03 Jun How to raise $1 Million+ outside of Silicon Valley
Let’s first start with the mind-set that capital is not scarce, the opportunity for improvement evolves around becoming a better, modern entrepreneur, with a bigger vision and better execution.
Say it with me “THERE IS CAPITAL… MONEY IS AVAILABLE!”
Now that we have that covered let’s get to it.
The first thing you must know is it’s not about money, it’s about people. Money follows people. Starting with your team. You can raise money easier with an A Team and a B product vs. having world-class tech with an average team. If you can’t attract an A team to your vision, you need a bigger better vision. The other part of the people equation is telling people you are raising and cultivating relationships in the startup community as you never know where that golden introduction may come from.
The top 2 places to start are at Silicon Valley Bank and Comerica Bank as both of these banks have cultures and relationships that are geared around connecting startups that need capital with investors that are looking for the next great startup.
I know what you’re saying, “So I have the team and I’ve gotten some introductions, what do I say and how do I support a $1MM ask?”
Let’s start with the Pitch Deck.
Even though you have your MVP, your deck will be the ultimate representation of your startup during it’s early stage. So your pitch deck should be well thought out, beautifully designed and minimalistic. Less is more and less is more difficult to create. It takes longer to design, yes I said design, a simple deck that communicates your billion dollar vision. So often I review pitch decks and they look like an after thought with way too much info and some picture cut and pasted on a crappy Powerpoint. Our deck went through over 150 iterations and design reviews and we pitched it easily over 100 times before we closed our $1.2MM round. (Check out this guide to creating the perfect pitch deck.)
To raise a million you’ll need at least a $2MM valuation but ideally you’d want a minimum valuation of $3MM on your first real raise. “But Craig, I can’t control the term sheets I get.”
Yes you can. It starts with understanding your pre-money valuation. Just like the stock market everything is based on speculation, when looking for venture or angel financing, your valuation is, frankly, whatever you can convince investors to agree on. There are a lot of methodologies to creating a PMV, a quick google search will yield tons. I suggest using a combination of methods, with an emphasis on valuing your people, product and potential. As you start to pitch you’ll get feedback, take that feedback and improve your startup so by the time you close your round the investors will feel like they are getting a steal. Take a look at this startup valuation tool http://worthworm.com
Also don’t forget you can’t raise $1MM if you don’t ask for at least $1MM. You’ve already defeated yourself if you subscribe to the “I don’t want to look like a rookie asking for too much too soon” style of thinking. It takes the same amount of effort and energy to raise $100K as it does $1MM. So if you are going to do the work anyway ask for more. The worst they can say is no. If you raise too little you’ll end up spending more time fundraising down the road than building your company and that doesn’t serve your company or the investors well.
“Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations.” – Tim O’Reilly
Bottom-line, the money is out here, you can’t be afraid to go get it. You can’t be afraid to think bigger. You can’t be afraid to go harder. You can’t be afraid to fail faster. You can’t be afraid to get better. You want to raise a $1MM outside of Silicon Valley? You have to be resilient and you have to believe.
There’s not a lack of capital only a lack of vision and hustle.