Techstars - Funding Your Startup

Update: Also see eNeighors blog for a more organized :-) post about this event.

I attended an event in Boulder, CO this evening put on by Techstars. It was a free event open to the public, unlike most of the Techstars events. It was called Funding Your Startup.

It turned out to be a very informative event. What I got most out of it is that a founder should try to raise money just about every way before going to an angel investor or VC.

Some of the ways that were mentioned were consulting (having a real job while working on your startup after and before work), bootstrapping (credit cards, bank loans, whatever keeps it 100% your own), friends and family, and bringing on partners.

A couple of questions to ask yourself when deciding on what kind of funding you are looking for are What kind of business am I trying to fund? and Who is going to care about my business?

A great point to remember: When you take money from somebody else, you are now working for them. So if your goal is the freedom of working for yourself, you might want to re-think taking any money.

Get as far as you can on your own. Relinquish all other possibilities before you accept money from someone else, especially an angel or VC.

Taking little bits of money over several fund raisers is self-destructive. The average you are going to have to give away of your company each time you raise funds is between 30% and 50%. It doesn't matter if you are raising $100,000 early or $5,000,000 later, you are going to have to give up a lot of your company, so if you take too many small chunks of money, you are going to end up giving away your company and never raise enough money to really make it successful. Better to wait as long as possible and raise millions (when your company has a proven track record and is worth something) than to start taking thousands here and there.

A better questions to ask yourself is How do I NOT fund my company?

Before you talk to anyone, ask yourself What does success mean to me? That way when you are looking for money and you are talking to many different VCs, angels, advisors, etc., you will have a better idea of who you are looking for to fund you; who is going to work best with your overall goal for the company.

Instead of looking for angels, look for advisors. Find an advisor that you really like and really click with, and then after getting a good relationship with her, she may end up funding your company.

Understand the investor - What is she like? What are her motives? There is a whole spectrum of behaviors in each funding category and you will have to find what is best for your company.

When pitching your company, investors would rather hear you say things like We are doing this, and This where we are going, rather than We will do this, and This is what we could do. Let them know what you've already done, what's real, what's in the present. That shows them action, an agressiveness, that you've already accomplished something, it's not just a dream.

Some of the biggest mistakes you can make and some suggestions:

Asking for money too early - Don't raise money from outside sources if you don't have to; if you have to, don't raise it too early!

Getting upset over criticism - Learn something from every meeting whether it was great, good, or horrible.

Thinking that you have to know everything about your company - Ideas change and evolve. Your idea is not going to be the same even a couple months from when you originally start, so don't worry to much about all of the small details. Let it grow organically.

Pretending to be someone you're not and prepared statements - When you pitch your idea, be yourself, don't say things by rote. Go ahead and practice, but don't sound like a robot when you pitch it.

These are the main points I picked up. Like I said at the start, the overall theme was: Don't raise money unless you absolutely have to.