I was in this situation not too long ago, and I feel your pain. As David S. Rose pointed out, the reality is you're just not going to get funding at this point, especially without a capable team.

The best thing you can do is network like crazy. Try everything you can to find a decent technical cofounder that can at least work with you to produce an MVP. Notice I used the word decent. With no previous reputation, you won't have the luxury of being picky here. Software Engineers and programmers are in high demand right now. Convincing even average ones to work only for equity is a monumental task. You need to do some research about coding languages and at least have an idea of the minimum skills you need in a partner to get it done.

Over the next several months (Yes months.....and that's if you're lucky) you should find yourself feeling like you've seen every technical profile that exists on Linkedin, FounderDating, Cofounderslab, and others. Also, find any tech gatherings or Meetups in your area that you can attend. Reach out to anyone that meets your criteria. I found it was fairly easy to get a response after some trial and error.

Here are a few tips:

1. As mentioned repeatedly on other Quora answers, discuss your idea openly. Nobody is going to steal it. Even if they do, you have the vision. An idea is worth zero.
2. Don't even mention NDA's. You don't need them, and you will scare off 99.999999999% of the people you are contacting.
3. Tell them you are working on a side project and ask if they'd be willing to meet up to help you figure out what it will take technically. Don't ask them to be your partner at this stage. Just ask for advice. If your idea and motivation are good enough, the partnership will form organically.
4. Don't use the word coder......use words like Software Engineer, Architect, or Programmer.
5. If they are not interested, ask if they know anyone who might be, or if they know where you might be able to meet someone who would be.
6. Wireframe your product. There are tons of cheap/free services out there that make it easy even for people with zero technical knowledge. balsamiq is what I used. This shows them you have thought things through, and likely have things relatively organized for them to get started as soon as you join forces.
7. Don't be stingy with equity. You will likely think (at first) that since you had the idea that you should only be giving away a tiny percentage for anyone lucky enough to be onboard. Not gonna happen. If it does, you've found someone that either doesn't know what they're doing, or will bail on you at whatever point they realize what they have done. Make them (at least close to) an equal partner if they are qualified. They are going to be doing the lions share of the work early on, and they need to be invested in company success.
8. Don't bring up equity early on. you'll seem way too eager. Let it come up organically and be generous as mentioned in point 7.
9. I found short messages (for first contact) received the best response rates. Don't bombard them with a detailed description of your app in the first contact. Something like "Hi X, I'm currently working on a side project and looking for some technical advice. Hit me up if you're interested in some free pizza and beer in exchange for some of your wisdom." Obviously that only works if A) you live near the person and B) you're both of legal age, but you get the idea. Free coffee is also popular, but it's also what everyone offers. Be different.

I've kind of gone off on a tangent here as you didn't really ask how to find a technical cofounder, but the reality is that's where you need to be focusing 100% of your attention right now. A cofounder is what you need to get to the next stage, not funding. Set your short term goals accordingly.

You're going to feel like it will never happen, but if you keep trying long enough it will. Never give up.

Best of luck!

There are basically three ways to get money - grants, debt, and equity. All other ways can fit into these categories or are combinations thereof. Let’s have a look at each in terms of key data you’ll want to have for each.

Grants - this is money that you receive for a program or a particular aspect of your business, and can come from Fed, State, or other Community Outreach departments of larger businesses in your area. In most cases, being a non-profit will help immensely, though it’s not always a requirement.

Advice for grants: you always want to show the following and substantiate it as best you can:

1. The humanitartian need for your program/service/business
2. How your program/service/business will solve part of that need.
3. How your grant partners or existing programs can ‘amplify’ the dollars that you recieve.
4. How you will define success, then measure and report results.

Debt financing - this is money you receive from the three FFFs (family, friends, and fools) or from established institutions like banks, credit unions, etc.

Advice for debt - These folks will want to see a business plan. Also, and this is the important part - they want to see 2 years of established income. This and the assets you can use as collateral is mostly how they protect their investments.

This one’s a chicken vs the egg problem for many entrepreneurs. If you already have a business, you can get a little creative with those assets if you own them and proof of income (an adventurous CPA may be able to tell you more).

Equity Investors - Angels & VCs fit into this category. To be clear: these folks are in the business of money making, so while they can offer higher dollar amounts than traditional financiers, they do look for startups that can give them a substantial return in a short amount of time. Substantial means from 12 to 20% or greater, and a short time means 5 to 10 years max.

I should mention that the above statement is a generalization. The folks that you may run into will vary, dependent on their personal or fund goals. I should also mention that Angels are usually individuals with specific skillsets and connections, while VCs are groups of investors.

Advice for Equity: There are a whole slew of questions that you’ll want to be able to answer here (with numbers and proof). The most important thing you’ll want to be able to articulate is customer data.

1. Customer data - who the customers are, what their problems are, how painful the problems are. Where you find the customers, how many customers you already have, and what the cost of acquiring each customer is per channel. What kind of traction you already have and what a projection will look like based on a proven case of how you’ll get more. Whew, that’s a lot to take in! These questions, answered well, will pave the way for a successful pitch a little later.
2. Projected revenues over 5 -10 years with cash backing and without.
3. The solution for customers and how much it will cost to develop further or make, both individually and ‘at scale.’
4. How the business makes money - presenting the actual model (there are 6 main ones in Business Model Generation by Osterwalder and Yves Pigneur ), and what the revenue models are (they’re in the book as well).
5. Who is going to make the business work - generally, equity funders will want to see more than one founder.

The idea for equity funding is that it’s best if you have a business up and running - you’ve got customers, a product, and revenues - that needs larger amounts of money to grow the operation and sales mechanisms.

That’s it in a nutshell. I’ve tried to lay out the main three ways to get financing and what numbers are important in each case. All three methods come down to a few key things that should be in place before you ask for dollar 1: customers, a product (even if it’s not the final vision), and revenues.

Good Luck.

I was CEO and founder of a capital-intensive hardware company in an industry (semiconductors) that VCs were running the other direction from.

