Raising capital is the focus point of every startup but before you hit the fundraising circuit, take a deep breath and consider this: capital is a tool, not a magic bullet. The intention of the business is supposed to inform how you raise your capital. If you are building a family business, surrendering a large chunk of ownership through extensive investor dilution might not be the most desirable path but that would be opposite if you want to build a unicorn.
Prioritizing immediate profitability might mean taking a slower approach to expansion. Conversely, aiming for aggressive market domination might require sacrificing short-term profits to reinvest in rapid scaling. Let’s be honest, focusing on both honesty is being a little bit too ambitious – it’s better to be strategically focused than spread too thin. The very essence of your business, its core purpose, should be the driving force behind how you secure that capital. After
They invest in you not the product.
It took me long to learn Investors will bet on you the entrepreneur more than the product. In his interview Masayoshi Son (one of the famous Asian billionaires) stated that he invested in Alibaba because of Jack Ma’s sparkling eyes and Charisma. ‘Sparkling eyes’ sounds as one of the dumbest reasons for an investor to put money in your business, but that was it.
Investor don’t just throw money at ideas. They back the people behind them. You need to be prepared to deliver solid information and data, not just a polished presentation. But more importantly, be the living embodiment of your vision. Investors are betting on you, so showcase your credibility and unwavering belief in your project.
Your business idea is worth nothing.
It does not matter how big your idea is, the fact remains that it is just an idea. Before pitching your idea to investors, they have probably seen 5 more people with the same idea.
If you’ve spent any time around entrepreneurs, you’ll know that ideas are worth (almost) nothing. What Investors want to see proof of concept. A minimum viable pilot demonstrates you’ve taken your idea beyond theory and into the real world. It shows you can iterate, learn, and adapt – crucial skills for any entrepreneur.
It’s true that you can get funding wit just an idea, but this is so rare. The best way is to get the initial funding from friends and family to launch your product. This is called pre-seed capital and it’s so crucial for your business. It allows you to launch your business but more importantly it gives your business access to human resource who are less transactional.
No one care’s as much as you do
No one will ever be as passionate about your business as you are. I am a big fan of Shark tank show and sometimes I see entrepreneurs who are so passionate that they cannot be convinced otherwise, that fire is essential, but so is a healthy dose of pragmatism. Remember you need to convince people who are applying logic and has been in the field long enough. and doing that will need a balance between your emotions and logic.
Protecting Your Vision
Not all capital is good some are punitive. While they are called angel investors some of them there is nothing angelic about them, beware of terms that could cripple your future. Remember money is not the goal but it’s a means to the goal. One of the people to study is the CEO of Facebook – Mark Zuckerberg. He had measures in place to safeguard his vision, allowing him to build a tech empire. I know if you are probably reading this you don’t love Mark Zukerberg and I don’t love him that much either. But he a force to reckon with. Probably you don’t agree with this point but here’s are 5 CEO who have been fired from their business, and boy are they many, 5 is just adjust like a drop in the ocean.
Founders CEOs who were fired from their own company
1. Sam Altman, OpenAI – Sam is the most recent example and he was fired from Open AI in 2023, the board said they had no confidence in his leadership. However, he was re-hired after few days.
2.Steve Jobs, Apple – Jobs was fired from Apple in 1985 the board claimed he is too young and temperamental to run the company. He went ahead and build two other companies NeXT and Pixar before rejoining Apple after 11 years.
3. Jack Dorsey, Twitter- Dorsey was fired from Twitter in 2008 by his co founder Evan Williams two years after Launching it in 2006. Evan claimed that Dorsey have poor management style.
4. Travis Kalanick, Uber- Travis was forced to resign in 2017 from uber due to reports of the company’s unethical corporate culture,
5. Jerry Yang, Yahoo – Jerry was forced to resign from Yahoo in 2008 after their shares decline because he walked away from Microsoft acquisition deal
Once I was asked what I would do if I was fired from my own business and my answer was “ I would cry” and then after I moment I added, “eeerr and probably start all over again like Steve Jobs.” Because at the point of being fired there is not much you can do. The best time to protect your vision is at the initial stage, and you don’t do this by owning 90% of your business because this will cripple it. Owning even 10% is more than okay but make sure to vet who you bring into your business, have legal gaps closed and your papers in place.
Don’t be desperate.
Once you secure your first capital you it is easier to raise the next round of capital. But there is one problem that might catch up with you, desperation. Make sure that you have cash reserves that can sustain you for at least a year when you are going to the next round. Don’t wait until your accounts are running dry because the investors will smell your desperation.
They smell desperation from a far no matter how much you try to hide it. When you seek investment without desperation, you negotiate from a position of strength. Without sufficient runway, you risk diluting your stake more than necessary.
Additional tips
- Don’t be greedy, Investors will invest in a leader who understands that not all boxes need to be checked immediately. Some aspects can be deferred, provided the core objectives are met.
- There’s no one-size-fits-all approach to fundraising. Striking a balance between explosive growth and long-term stability requires careful consideration.
- Investors who fixate on short-term results are not the best partners for your long-term vision. In the fast-paced world of startups, what you truly need is patient capital.
- Investors care about your team too; so it is important to partner with talent, experience and character.
- You might receive more Nos before getting a Yes so the wider you cast your net, the greater the chance of finding a perfect catch: and more importantly don’t burn bridges; the venture community is not very big so people talk and you might as well loose an investor or get a referral.
I pray you get the best investor.