Trekker’s Creed

Your first priority must be to make real business progress, even while you’re fundraising. If you can make real business progress, especially in finding customers, then you can probably find funding.

Take into account your total capital needs, not simply what will advance your business for the time being. You are on a trek – not a sprint. This includes looking ahead to the total capital you need in raise, not just the current round. This is critical to figuring out what kinds of potential investors you should be cultivating in advance, as well as to structuring your investment offer and deal pricing.

Mercilessly reduce your spending and capital needs at the early stages. Many early-stage fundraising efforts fail because they try to raise too much capital too early, even before the business can demonstrate that it can successfully deploy the money being raised. Most people grossly overestimate the amount of investor capital available at early stages. Early-stage capital is scarce and costly, even for worthy companies like yours.

Don’t try to raise early money from outside investors unless there’s no other reasonable path to making your business successful. Fundraising takes – and often wastes – a great deal of time and effort you could be devoting to advancing your business or supporting yourself while you bootstrap. At early stages, manage your business as if investors didn’t exist.

With very few exceptions, don’t pursue venture capital firms for funding at the seed and early stage rounds. VC’s are much less active at the seed and early stages than you the business press might suggest. There are notable exceptions, but exceptions they are.

The best investor is someone who will win if you win in ways that go beyond investment return. Normally, these will be business allies like customer, suppliers and strategic partners, as well as personal friends and family. Cultivate these sources in preference to financial investors.

Build relationships with potential investors, gatekeepers and funding sources before you start your funding round. Investors are in no rush to write a large check. This will take time and effort on your part, not all of which will pay off.

Keep your investment structure and legal documentation as simple as possible for as long as possible. Not only will you save thousands in attorney fees, but you’ll also make your investment structure more appealing. The time and effort needed to evaluate a complex structure can place burdens on prospective investors.

After successfully closing a funding round, keep all promises made to your investors. Communicate often and treat investors as if they were future funding prospects. The most likely investors in Round 3 are pleased investors in Round 2, or someone they know.