Seeking Funding? Be Aware of These 5 Details. Venture capital has big rewards, but also added stress.
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There is a common misconception that securing a round of funding means success. In reality, a round of funding is a stepping stone down a long path -- like a tool to an equation, far from the end result.
If you're one of the few to get funded, you'll realize your road to success is just starting. I remember when my friend, Morgan Schwanke, secured his first round of funding for his startup, On My Block. He walked in our front door with a mix of excitement and fear on his face. He knew he was now able take his startup to the next level, yet understood he was far from making what really matters -- profit. Instead of celebrating that night like most people would, Morgan was thinking of the future.
If you have the drive and determination to make your startup profitable, then realize money earned is much more powerful than money raised. Securing an investment is just the beginning. Along your road to securing funding you'll realize these five facts about venture capital:
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1. It's time consuming. Seeking outside funding will take up a ton of your time. You will either be shooting off many emails to potential investors, or if you're lucky, meeting face to face with them. If you're having trouble securing investment, refocus your time towards dialing in your business model and driving sales.
2. Consider the source. Don't be the entrepreneur who accepts any money thrown at them. Just as an investor screens your startup, you should be screening them as well. Remember, securing funding is a relationship, not a transaction. Also realize that investors aren't always experts in the subject areas in which they're spending. Though their money is valuable, their insight in your field may not be.
3. The added stress. An investor will want to know about anything and everything you're doing. You'll need to be as transparent as ever with them, which is crucial to building trust. If you're having trouble managing your existing partners, think about how much trouble you would face when dealing with someone else's money.
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4. Reporting in. Though an investor is not your boss, it does mean you need to report to someone. They will expect you to keep them in the loop and failing to do so could hurt your relationship. Entrepreneurs seek freedom, and an investor can potentially tie you down while simultaneously opening doors.
5. Others will follow. The hardest part of securing a relatively big round is getting your first investor on board. Venture capitalists tend to follow in others' footsteps because they don't want to be the only one to potentially lose money. If you have the talent to pull together a pool of investors, you'll likely have others knocking on your door.
Though an investment can take your business to the next level, realize money earned is much better than money raised. As my mentor, Will Caldwell, founder of Rivolix, says, "If you're making money, investors will notice and come to you." Start focusing more on driving sales and you'll be more likely to secure a round of funding.
