First commandment of Startup Finance: "Thou shall not run out of money."
Second commandment of Startup Finance: "Take your money when you can get it."
The first is obvious. The second is a challenge to first time entrepreneurs.
So let's take a look at what serial entrepreneurs do with that commandment.
TIPS FROM SERIAL ENTREPRENEURS
- Aim for top tier angels and or venture capitalists. Yes, be brave, be bold. Be confident that your idea is worth the attention of the best. Start at the top.
- Getting turned down by an investor is not the end. Angels sit on only one or two boards of directors. VCs cannot be effective when on more than seven, they prefer only five. So the person you'd love to have invest and be on your board may simply not have enough time for you even though the person loves your idea.
- Be prepared to settle for second best. If your favorite top tier sources choose to not invest in your (wonderful) idea, get money from the next level investor. Often they are eager to pick up where the top tier passed on your startup. They look aggressively for deals the top tier pass on, often such startups prove to be big winners and help the investor rise in the ranks of the venture community. They will love helping you succeed.
- Plan on waves of financing. Pick six top tier venture investors and try to get your money from them. If no go, pick six more. It's difficult to manage more than six at a time. Keep going with waves until you have money in the bank.
- Screen investors carefully. Avoid wasting time with investors who have put funds into similar companies or even direct competitors. Find people who know your industry. Avoid educating others, don't waste your time.
- Beware of arrogance. Over confidence and excessive optimism can lead to no money raised. You cannot out-guess the timing of market crashes, when venture investors stop investing, when world stock markets crash and scare everyone away from startups that need money.
- Cash in the bank is wonderful. You need gas in the tank to get going, keep going. Regardless of who you got it from. Everyone in your company will love that news.
- Take the money and then focus on building a great company that grows successfully. You will need more money. With a bit of success, top tier choices will be eager.
BOTTOM LINE: Serial investors accept money when they can get it. They've learned that they will need more. So they accept what is offered, put it in the bank, and start building the company. Sounds simple, and it is. It's one of those easy things to do that contribute to constructing an unfair competitive advantage (you get going, fueled with cash before competitors do). So get going, you also can do it!
I wish you The Best on your Adventure!