I have a confession to make. I’m a serial entrepreneur – currently on my fourth business – who has never raised venture capital. Sure, my last company had a few angel investors; but securing friends-and-family money is a very different experience than running the gauntlet with VCs and organized angel groups. Or so I’m told.
But what if you want to raise venture capital for your startup? Where do you begin? How about by talking to the CEOs and investors that have had previous success with early stage fundraising?
On January 29th and February 5th some of the Triangle’s best and brightest are gathering together in Durham for CED’s “Raising The Dough” Fundraising Series. The two-day event brings together CEOs who have successfully raised funds and area investors to talk fundraising strategies, share real-life experiences and provide fundraising tips to early-stage startups.
The list of speakers and coaches is solid. We’re talking CEOs like Luke Fishback of PlotWatt, Brendan Morrissey of Netsertive, Matt Williamson of Windsor Circle and Daniel Chalef of KnowledgeTree along with investors like Jan Davis of Triangle Angel Partners, Elaine Bolle of RTP Capital and Lister Delgado of IDEA Fund Partners. There are dozens in all, coming together to help startups like yours learn the ins and outs of raising money locally, regionally and nationally.
I had the opportunity to speak with a handful of the CEOs and investors attending the “Raising The Dough” series to talk through their thoughts and experience of raising money. Choice insights are as follows:
Matt Williamson, Co-Founder and CEO, Windsor Circle
Raising money anywhere is difficult, dilutive, and an arduous journey. It’s perhaps a bit easier if you’re in NY or CA where there may be bubbles, but otherwise, the same rules apply everywhere… investors look for risk mitigation, and the entrepreneur is solely responsible for that task.
As a very early stage company, that means building a great team, having a deeply researched and cohesive set of assumptions, and ultimately gaining the always elusive concept of “traction” in the form of customer commitment and revenue growth. It helps to have long standing relationships with the people that make these kinds of funding decisions.
Brendan Morrissey, CEO, Netsertive
[Raising money is] a simple matter of supply and demand—the supply of in-state venture money is very low relative to the number of startups seeking investment. However, the best companies WILL always get funded within NC or some other way. And ‘best’ doesn’t mean the best idea or the ‘hottest’ space etc., best means the combination of: evidence of execution, novel approach and a team or the beginnings of a team in place who are attacking a big market. Icing on the cake is having actual paying customers.
If you were to look at all of the venture-backed tech (not healthcare/biotech which I don’t know much about) companies today in the Triangle you will see that most have attracted out-of-state VCs. The exception is small seed rounds, which have many sources locally—angel groups, micro-VCs, etc. who make investments in the hundreds of thousands. There is a great number of promising early stage companies getting their start with $500K or less—which is terrific—however they often run into trouble for subsequent rounds unless they have the ability to fundraise in other geographies where there is more money and a larger number of investors whose investment profile matches the company/industry.
Lister Delgado, Partner, IDEA Fund Partners
Raising money is difficult everywhere. If raising money becomes easy, then we should be scared. Right now, in particular, raising money in the Triangle may be more difficult than it should be. I think there are several reasons for that. One is the fact that we have few venture funds that are local to this area and several of them happen to be raising or are about to go out raising money, which creates a lack of accessible capital.
We have made some strides on the seed and very early stage, with angels slowly coming back, seed funds like IDEA Fund, accelerators, incubators, business plan competitions, etc. Companies that achieve significant traction ($2M – $5M+ in revenue) and have a significant value proposition are able to attract money more easily on a national scale. The big problem is with those companies that are in between that are generating some initial traction, but are not yet at a revenue level that they need to be to attract most investors. They are the ones that are suffering the most today.
John Austin, Managing Director, Groundwork Labs
Seed/Angel/early stage is very much a local phenomena. It’s very hard to get someone from a great distance away to write a check if they aren’t intimately familiar with the founders. That being said, companies do need to opportunistically identify potential investors outside of the area who have a keen interest in their market. As the company advances and raises larger sums, the company definitely has to expand their horizons beyond the region, and their track record will make it easier to attract attention.