We raised our initial $12M Series A funding during the Great Recession:

• We had no products in the market
• We had nothing in development

All we had was:

• A unique plan that was not capital intensive, and..
• A kick-ass team

Amazingly, we got funded.

I think the same idea with the same team would almost be unfindable today:

• The number of VCs funding hardware companies in the Silicon Valley is shrinking by the second, but...
• There are still some VCs out there funding hardware companies

So, what would I do today?

1. I wouldn't change the idea at all. A great idea is a great idea, but...
2. I would start with a small team of just a couple engineers, and...
3. I would look for seed funding from angels that have had succeeded previously in my industry. Then...
4. I would develop an initial MVP (that has significance in the market) to get to market. Then...
5. I would be recruiting my follow-on engineering team and, at the same time...
6. I would be courting follow-on investors for a Series A, and...
7. I would look outside the Silicon Valley (as well as inside the Silicon Valley) for my investors all the time...
8. I would be leaning heavily on the VC contacts the initial group of angels brings to the table.

You still are going to need a healthy dose of perseverance and a lot of luck. But maybe, just maybe, you'll succeed.

Three years ago, my company (Lawtrades) almost went bankrupt.

We’d failed to raise a Series A or generate any interest among VCs.

Last month, we closed $6M in funding (at an $80M valuation) from more than 100 customers and investors, using a link and no pitching.

Here’s how it happened, step by step.

First, we pivoted, redefining our business

While we watched Justin Kan raise $75M for Atrium — a competing legaltech startup at the time — Lawtrades managed to raise only $3.7M. By comparison, we looked like a bit player, unworthy of serious interest.

We faced an existential decision: Shut down the company or try something radically different.

As I’ve written previously, it was a pivot that saved us. Our initial focus on small-to-midsize businesses (SMBs) attracted a lot of customers — who, unfortunately, weren’t profitable. SMBs often needed legal services on a one-off basis, meaning low fees and lots of churn.

But fast-growing tech companies were different. Their general counsels (GCs) needed ongoing support on a near-daily basis — higher fees and lower churn than SMBs.

So, we “fired” all our unprofitable customers and sharpened the product specifically for power users. We borrowed against our receivables to keep growing without dilution. Little by little, the bet paid off, and we scaled our revenue 10x, from $70k/mo to $700k/mo.

Then, we decided to revisit fundraising (and do it differently)

This time, we were in a unique position. Lawtrades was cash flow positive for most quarters of last year, meaning we could dictate our own terms, rather than letting VCs do it for us. That was convenient, because VCs were still sour on legaltech since Atrium shut down (though they were thinking about the space).

We neither wanted to rely on VCs nor dilute more than 10% equity. So, instead of vying for in-person pitch meetings, we went about it a little differently.

We set up an AngelList Roll-Up Vehicle (RUV). Through an RUV, any accredited investor can contribute, up to 250 individual investors in a single round. Our first step with the RUV was to email it to our customers. Why? Because fundamentally, I wanted to enrich the people that are making our platform rich.

Imagine if Uber had an RUV that allowed all drivers to invest, or if Airbnb let all Superhosts invest. In all cases — theirs, and ours — human beings make the platform what it is. Giving those human beings a chance to put some skin in the game, becoming primary investors, just compounds their loyalty.

After some initial interest, we took it even broader

We created a Journey link, containing everything that would normally go in an investor pitch:

• Slides
• Video pitch (from me)
• Investor testimonials
• Product demo
• Financials

Doing it this way, we could also include a link to our AngelList RUV — and send the pitch to a theoretically unlimited number of people. Rather than a 1:1 pitch-to-investor ratio, we ended up with something more like 1:10,000.

We dropped the Journey link into the RUV Alliance Discord channel. Right away, more than 600 accredited investors saw it. Customers became investors, investors became customers, and within days, we raised $250,000.

That grassroots enthusiasm drew interest from Stonks, where we live-streamed our pitch to thousands more viewers. This is where things really took off — we got $1.4M in commitments from people I’ve never met.

We shared these updates via Pump, which stirred up even more buzz. I got DMs and emails from many more investors — executives at Facebook, Uber, Netflix, Robinhood — all wanting to invest. This included Sahil Lavingia, who had initially rejected us, but ended up giving us $100k.

We leveraged the groundswell of support to close the round

By this point, we’d raised $2.3M without a single pitch meeting. It was a result of natural enthusiasm: taking care of the people who made us who we are, giving them the chance to move first, and letting their enthusiasm drive our leverage with VCs — who, by this point, got interested.

We leveraged those network effects to secure $3.7M from a founder-turned-VC, closing the round: $6M raised at an $80M valuation (which, by the way, I set myself).

What flipping the fundraising script allowed us to do:

Instead of hoping for 2-3 VCs to constitute the round, we inverted the process, starting with private individuals and using their enthusiasm to show VCs what we were worth. This gave Lawtrades the ability to:

• Share our vision at scale without meetings. Our Journey link was seen by thousands and thousands of people. I ended up taking meetings with people who planned to contribute $50k+, but still, the ratio of views-to-meetings was outrageously good for us.
• Create our own leverage. It ended up that, instead of selling ourselves to VCs, VCs sold themselves to us. We actually had to turn away some people whose checks were too large, or who wanted to jump in too late.
• Maintain voting power. We didn’t give up any board seats.
• Leverage viral network effects. Power to (and from) the people.
• Preemptively halt churn by turning our users into owners. Again, when people own something, they’re more likely to treat it with loyalty and respect. Our users make us who we are — no matter how good our tech is, we need human beings to use it. They deserve to be owners.

For now, most founders are still wary of this approach — and I don’t blame them. Pump is less than a year old, RUVs are less than a year old, it’s new, it’s scary. But it won’t be that way for long. Our approach redistributed some of the power that normally lies entirely with VCs, putting it into our hands and our network’s hands.

This is the future — one more way that power is flowing away from the centralized few, toward the decentralized many.

