At Ghacklabs, our team was running a fun $1 experiment – anyone could ask us a question and we’d charge $1 for providing the answer.
We got a heap of questions and noticed that a lot of those came from early-stage startups who wanted to know how to raise early-stage investment capital.So. How do you raise an early stage investment for your startup?
It can be tough and there are multiple ways to approach it. So we thought a lot of new or aspiring founders could benefit from hearing how others have gone about it. Today, we’ll be hearing some examples from WealthNation, AdviceMarket, GuessBox.io and DealzTap.
WealthNation raised $400K pre-MVP from high net worth investors with broad executive level experience in the financial sector. Jason Kaye, CEO, and Co-founder shares his story.
“Experience is important. I had eleven years of experience in the financial services industry before I started working at a VC firm based in Melbourne. My co-founder, Tony Zakula, came with a FinTech background from his days as CTO at Expensify (a Silicon Valley startup that counts Uber, Yahoo!, Pinterest, Snapchat among their customers).
Everyone has a different experience. But in our case, investors were looking at two things:
- The team – What’s their background? What’s their history? Why are they doing this? Do they have a history of delivery?
- The opportunity – What’s the business opportunity here? What problem are they trying to solve? Is it a problem worth solving? Do I believe their story?
If those things jive in potential investors mind’s, you’re in with a shot at raising some cash.”
The key lesson: Investors pay close attention to team and opportunity. It helps if your experience backs up what you’re doing and why you’re doing it.
Spiros Christoforatos, Founder of AdviceMarket, raised a significant amount in one night. Here’s his story.
“After a few months of putting together the requirements that were needed to build the AdviceMarket MVP, I quickly realized that the project would take a few more dollars to become a reality.
Not so much the build but more about the money that was required to market the platform. I didn’t have that much time to seek investment through angels or VC’s and decided that the quickest way to get funding was to invite business associates, family and friends together in a room and pitch my idea to them.
Armed with a well thought out shareholder agreement, a PowerPoint presentation, my research and my hypotheses testing – three hours later I had the majority of the group committing funds to the project.
Within two weeks, all active investors deposited the funds into our company account and off we went.”
The key lesson: Sometimes if you’re looking for capital you can raise a friend and family round. However, a word of caution – do not raise capital from friends or family if they do not have the money to lose. And, it’s important to be aware that if you’re not successful, it could ruin some of your very close relationships.
Eric Azizian, Founder of GuessBox.io, gets the money in the bank a week after pitching his boss. Here’s Eric’s story.
“Sometimes raising money is a simple as being in the right place with the right person. I built our MVP in my spare time – under the gut instinct that outbound marketing could be done a lot better.
I showed my boss our prototype, who happened to be an angel investor – and a week later the money was transferred into our account.”
The key lesson: A lot of startups get funded by having existing relationships with investors – and, it helps if you can show them a working prototype too.
Phil Tran, Founder of Tayble, shares his tips on how he raised an early stage investment pre-product. Here’s what Tran has to say.
“It’s all about relationships. Pre-revenue funding is all about the non-savvy investors having confiding trust in you.
You need to build that relationship over time, and you need to know the right people to talk to as well – so I do agree with the expression: ‘You have to be in the right place, at the right time.’
However, it’s not always the case. You need to work for it. Don’t wait for the opportunity to come to you, knock some doors down. What I mean by this is in the literal sense. Opening doors create opportunity, and if you don’t do that, you’ll be left stranded.
If they do decide to invest, the majority of the time it’s because they already have a good vibe about you. The 20 / 80 rule:
- 20% – Is the product.
- 80% – Is the relationship.
It’s all about the trust that they have in you. At the end of the day, that’s why angel investors place great emphasis on team. A team that knows what they’re doing and can execute.
Non-savvy investors believe in the founder and trust the CEO. That connection has to be already in place.
To seek out these non-savvy investors, you need to have a lot of meetings and a lot of conversations. The hardest thing is meeting them and asking for their time, just to have a conversation.
That’s why you’ll need to make sure that you are willing to do all of the hard work and drive across town, or drive across the state to meet someone for half and hour that can potentially pave the way to an early stage investment.
The key lesson: You have to establish trust with investors first and be willing to go the extra mile to meet them. Doors open for those that knock.
However, it’s not as easy as it sounds.
Alistair Bentley, CEO of Simply Wall St. shares practical advice on early-stage startup funding. One important element missing from these examples above is time. Here’s what Bentley has to say.
“Budget on fundraising taking you at least six months to raise, and you’ll be very lucky to do it sooner. The only exception is if it’s your second rodeo; or small friends and family round.”
The key lesson: The examples above may paint an inaccurate picture that it’s easy to raise early funding. Be prepared for it to take longer than you expect.
Raising an early stage investment can be a combination of having the right network, trust, a prototype, and relationships. The cases mentioned today a rare, and it can often take six months to get an investment.
The examples from WealthNation, AdviceMarket, GuessBox.io and DealzTap show how they raised an early stage investment. They were able to get an investment reasonably comfortable, but this does not mean it will be the same for you. We’d love to know what you think. What were your experiences raising capital? How long did it take you? Did you do anything different?