Part 2 Raising money
You and your team have officially formed and launched the new company. You may be able to self-fund, but most startups can’t and need to raise money. There is a lot to know when it comes to having a smooth financing round. I’ve laid out the most crucial things you need to know, along with stories to explain the consequences of critical decisions along the way. The anecdotes in this part are as follows:
- Friends and family, angels, venture capital, or strategic?
- Angels: Your bridge financing solution
- The art of pitching to institutional investors
- Investors aren’t your friends
- Understand the VC business model: Raise money faster
- Seed: The first priced round
- Term sheets: An institutional investor wants to invest in you
- Due diligence: An exam you must pass
On day one, you may need some money to get a place for your team to meet (even if you are going to operate with everyone remote, and even if that meeting place is a shared-office location). A great way to get a small amount of working capital is from friends and family. I contrast that with having the first raise be from angel investors, venture capitalists, or strategic (corporate) investors.