If you enjoyed this answer, follow me on Quora and Twitter, and consider subscribing to my newsletter. I love writing about:

• Fundraising
• Startups
• Growth

The best capital by any standard is revenue. If you can 1) make enough revenue to sustain the business without further capital, and 2) do it in a way that doesn't obstruct the companies’ growth prospects, then you’re golden. You will stand out from all the wannabe’s, you will be able to be patient, and you’ll be in a position to have investors compete to sell you their money.

But, though #1 is hard, #2 can be harder. The four most obvious ways to accomplish #1 get in the way of #2:

• earn consulting revenue. This both distracts you from the real business and establishes a mindset, among you and your customers, that this is a non-scalable business with nothing to offer but expertise.
• Keep burn rate low by not paying founders. Investors know this is unsustainable. Founders run out of savings and give up, or end up working part time elsewhere because they and their families have to live.
• Sell heavily discounted beta projects. In your head it's a discounted beta, to everyone else it's a price point.
• Work with one big customer. It sure feels great when a Fortune 500 buys from you, but it's like dancing with an elephant. Their requirements, timelines, and personnel changes can all accidentally kill you. And even if you survive, the version of your product that they’ll buy is likely to be too customized to be scalable.

Get to break even, avoid those four pitfalls, and then just let your lawyer sort out the best investment structures to chose from.

Business formation doesn’t start with a capital raise—it starts with a solution to a problem. Then you sort out how to resource that solution. Often that’s revenue. Less often it’s via investment.

What do you need capital for? How will you provide return to the investor or lender? What is the likelihood you will achieve the success needed to provide that return? What are the risks? By answering these questions you can answer your question.

In B2B you’d usually start with a problem thesis and then speak to lots of prospective customers about the existence of the problem and possible solution. In B2C you might start with a hobby MVP. In both cases you’d end up with some validation of the problem and solution. Then you create a business plan or you just dive in and start iterating (or both). Either way, raising capital usually comes post-validation and with a plan in place.

Not always—really big brains or uber-charismatic salespeople or people with amazing chops (this is your 4th startup, all of which were acquired for $100MM) may get people to toss money at them. But, usually, you just get some validation that you’re solving a problem, that the solution has value, and then (if necessary) raise capital.

“I don’t think we should raise $11M,” “John” said to me. “We will give up control of the company! We should only raise $6M.”

“John, we’re going to have to raise the $11M and probably more. Getting the $11M gives us more runway,” I said. “Let’s get the money now!”

It’s the classic debate you have between cofounders. Should you take money, any money, now, or should you wait?

Your decision to take raise money depends on several things.

In our case, we were building a business that needed a lot of capital right from the start (a semiconductor company), so we had to raise money. The question was how much money.

That leads to decision number one for your funding: How quickly do you want to grow?

Gill, the investor who eventually led our Series A funding for $12M, had a great way of looking at venture funding. He would say, “VC funding is like jet fuel for a startup.”

If you raise more money, then you can hire more people and grow faster. That’s the goal.

And yes, you do give away more equity. That’s the tradeoff. In our case, we had to choose between where $11M (which turned into $12M) would get us versus where $6M would get us.

The difference in our case was huge. We would not only be able to release a lot more products, we would be able to prove out our sales model. Risk would be reduced significantly.

That leads to decision number two for your funding: Will you give up more equity by taking more funding early?

The answer is a definite maybe. Maybe you will give up more equity and maybe you will not. In our case, it turned out we actually were better off taking more funding.

Every company is different. Plus dilution is also significantly dependent upon how much money you are planning to raise.

That leads to decision number three for your funding: How much traction do you need to be able to attract outside investment?

Unless you have had previous success you’re likely going to need traction to raise money. The larger the amount of money you need to raise, the more traction you’re going to need.

For example, you might need a $100K/month monthly run rate (MRR) these days to attract VC funding. That means, there’s a lot of work you’re going to have to do before you get there.

Maybe you can attract angel funding before you get to $100K/month MRR, but you’ll still likely need some traction.

That leads to decision number four for your funding: How much risk are you willing to take?

There’s an entrepreneur that I’ve been informally advising now for about three years. He’s taken on a small amount of investment, but he’s really bootstrapped the whole time.

He’s not taken a dollar in salary this whole time. I’ve been telling him he’s crazy, but he’s been willing to take that risk.

Yes, you can go slower and bootstrap your company like my friend. But time is ticking away, and your competitors are moving maybe at a faster pace than you are.

Remember that just because you want to raise money, doesn’t mean you will be able to raise money.

Most startups never raise any venture funding. Ever. Your business may be a great business, but it might not fit the venture model.

For more, read: The Nine Facts Of Fundraising You Need To Know

Raising capital isn’t a spray and pray endeavor. It also doesn’t operate on the self service model. Even at the seed stage closing a round of funding is a high-touch, big ticket sale where relationships need to be built and nurtured.

Start with knowing where they start

As a founder, you are competing daily for two things – capital and talent. Raising money means selling your company in a way that puts you at a competitive advantage against other startups a VC could back. One of the quickest ways to build this advantage is by understanding what factors play the largest role in your target investor’s process; a good product, a highly functioning team, and a large, growing market, etc. You need to know this before the first call or meeting. Instead of “here is what we do, are you interested?” switch the context to “here is why we are a perfect fit for your thesis.”

Make it easy for them to fit you into their existing mental framework of how they want to invest instead of forcing them to do all the work to organize their own thinking around your company. Remember, VCs need to sell too. They need to convince their partners that adding your company to the portfolio will have a positive impact. They also need to defend their investment decisions to LPs, often on a quarterly basis.

Build an investor interest profile

Marc Andreessen, for example, sees market as the determining factor in a company’s success or failure. Upfront’s Mark Suster trumpets team as the most important factor in a VC’s decision of whether to investor or to pass. If you are fortunate enough to get an audience with one of the Marc/ks, lead with market and team respectively. Search further and you’ll find plenty of investors who base decisions first and foremost on whether a company’s product stands out amongst its competition.

Additionally, leverage the information your peers are putting out into the market. Funding announcements come fast and frequent these days and are often accompanied with quotes from CEOs and founders around the future of their businesses. The narrative put forth in these funding posts are likely the same ones they used to court and close their investors. Go through enough announcements for companies your target investors have backed and you can build a very detailed profile of what they care about.

Want to go a step further? Reach out the CEOs who just closed the round. They’ll probably be happy that your inquiry isn’t another terrible sales pitch and will be open to help since they know first hand the challenges you are up against.

First let me dispel the most common false beliefs on raising outside investor capital:

1. Thinking it is easy. It will typically take 3–6 months of full-time effort. 80% will fail
2. That the “Idea” is worth something. It is not worth $0 because anyone can copy an idea and do better at marketing, sales, product development or just dump capital on that idea
3. Thinking VCs are the best source, they are the worst for 90% of businesses. They finance at most 1 in 200 plans and represent a tiny percentage of business financing. A narrow niche of rapid growth, technology-based companies mainly.
4. Your company has value one day #1. It does not, value and pre-money valuation come from team + plan + market research + product development. Investors generally put money in only AFTER value is created.

The pitch deck is critical. It separated out the 75% of people looking for money that did not do their homework. A good angel or VC can glean a lot about the team from this 5-minute read. An investor would be silly not to review it to save time. It is your calling card and foot in the door - but only when done well. Over 80% of pitches I have seen from many hundreds are missing the key data, sentences and strategies.

As an angel, Serial Entrepreneur/CEO for 20+ years and consultant to VCs I have been on every side of the table in most types of deals from $100K seeds to $300M. Each level, set by the amount sought and stage of development of the company, has different required criteria to get a face to face or video call.

I am doing a Free webinar shortly called: How to Raise Millions from Outside Investors for any company. It covers angels, VCs, crowdfunding and many other capital sources. Everything you need to prepare to raise capital. The top 8 reasons companies fail to raise funds and more. Limited seats. Register now here. FREE WEBINAR: How to Raise Millions For Any Company (FREE WEBINAR: How to Raise Millions For Any Company)

Bob Norton, CEO and CEO Adviser, http://www.AirTightMgt.com (http://www.AirTightMgt.com) and The CEO & Entrepreneur Boot Camp (CEO & Entrepreneur Training)

This is a question that I have significant experience and until recently great success. If you consider most companies (ideas) at this stage fail to raise their seed round, should set your expectations.

Having said that, raising sees money from local “angel” groups in my opinion is fruitless. I would instead focus on friends and family at this point. The best investor could be from a current investor. Asking for investor referrals once an investor commits is a smart move. Even check friends of the investor from Facebook/LinkedIn, etc.

During your investor meeting, depending upon your cash flow needs (how badly you need the money) I wouldn’t leave the premises until I got a check. This happened to me once in Florida. I literally stayed at this man’s hotel for 7 hours. He even left but I stayed and eventually during our text messages (terms for an investment) he had left and went home for dinner. When he realized I was still there, he gave me his address and said to come over. This kind of perseverance is often necessary when raising money. And because I literally had no money, I had to close this $100k deal, which I was fortunate enough to do!

When dealing with these “angel” investor, disclose whatever “issues” you’ve had in the past fairly quickly in the pitch process, as an investor must be able to trust you and often, if they are successful, ran into similar problems in their own past. I would say Trust in you as founder:CEO is as if not more important than the project itself.

Lastly, pitching Angels can be exhilarating , as you can and should go into any pitch meeting with the attitude of closing and picking up a check. Good luck!

1. Bootstrap as long as possible and try to get your MVP out with customers on board before seeking any investment.
2. Always approach investors with the knowledge that it’s like dating.. you are building a relationship and it will take time (3–6 months sometimes).
3. Always approach investors with cash in the bank and a smile on your face, because a broke founder means they can get a much better deal and you won’t be happy with it.
4. Always be open-minded to investors advice, and encourage their honest feedback so you can learn from their experience.
5. Practice your pitch with as many investors as possible, and never accept the first offer.
6. Always tweak your pitch and simplify your deck as much as possible to save investors time.
7. Only raise capital if you have a specific reason, can justify the reason financially, and can express in detail what the company will accomplish with that money.
8. Whether you like it or not, your investor will be a permanent addition to your company, so pick someone you enjoy working with and who can add more value than just writing a check.
9. Know what you are lacking, and tell your investor so they can help you get it (intros to high level execs you want to poach, intros to follow-on investors, companies that may acquire you, etc.
10. It’s better to raise more than you think you need: because you lose value and trust by going back for more money because you underestimated your costs.
11. Investors are always happy when you ask for more money because you are growing fast and need to scale.

Thanks for a2a but it's a bit awkward because this same question has been asked often. Please check out, already here on Quora...

• How do you attract investors to your startup? (8 answers already as I write this, including my favorite: Tim Berry's answer to How do I find investors for my startup?
• There is an entire topic here, lots of good questions and answers, on Startup Fundraising.
• What are the best ways to raise funds for a startup?
  

And for convenience, here's my answer to this same question asked previously, copied and pasted here (same one linked to above):

Start by realizing that only a small percentage of startups offer interesting potential return to investors. A lot of great startups aren't good investment. Be honest with yourself.

• If you don't have excellent potential growth, an interesting market, scalability, defensibility, and a credible team of founders, then revise your plan. Forget attracting investors. Look for alternative financing (friends and family or borrowed money) if you need it, or – even better – early sales, pre-sales commitments like Kickstarter, deep discounting some key customers to cover early spending.
• Recognize that the answer to this question is different depending on what you're doing, who you are, and where you are. If you aren't in the U.S. or Western Europe, you have a different set of problems and opportunities than what you'll read about in Investors, Angel Investors, and Business Fundraising here on Quora. Investment is overwhelmingly local, so bear that in mind. Here's a general review of that aspect: Tim Berry's answer to How do I find investors for my startup?
• If you are in the U.S. and you really have the kind of startup that might be a good investment, then register with Startup Funding & Investing, AngelList, and look on Gust and elsewhere for local angel investor groups. You can also Google "[your location] angel investment group" to find groups close to you. Then Google "[your location] startups" and see what comes up as startup organizations. Also, depending on your background, check out the possibility of angel investment groups related to your university alumni. With all of these, look for pitch events and angel investor events. Despite the pervasive talk of networking and who you know, and introductions, these days getting early seed investment is far more about the investment opportunity you're offering than who you know and where you get personal introductions – that is, as long as you do your homework and check out the local events and opportunities.

If you’d like to avoid one of the best VCs of the modern era, yes.

If you want a VC that has shown a history of investing in winners, Benchmark would appear to be worth a look. Here is some data.

First: Exit History is Amazing

Here is Benchmark’s exits over time. Look at the sheer # of dots over the $1B mark. It’s a lot.

source: Benchmark Capital profile

2: Amazing Success With Modest Fund Sizes

What is even more impressive is they’ve had this level of exit success with relatively modest fund sizes. They could have raised much larger funds but have stayed focused. Here are their recent fund sizes.

There has been no creep.

3: Respected by their VC Peers

In a survey of venture capital general partners, Benchmark was the 2nd most respected firm. The question posed was “If you were an LP and had to put money into a fund, where would you put it?”

They came in #2 behind the venerable Sequoia Capital.

Source: Venture Capital Power Rankings: VCs Rate VCs

Think of this survey as akin to the college football coaches poll.

4: The Individual Partners Have Amazing Track Records

Related to the above, the individual partners at Benchmark are among the best in the biz. In a New York Times / CB Insights ranking of the top VCs, 2 of the top 10 and 3 of the top 20 partners are Benchmark partners.

source: The Top 100 Venture Capitalists (CB Insights) and The Top 20 Venture Capitalists Worldwide (NYT)

Notes/Opinions:

1. This was strictly evidence-based.
2. I have zero connection to Benchmark.
3. This doesn’t try to gauge marketing talk like “founder-friendly”. I imagine everyone is founder-friendly until they are not.
4. VCs are trying to make money. They are financiers of companies. It would seem to make sense to view them as such versus as your cool, rich friends. It’s business after all.
5. I wonder if this question was posed by a peer VC :)
6. For a detailed overview of Benchmark, check out the Benchmark Capital Teardown

You create value by doing the following before even calling a VC:

1. Build a team of 2–3 committed founders with 10+ years' experience each.
2. Develop a business plan, based on in-depth market research and competitive intelligence which covers your strategy for marketing, sales, operations, finance and product development (pure service companies rarely get VC money because the margins and competitive advantage is harder to justify the ROI these investors need).
3. You develop a product that can be protected via intellectual property or other methods to create and maintain some “Sustainable Competitive Advantage” (SCA). First to market is SCA if there is a “Network effect” whereby you can maintain a lead through customer critical mass (i.e. Facebook/Meta)
4. Ideally finish a product and get some “Traction” which means customers paying. Angel investors may not need this, but most institutional investors will need this “Proof of concept”. Back in the 1980s and 1990s many VC invested in “seed deals”, where the money went to developing the product. Today it is rare unless you are Elon Musk.

Realize that most people MUST typically go through Founder investment (cash + sweat equity), family and friends' investment (usually $50K to $250K) and angel investment (Often $500K-$1M) BEFORE they are likely to get to a point where professional VC will invest. It is highly unlikely that approaching VCs will get you any money without creating value first. This is quantified by a “Pre-Money Valuation” which is used to determine the percentage of the company they will get for their investment. This goes up with each step above you complete, often doubling or more with each step. If all you have is an “Idea” you have ZERO pre-money valuation. Even a plan adds little without an experience team with the proper experience to execute the plan. Team is 50% to 75% as a good team can fix all the other issues.

I have a free eBook called The Top 8 Reasons Companies Fail to Raise Funding and also provide training, coaching and consulting to help people raise funds from outside investors. See:

People think, due to headlines in the press, that raising money from VCs is easy. It is not. Typically, it takes a company 3–6 months of halftime work of the CEO and all these things must be in place before starting. The due diligence process is elaborate to verify the team, technology, customers, etc. Few fall for the lies that Theranos’s 20-year-old founder Elisabeth Holmes provided to amateur investors. She was convicted of fraud and will do jail time for her lies to these investors. It remains to be seen if any board members get sued. I think they should have financial liability as they failed in their legal duties. These were not professional VCs but wealthy people trusting a “Board” that failed to do its job and was famous, wealthy people, not quality investors.

Capital raising services refer to professional support and strategies that help businesses secure funds or investments to grow, operate, or start a venture. These services are typically provided by financial experts, investment banks, consultancy firms, or specialized advisors. Here’s a detailed breakdown in simple terms:

Why Businesses Need Capital Raising Services

1. Starting a Business: Entrepreneurs often need funds to turn an idea into a reality.
2. Expanding Operations: Established businesses may require capital to launch new products, enter new markets, or scale their operations.
3. Managing Cash Flow: Companies might need funds to cover short term expenses or invest in long-term projects.
4. Restructuring Debt: Businesses can raise capital to refinance or restructure existing debts under better terms.

Types of Capital Raised

Capital can generally be categorized into two types:

1. Equity Capital

• Involves selling ownership stakes in the business.
• Investors (like venture capitalists or private equity firms) get shares in exchange for their investment.
• Example: A startup raises $1 million by giving up 20% of its ownership to investors.

2. Debt Capital

• Involves borrowing funds that need to be repaid with interest.
• Loans, bonds, or credit lines fall under this category.
• Example: A company issues bonds to raise $2 million, promising to pay back the principal amount plus interest after a set period.

