Contributed by Jeff Ellman, Co-Founder of UrbanBound
4 Tips On Going For Funding For Your Startup
Some things I learned when we decided to go out for funding is:
Solve a Problem
When selling the vision do not just share ideas, share problems and your solution to them. It’s easier for the VC to grasp the concept if you present them with a problem, and then solve it. I believe ideas are meaningless if they don’t address a core problem that someone is willing to pay you to solve.
Raise More Than You Need
Regardless of how much capital you raise, you will likely wish you raised a little more within reason. Raising more money will allow you to attack an aggressive hiring and growth plan and hit the ground running. Raising capital is a lengthy process, and it takes entrepreneurs out of the day to day of their business. The transactional cost of having to raise an additional round within 12-24 months will be a drain on time, money, and resources.
Top 3 Terms
Before going into a negotiation, know the three most important terms that you want to negotiate. For us it was valuation, options pool, and board control. Start off your negotiation with the VC by learning what terms are most important to them. This guides conversations down the path of swallowing the largest frog first. If you can’t agree to your top three terms, you likely won’t have a deal.
Ask for Referrals
Not all VCs are the right fit as many focus within very specific verticals. If your company shows promise but doesn’t fit within the VCs investment strategy, be sure to ask for referrals at the end of the meeting. The VC community is very small and word travels fast with the help of a few good referrals.