At this point I am assuming that you have achieved the proper business milestones or are getting very close, prepared the investor documents & website, and have taught yourself about the fundraising process. Therefore, it’s time to start fundraising.
The CEO should be leading the fundraising. Ultimately, investors bet on the jockey, not the horse. Meaning, they closely scrutinize the management team when considering an investment opportunity and that team is led by the CEO. Fundraising will take a significant amount of time (typically 3-9 months) until the deal is closed. As a result, the impact of having the CEO focused on fundraising needs to be discussed and planned for with the team. You don’t want all of the hard work to go down the drain because the CEO loses focus on the fundraising and proper plans were not put in place to prevent a leadership vacuum.
Prepare Your Fundraising Plan
Build a “Prospect List” of potential investors/connectors.
- This starts with your BOA, BOD, management team, employees, personal/business network, etc. And, all of their contacts
- If you have a list of potential investors that you are interested in meeting with, comb through it and check to see if you have any mutual connections. Before asking for an introduction, get together with your personal connection so that you can update them on how great your company is and the market potential. Even though you may want to remain casual because it is someone you know personally, treat the meeting in a professional manner and be specific in regards to who and how much money you are looking for. Hopefully, this will allow them to feel like they are not only benefitting you, but also the investor if they make an introduction to.
- Potential investors are generally accredited investors (if looking for angel round) or VC firms for larger rounds.
- If your list is lacking or you feel you are going to need a deeper list, identify local fundraising related resources such as startup groups, your bank, your lawyer, etc.
After you have explored potential investors through your personal network, your next approach will be to start attending events in your local area and creating company profiles on websites where investors look for their next ventures.
Also search out startup launch events where investors most likely will be present. It might not be the best time to pitch your business to them as they are probably more concerned with the company that is launching; however it is an opportunity to make a connection at the very least.
In San Diego, where The Startup Garage is based out of, there are some notable groups that promote the startup community and contain many investor members
- Tech Coast Angels – Contains 300 investor members in 5 regional areas covering throughout Southern California. They have already invested in 200 companies with $120 million in capital. They also can provide connections, knowledge, operational assistance, and mentoring legitimate startups/ entrepreneurs. Check their website for upcoming events.
- San Diego Venture Group (SDVG) – A non-profit that seeks to support and promote the venture capital and start-up community in San Diego. Its 800 members include venture capitalists, entrepreneurs, tenured executives, and other industry professionals. They also organize events and workshops designed to help startups get funded.
You can also looking into universities, non-profits, government initiatives, business plan competitions, pitches, Meetups, Angel Groups, VC firms, other investor related groups, and co-working spaces. In fact, many co-working spaces and incubators regularly host pitch events. It allows their members to learn firsthand what works and what doesn’t.