Key Players in Capital Raising Services

1. Investment Banks: Help companies structure deals, find investors, and manage the legalities. Common in large-scale funding like Initial Public Offerings (IPOs).
2. Venture Capital Firms: Provide funding to startups and early-stage businesses in exchange for equity.
3. Private Equity Firms: Invest in established businesses, often to support expansion or restructuring.
4. Crowdfunding Platforms: Allow businesses to raise smaller amounts from a large group of people, usually online. Examples: Kickstarter, GoFundMe, and SeedInvest.
5. Corporate Advisors and Consultants: Offer tailored advice and services, including market research, financial modeling, and investor relations.
6. Government Agencies and Grants: Provide funding for specific industries or community-driven projects.

How Capital Raising Services Work

1. Assessment and Strategy Development

• Providers assess the business's financial health, growth potential, and funding needs.
• A clear strategy is developed to determine the best type of capital (debt or equity) and target investors.

2. Preparing Documentation

• Essential documents like business plans, pitch decks, financial statements, and valuation reports are created.
• These materials are crucial to convincing potential investors or lenders.

3. Finding and Approaching Investors

• Capital raising experts tap into their networks or use databases to identify suitable investors.
• They also arrange meetings, presentations, and negotiations with these investors.

4. Structuring Deals

• They help finalize the terms of the investment, including ownership stakes, repayment schedules, or interest rates.
• Legal compliance and contracts are managed to protect both parties.

5. Closing the Funding Round

• Once agreements are signed, funds are transferred to the business, and the capital raising process is complete.

Examples of Capital Raising Services

1. Startup Fundraising: A tech startup hires a venture capital consultant to raise $2 million in seed funding from angel investors.
2. IPO Management: A medium-sized company works with an investment bank to go public and raise $50 million by selling shares on the stock exchange.
3. Debt Refinancing: A manufacturing firm hires a financial advisor to raise $5 million through a bond issue to replace high-interest loans.
4. Mergers and Acquisitions (M&A): A retail company engages a private equity firm to fund the acquisition of a competitor.

Benefits of Using Capital Raising Services

1. Expert Guidance: Professionals navigate complex financial processes and regulations.
2. Time Savings: They handle investor outreach and negotiations, freeing up time for the business team.
3. Better Deal Terms: With their experience, they can secure favorable terms for funding.
4. Access to Networks: Providers often have established connections with investors and lenders.

Challenges in Capital Raising

1. Valuation Disputes: Investors and business owners may not agree on the company’s worth.
2. Dilution of Control: Equity funding involves giving up ownership, which can lead to reduced control.
3. High Costs: Hiring professionals for capital raising services can be expensive, especially for small businesses.
4. Regulatory Compliance: Navigating legal requirements can be challenging without expert help.

In summary, capital raising services help businesses of all sizes secure the funds they need, using expert strategies and networks. .

I bootstrapped and pushed sales past $5 million annually before raising investment. In my case, bootstrapping meant that I created a software product myself, packaged it myself, and sold it via reviews of that product in the magazines of the time. That gave me sales revenue to work with to build the company.

During that time I made money by consulting and dedicated all the money from software sales to building my company by improving the packaging, the marketing, and the product.

That company was Palo Alto Software. The story in more detail is here on Quora as Tim Berry's answer to How did Tim Berry grow Palo Alto Software?

Thanks for a2a.

Before engaging with investors, make sure you know the answers to the following questions:

• Why do you think raising venture capital is a good decision for your business?
• What consequences and downsides will there be if you raise these funds (e.g. dilution, loss of control, what kind of exit your investors may demand, etc.)?
• What exactly will you be spending the money on, and how much do you need in total?
  
• Where will you be once those funds run out (Will you need more money then? If so, will your company look like an attractive investment at that point in time? If not, then what?)

Too many people these days are raising VC rounds because it just feels like the default right thing to do. That's a highly dangerous way of thinking. You should have a really clear idea of what you're getting yourself into when you take outside venture investment; you should have conviction that your company has a chance to deliver high returns back to investors (i.e., would you make this investment yourself if you had the same amount of money sitting around?); and you should be comfortable with the downsides of doing such a transaction.

Many companies and founders are not great fits for venture capital, and that's totally fine. Only go down this path if it makes absolute sense to you as the CEO. Not all great technology companies take venture capital, and not all companies that take venture capital are great :) .

Quickly is a relative term. Raising equity is typically a 3–6 month process. Bank loans (when you have cash-flow and profits for 18+ months) is much faster.

Home equity loans, credit card advances, friends and family and many other sources all have different timelines of their own that you can generally not speed up. A VC’s due diligence process can eat 8+ weeks alone.

First let me dispel the most common false beliefs on raising outside investor capital:

1. Thinking it is easy. It will typically take 3–6 months of full-time effort. 80% will fail
2. That the “Idea” is worth something. It is not worth $0 because anyone can copy an idea and do better at marketing, sales, product development or just dump capital on that idea
3. Thinking VCs are the best source, they are the worst for 90% of businesses. They finance at most 1 in 200 plans and represent a tiny percentage of business financing. A narrow niche of rapid growth, technology-based companies mainly.
4. Your company has value one day #1. It does not, value and pre-money valuation come from team + plan + market research + product development. Investors generally put money in only AFTER value is created.

The pitch deck is critical. It separated out the 75% of people looking for money that did not do their homework. A good angel or VC can glean a lot about the team from this 5-minute read. An investor would be silly not to review it to save time. It is your calling card and foot in the door - but only when done well. Over 80% of pitches I have seen from many hundreds are missing the key data, sentences and strategies.

As an angel, Serial Entrepreneur/CEO for 20+ years and consultant to VCs I have been on every side of the table in most types of deals from $100K seeds to $300M. Each level, set by the amount sought and stage of development of the company, has different required criteria to get a face to face or video call.

