your own money in it. Be your own first investor in your business, whether it’s fifty or a hundred dollars. Doing that gives you something tangible, it gives you momentum. When you’re having conversations with prospective investors or potential teammates, it’s not an abstract thing you’re thinking about doing, it’s something you are already doing. That helps psychologically and in so many important ways.”
View our full interview with Dan:
7. Tell a Story
Cindy McLaughlin, the CEO of Envelope a company that offers developers a sophisticated software solution to help navigate the complicated zoning process. She recognizes that persuasion is all about storytelling. People like to invest in more than a company, they like to invest in a purpose. And if you can articulate that purpose in a way that truly connects on a human level, you’re in business.
“It’s really always about storytelling. It’s about painting a picture. It’s about showing people what the future is going to look like once the company succeeds. If you can do that effectively, if you can show people the future, and if it’s a future that they’re into, they will get behind you.”
View our full interview with Cindy: