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4 tips for raising a successful seed round of funding

(Business Finance) After seeking a seed round of funding, one entrepreneur learned some difficult lessons and offers a fresh insight into the process.

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I couldn’t believe what I’d just said.

I don’t think my boss could either, so I repeated “That’s right, we just got a $50,000 check for my new startup and I’ll be leaving in a couple of weeks.” I was on cloud nine. Our funds had just hit the bank and I was on my way to fulfill my entrepreneurial dream, but it wasn’t always this way.

Here’s what I learned through raising a seed round of financing.

1. Have a product and market penetration

In today’s tech landscape if you can’t put together your first product and get some decent validation working out of a garage, dorm room, or basement you are going to have a rough go at raising any good money. When we approached our first investors we already had a product with about 2,500 people using it in our target market and we were growing rapidly every month without much paid advertising. Growth and penetration is so key to raising money. Investors know it’s difficult to do all of this without funding, but that separates the doers from the people that only have an idea.

2. Don’t be afraid to turn people down

Our first “nibble” from an investor was the kind of offer that feels a bit more like an insult, but we didn’t know if we could do better so it was tough to turn it down without a lot of other options out there. We did turn down that offer and we’re glad we did. Our next offer had double the valuation and a lot better investors behind it.

While we were considering this afore mentioned offer I called a board member from my previous company to ask his opinion about that investor. He invited me to his offices to talk about it and ended up writing us check a few weeks later. We didn’t know what a round would look like yet so we agreed on a convertible note for $50k. He liked our idea and started sending me to pitch his friends. They were all kind and told me I could come to them with strategic questions in the future but most said that they weren’t investing at the time.

I reached out to a few investors per week and was networking the best I knew how while working late nights to keep working on our product and marketing efforts. I kept in close contact with the investors that said I could go to them with strategic questions as I continued to reach out to new potential investors. Eventually one of the investors I contacted wrote us another $50k check, but we were still $400k shy of our target seed round. When the new investor came onboard I reached out to those that said I could come back with “strategic questions” to tell them about the exciting news. In short order a few of them wrote me checks as well.

LOOKING BACK: As I look back on this time I have identified a few keys to my success. The first was building good relationships. When I got turned down I maintained as close of a relationship as the potential investor was okay with. That is where most of our money came from. We also had to have good growth, so I couldn’t leave our business behind while raising. When you have a small team you have to continue to grow your business despite the demands on your time to raise money because the people you are raising money from care about your growth.

Once we had 4-5 investors onboard I would get an occasional meeting setup with an angel that wanted to invest in a hot tech startup. Our investors would refer that angel to me, we would talk for 30 minutes, and they would cut me a check in the next few days. These were the good days, but I started to get worried about taking in too much capital and diluting ourselves as founders.

3. Raise money when it wants to be raised

At this point in the fund raising process one of my investors taught me a valuable lesson. As I struggled with whether or not we actually needed more money I gave our lead investor a call to discuss the matter. He laughed a little at my dilemma and said, “Jordan, you raise money when it wants to be raised.” What did he mean? You’re not always going to be the hot company that everybody wants to be involved in. There will be ups and downs. You’re worth more during the up swings. Take the money then, and take as much as you can, within reason.

4. Startups fail because they run out of money

Speaking of taking in as much money as you can I thought I would share this last tidbit on how to think about money as a startup. One day while speaking with one of our investors he mentioned a recent conference he had attended. At the conference a question came up that he gets asked regularly. The question was, “Why do startups fail?” His answer? “Because they run out of money.” I know, it’s super profound! But while it might sound a bit obvious I think there’s a lot to be said for his answer. I firmly believe that most startups can be successful given enough time and resources to pivot and nail a product and market. The problem? One day you’re going to fail if you run out of money. As a founder you have to watch your resources like a hawk and raise as much money as you can. You have to do amazing things regardless of the limited resources, and you need to make sure your company has enough resources. You have to be scrappy.

There are so many other things that go into the process of getting a startup off the ground including achieving product-market fit, building a great team, designing and building product, creating an investor presentation, identifying and understanding your market, growth hacking techniques, and more. Stay tuned as I share what I have learned about these topics through my experiences being a product manager at a small B2B startup that was acquired in December of 2011 by Proofpoint (now a publicly traded company), and starting my own consumer-facing business that is currently disrupting the student housing search.

Most recently Jordan was the Co-founder and CEO at Unbill - a FinTech startup that was acquired by Q2ebanking (QTWO) in January of 2017. Before that, Jordan was an early employee and product manager at NextPage which sold to Proofpoint (PFPT) in December of 2011. Jordan is happily married and has 3 children.

Business Finance

First impressions matter – how to win over investors immediately

(BUSINESS FINANCE) Impressing investors is nerve-wracking, but these tips can help you to nail your first impression.

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Going in for your first pitch meeting with investors can be nerve wracking—especially if you haven’t yet met these investors in person. Fortunately, if you land a solid first impression, you can set the right tone for the meeting, and make the rest of the presentation a little easier on yourself.

But why are first impressions so important, and how can you ensure you make one?

Let’s start with a recap of the benefits of a strong first impression:

  • A reputation framework. Our brains are wired to make quick judgments about our surroundings. Accordingly, we tend to judge people based on our first interactions with them, with little opportunity to change those initial judgments later on. If you strike investors as a smart, likeable, and capable person early on, they’ll see your pitch deck in a whole new light.
  • Memorability. First impressions stick with people. If yours stands out from the other entrepreneurs pitching these investors, they’ll be more likely to remember you, specifically, and therefore may be more likely to eventually fund your project.
  • Personal confidence. If you know you’ve nailed the first impression, you’ll feel more confident, and as you already likely know, confidence makes you a better public speaker. You’ll speak more deliberately, more passionately, and with fewer mistakes.

So how can you make sure you land this impression?

  • Arrive in a nice vehicle. Show up in a luxury vehicle, or at least one that’s been recently detailed, sends a message that you’re already successful. This isn’t a strict necessity, but it can speak volumes about what you’ve already achieved, and how you might look when you drive to meet your future clients.
  • Dress for the occasion. Along similar lines, you’ll want to dress nicely. You don’t need to have ridiculously expensive clothes, but you should wear standard business attire that fits you properly and has no signs of wear. It’s also a good idea to get a haircut, shave, wear tasteful makeup, and make other small touches that improve your overall appearance.
  • Smile. Smiling is contagious, and it instantly makes you more likable. Don’t force a grin (or else you’ll look like a robot), but do flash a genuine smile as often as appropriate during the first few minutes you meet your prospective investors.
  • Use your investors’ names. When you speak to your investors, try to address them by name as often as possible. People love to hear the sound of their own names, so it might help you win their favor. As an added bonus, it will help you reinforce your association with their name and face, so you eliminate your risk of calling someone by the wrong name later on.
  • Warm up with something personal. It’s tempting to get down to business right away, especially because your investors’ time is limited, but in most cases, it’s better to warm up with something personal—even if it’s only a few lines of a conversation. Tell a funny joke you heard earlier in the day, or share an anecdote about how your morning has been going. It makes you seem more personable and charismatic.
  • Find a common link. If you can, try to find something in common with each of your prospective investors. You might comment that you got your tie at the same place they did, or that you use the same type of pen. Look for subtle clues about their personalities, lifestyles, and hobbies, and forge a connection through those channels. People disproportionately like other people like them, so the more commonalities you can find with your prospective investors, the better.
  • Watch your posture. Your posture says more about you than you might think. Keep your back straight with your shoulders back, and walk confidently with your hands out of your pockets. This is crucial for projecting confidence (and feeling it internally as well).

If you can land a great first impression, you’ll set the stage for a killer presentation—but don’t think you’re out of the woods yet. You still need to make sure you have a fantastic pitch deck in place, and enough knowledge on your startup idea to handle the toughest investor questions. If this is your first pitch, don’t worry – it does get easier – but the fundamentals are always going to be important.

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Business Finance

Anyone can invest in startups in a new, more bite-sized way

(BUSINESS FINANCE) With this new platform, startups can now seek funding in different ways than the traditional paths, using blockchain to set themselves up for financial success.

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Blockchain’s democratization of currency and investing continues to roll along, and it has just dug it claws into startup funding and investing.

A startup up called Securitize wants to offer an Initial Coin Offering (ICO) platform service for startups. The company believes this platform improves the equity experience on both sides of the aisle.

For startups, the ICO format streamlines the access to capital “without the overhead of needing to cultivate personal relationships and go through individual due diligence procedures.” Put simply, it takes less time and logistics to earn funding.

That trend of reducing logistical issues is also beneficial for investors. Traditionally, being a startup investor or equity holder is restrictive for numerous reasons. For outside investors, there are restrictions around investor accreditation to determine who can invest, and how much. Employees compensated with equity struggle with getting equity converted into an actual asset, if it ever gets converted at all.

According to Securitize, thanks to the ICO format, “investors can buy-in knowing the assets are completely liquid from day one.”

Furthermore, because currency investments differ from traditional business investing, more people can get in on the action.

That last point is important, since investing in cryptocurrencies this year is a bajillion times larger than the volume being pointed at startups. When these two world convene, startups get more eyes (and more dollars) pointed at their companies.

All that said, the floodgates aren’t open to free-market bedlam investing by anybody’s Uncle Ricky. Take 22x, a Securitize project that offers “tokenized equity in 30 startups – up to 10 percent of each.” For this project, you must be an accredited investor with a yearly income of 200k and a net worth over $1 million. These restrictions (among others) still allow Securitize to operate within the rules of US law; however, that barrier is still lower than traditional venture capital firm accreditations.

The implications of a more diversified set of funding will be interesting. Perhaps companies will be able to prioritize their journeys differently to align with new funding incentives. Its certainly a worth option to consider, and one that is important to follow as the first sets of companies embrace it.

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Business Finance

Startup offers Kickstarter campaign analytics so you don’t fundraise blindly

(FINANCE) If you’re considering using Kickstarter to fund your next big idea, you need to be armed with data so you’re not going about it blindly.

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You might have heard the common adage “if you fail to plan, you plan to fail.” If you’re starting a company, this rings especially true.

Whether you’re building software or a physical product, there are a lot of strategies to take into consideration, especially if you’re crowdsourcing funding.

If you’re planning on fundraising on Kickstarter, take a look at BiggerCake.

Created by Tross, a crowdfunding data and consulting firm, BiggerCake allows you to take a deep dive into the analytics behind a variety of Kickstarter campaigns.

(Author’s note: we normally don’t write about companies using Kickstarter because scams are rampant, but we know Kickstarter has been a useful tool for a lot of companies.)

So here’s how BiggerCake works. Campaigns are separated into categories by industry, like art, design, journalism, and technology. From there, you can see within each category like most funded, most backers, and highest average pledge:

biggercake

Let’s take Salsa for example, a photobooth built to help you make money — it’s already raised over 817% of its goal and almost $250k.

You can see the data behind the backers and pledges from a daily and hourly standpoint, as well as a favorite feature of mine: the ability to view average funding per day and average funding pace, since you don’t want to end your campaign too early.

Don’t be an idiot: always look at the data. Seriously though, if you’re planning on using crowdfunding to finance any of your company, please take some time to look through this resource.

It’s an easy way to learn from other makers’ successes and failures from objective, data-based standpoints. And you know how we love some good data.

Besides the funding pace and average pledge, take a look at common themes among the most successful Kickstarter campaigns on BiggerCake, and ask yourself some of these questions:

-What time is best to release my campaign?
-Is there a common thread among the copy or graphics/videos?
-What are the most successful incentives?
-How can I emulate the best campaigns?

The best part? It’s free. And after taking a look at the ToS, it doesn’t look like there are any big catches, so take advantage of this free resource while you can.

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