I am doing a Free webinar shortly called: How to Raise Millions from Outside Investors for any company. It covers angels, VCs, crowdfunding and many other capital sources. Everything you need to prepare to raise capital. The top 8 reasons companies fail to raise funds and more. Limited seats. Register now here. FREE WEBINAR: How to Raise Millions For Any Company (FREE WEBINAR: How to Raise Millions For Any Company)

Bob Norton, CEO and CEO Adviser, http://www.AirTightMgt.com (http://www.AirTightMgt.com) and The CEO & Entrepreneur Boot Camp (CEO & Entrepreneur Training)

Starting a business with very little capital is very challenging, but it can be done. Entrepreneurs are often restless and it’s always tempting to “get going” with a business idea even when you don’t have everything you need. We glorify “bootstrapping a business” and idolize companies like Mary Kay and Domino’s Pizza that were started with a few hundred dollars. But the reality is if you run out of cash you’re done - even if your business is “technically” profitable. Starting with very little capital works best if you get paid immediately, have low overhead, and don’t have high inventory or labor expenses.

In any business, cash flow is everything and there is often a big gap between the time when you get paid and when the bills are due. Unexpected expenses, fraud, or a customer default can sink your entire business if you don’t have a cushion or line of credit with a bank. Some entrepreneurs have used personal credit cards to keep things going. At one time, I had $50,000 in accounts receivables and deposits waiting to clear, while simultaneously searching my couch cushions for spare change and borrowing from friends and family to keep the lights on until the payments came in. As your business grows, this problem will compound past the point where credit cards and personal loans can keep you afloat.

If you are going to start with very little capital, you need to plan carefully and conserve all the cash you can. This starts with your business model. Ideally, you are starting a business with very little overhead, with you as the primary source of labor, and a model that can scale as you grow. Keep in mind that any business with this model is going to have lots of competitors, so you’ll need to compete fiercely for customers.

Some things to keep in mind:

• Don’t spend a single dollar without thinking about how that dollar is going to grow your business. If what you are buying isn’t getting you more customers or enabling you to serve more customers, don’t spend it. Keeping a lean mindset will keep you humble and focused. Keep your costs low and make every dollar count.
• Your business account is not your personal piggy bank. Be prepared to take little or no salary for the first year of your business, even while paying employees. For the first few years of your business, you may be the lowest paid employee. Get your personal expenses down to as close to zero as you can.
• Don’t assume you have to buy everything for your business. Leases are available for almost everything. If you are just starting out your business won’t qualify for a line of credit without you personally co-signing and guaranteeing a loan. But if you can rent a piece of equipment for $50/month versus buying it for $1,000 when you’re starting out you can use the $950 on something else.
• Leverage the cloud and software as a service (SaaS) capabilities. Before you spend a single dollar on any software see if an alternative is available that can be used for a monthly fee - accounting software, CRM, sales planning, project management, email, cloud file storage. Cloud apps let you pay per user per month and you can scale up or down as your business needs change.
• Hold off on opening a physical office space unless you absolutely have to. Office space is expensive, and unless you need to meet customers in your office or have a physical retail or manufacturing space, don’t open an office. I worked for a consulting firm that didn’t open an office for nearly 18 months after they started. By that time, they were making over $1 million in annual revenue.
• Don’t buy any equipment new: Businesses go under all the time. Almost anything you need from office furniture to manufacturing equipment can be purchased used. Talk to your business banker - they often know of other businesses that went under and are liquidating and the banks want these assets off their books. Sometimes you can walk into a business with very little capital. (For example, Dominio’s Pizza was started for $900, by buying a Domi-Nick’s pizza. They didn’t have enough money to change the sign, so they made a quick edit).
• Make your business banker your best friend. If your business receives cash or checks in payment of services, walk those deposits into your branch during business hours and make sure you say hello to the bank manager and the business banking manager weekly. Eventually, you will need a line of credit or a loan from the bank and that is not the first time you want to meet a banker. If they know who you are and they see you frequently, you will have a much easier time getting help when you need it.
• Learn some basic accounting principals: You don’t have to be a CPA or even an accountant (you can always hire one), but you need to understand how to track your income and expenses and be able to determine which activities are profitable and which aren’t. You also need to be able to forecast cash flow - I can’t stress this enough. Unexpected events and expenses will pop up. Without sufficient capital, you can look successful to the outside world and still go out of business. The more you know about your business, the more control you’ll have.
• Be slow to hire: Full time employees are a huge overhead, and you can hire business services and freelancers to do almost everything your business needs until you are at the scale where you need a full time employee - and even then 2 or 3 dependable part time freelances may still be a better option.
• Choose quality customers over quantity: A good customer who is easy to work with and pays on time is better than a three bad customers who spend twice as much but never pay on time and are difficult to deal with. If you track the time spent dealing with lousy customers, you’ll quickly find out that you’re actually losing money. Don’t be afraid to fire your customer.

Always keep in mind that “cash is king” and net profit (what you actually keep after all the bills are paid) is more important than lofty revenue goals. If you run out of cash, and can’t secure a line of credit (or have exhausted your lines of credit) you are finished. To be successful you really have to focus on high value activities and investments that grow your business.

On the plus side, the habits you learn growing a lean business will serve you well in the future. Sometime having too much starting capital is worse for a business - it gives the early illusion of success and leads to wasteful processes and business practices. By starting lean, you’ll be more likely to maintain disciplined financial practices as your business grows.

Hope this was helpful.

Choosing between equity crowdfunding and venture capital depends on your startup's needs and stage of development. Here's a breakdown to help you decide:

Consider Equity Crowdfunding if:

• You need to raise a smaller amount of capital: Crowdfunding is ideal for startups seeking amounts typically in the millions, whereas VC deals are in the tens of millions - usually beyond the scope of a crowdfunding platform where financial regulators restrict the maximum sums that can be raised.
• Faster fundraising: Crowdfunding platforms can get you funded quicker than the VC route, which involves a lengthy due diligence process. Having said that, crowdfunding does require a crowd of people to promote your equity offer to. If you already have customers and/or social media followers this may not be much of an issue. On the other hand, it may require months of crowd-building for a startup’s crowdfunding to have a good chance of success.
• Building a community: Crowdfunding can be a great way to raise profile, and generate interest and brand awareness around your startup among a larger audience. This is particularly appropriate for B2C and D2C businesses, less so for B2B. That larger community could include angel investors who spot your crowdfunding, choose to invest, and are able and willing to provide mentorship and make introductions to their connections. Communities of followers and investors can also be valuable in providing feedback, acting as a market research group, and for crowdsourcing ideas.

Consider Venture Capital if:

• You need significant funding: VC firms are suited for startups with high growth potential requiring substantial capital investment.
• Strategic guidance: VCs bring not just money but valuable mentorship, industry connections, and expertise to help your business grow. They can also start telling a startup founder when to sell the business to meet their aims of investor returns. Don’t think a VC is on your side simply because they invest their clients’ money.
• Less dilution of ownership: While you'll cede some control, VCs typically take larger stakes than the numerous small investors in crowdfunding.

Here are some additional factors to weigh:

• Success rates: VC-backed startups have a higher chance of success, but competition for VC funding is fierce.
• Regulation: Crowdfunding regulations are less stringent, which to some financial commentators means that for investors it can carry a higher perception of a risk of fraud. However, crowdfunding platforms are regulated ( don’t use one that isn’t), and a community of potential investors always ask issuers to defend their valuation, supply current quarterly results to compare against historical performance, and more. Answers to such questions are posted in public forums. The “wisdom of the crowd” generally uncovers business plans and projects that are not up to scratch.
• Investor expertise: VCs are experienced investors who understand the startup landscape, while crowdfunding investors may vary. But then again - money is money.

Ultimately, the best choice depends on your specific circumstances. You can even consider a hybrid approach, combining a crowdfunding campaign with seeking VC funding. Some VCs are starting microfunds for their clients to get involved with startups at their earliest stages of development.

When I first went about being an independent business consultant, I was using the computer and printer I already had, sitting at a desk my father had built in his high school Shop class in the early 1950s, Internet and phone beside it. I had a buyout equivalent to six months pay from my employer, which bootstrapped my time forward.

Personally, I recommend that while debt against existing assets might assist for launching a business, you need to understand that most businesses are not initially profitable, particularly at a rate to pay on that debt. For some, it means having a second income, possibly from a spouse or a side job, while others really scrimp and save to free up the money the bank needs. Also involved are leveraging accounts payable as long as possible, but that makes things difficult later for the business once profitable.

Investors are also a possibility, but often in order to represent sufficient capital, they want controlling stakes in the company, extensive monitoring of spending and possibly changes in the business focus to establish profitability rather than your work being rewarding to you.

Being in business is not a time for learning the job you will be doing - you will be learning enough about bookkeeping, labour laws, tax and regulatory filings and if you employ others, just basic personnel management. You will be learning about how to identify customers and for matters of some complexity, probably contract law. Learning day to day core to what you are doing beyond keeping up with the industry is not what you want.

But some businesses are less expensive to get into

Okay, yes I wrote this whole answer primarily for the opportunity to use that picture.

Raising your first round of Venture Capital

A friend recently quit his high paying job to do a startup. He’s years of experience in product development and now wants to build a B2B SaaS company.

For some, it would seem like he’s struck gold because one well known accelerator has already offered him a place.

His initial plan was to bootstrap and launch an MVP (Minimum Viable Product) before raising venture capital, but now he’s tempted to take the VC money :).

Most founders don’t have this luxury of VCs backing them so early. Since he’s a long track record in product development, VCs are eager to back him.

But valuation is not high because he’s just starting out. So he’s in a dilemma – take the money right now or raise at a higher valuation post MVP?

Some founders face this quandary. It’s a good problem to have. These are successful guys who are building something interesting. They also have money and can bootstrap.

Raising a seed round from a reputed VC adds credibility and reduces risk. Founders can hire more people and go aggressive on product development. But some don’t want to dilute their equity at low valuations that accelerators offer.

Take the money or wait for MVP?

The question they must answer is if this seed capital can shorten their planned MVP launch date. For example, will they be able to bring down the launch date from 8 months (bootstrap) to 4 months (seed capital)?

If your answer is yes, I suggest taking the seed capital.

Startups are high growth companies. Time is of essence. Every founder’s goal should be to launch the MVP asap to test the market. If seed capital helps you do this, grab it and go full throttle.

If not, bootstrap until the MVP launch and then raise a larger round. Investors will take you more seriously, and you'll get a higher valuation. This would show that you’re willing to risk both your career and money.

Even though my friend doesn’t live in India, the route of raising capital after MVP is more relevant here than abroad. We lack seed VCs who invest at pre revenue stages. Although there are accelerators like YC and Antler, the competition is intense. It’s difficult to get into their programme unless you’ve the right background and credentials.

For first time founders, building an MVP is still the easiest way to raise capital. The challenge is most founders can’t take this route because they don’t have the money to survive the launch period. For them, raising seed capital is the only option.

Although you're not going to want to hear this, the simple fact is that you are highly unlikely to be able to raise capital to hire engineers to build your application for you. Investors only fund a teeny, tiny percentage of ventures that are presented to them (1 in 40 for angel investors, 1 in 400 for venture capital funds), and it just doesn't make sense for them to invest money in your idea, when they could invest the same cash into a company that already has an application developed, published and getting traction in the market.

The most constructive advice I can give is that you actively network around your local tech scene to see if you can convince a coder to join you as a co-founder and create the application in exchange for equity in your company. But even this is going to be very tough, because good iOS coders have almost as many opportunities these days as do investors!

Lead with your passion and believe in what you’re doing. If your idea or product will solve a real problem, then people will offer their support and want to be part of the journey.

As a founder myself, I learned the importance of chemistry fit and engaging with investors who can provide strategic value and contribute to the growth of your company, whether it's through network, skills, experience, etc. As a first time Founder/CEO, it's key to develop a strong support system for your business. Don't waste your time with nay-sayers and just focus on surrounding yourself with yay-sayers who are passionate about or have vested interest in your success.