How Do You Go About Finding Outside Investors and What Does It Take?
Networking is always the best method to build your universe of contacts. Historically this was done by attending investor pitches, meeting other CEOs and Founders and working with consultants to target specific categories and profiles of investor. However, with COVID and more technology and social networks there is an increase in cold outreach through platforms like LinkedIn, Angel.co, angel syndicates and other platforms that allow you to publish your profile. Of course, crowdfunding is also a way to find angels, as these platforms have member that are active and want to invest small amounts in many deals. This however a very different strategy with a different marketing and sales plan than approaching traditional angels and VCs.
One key strategy is to back trace investors who made money in the sector before from SEC filings on IPOs. This can point you to individual investors as well as venture capitalists and even corporate investors.
How big are typical venture capital investment valuations at each stage of development?? Series A, Series B, and Series C?
This is best answered by this diagram of statistical information. However, be aware these are the deals that report only and not all deals and so likely higher than the true averages because smaller angel deals are less likely to report to PitchBook.
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No one really knows or can get data on all deals as they are private and may be between the company and on angel investor.
I would guess these valuations are doubled by missing so many of the smaller, seed deals that go unreported. Many companies start with a single $50K to $100K angel which is enough to get a product finished after the founder’s invest sweat equity and some of their own capital while bootstrapping.
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Should I hire a consultant to help me raise funding from outside investors?
Yes, assuming you have not successfully closed a similar round of financing before, this is a good idea that will generate a large return on the investment. It is likely the difference between success and failure, or at least getting a deal done in six months instead of two years of very expensive “learning”. The financing process is complex, and most will learn the hard way over many months or even several years of mistakes. The lost opportunity cost can be millions. This is super dumb when compared to spending a few grand on a quality consultant with experience in this area. Not a “finder” though. They are mostly scammers.
Most will absolutely need help with the following tasks, ideally from an experienced CEO that has done this exact task before:
- Validation of your market entry strategy. This is key, and most people get it wrong with a short-term vision instead of a multistep entry that broadens the company’s focus to larger...
How hard is it to get outside investors and Do I need revenue to get outside funding?
Very hard, maybe 1 in 400 deals VC looks at will become a closed deal that they invest in. Most go in the circular file. More than 90% of companies never get any outside investors of any kind. This does not include bank loans based on assets and cash-flow which is much easier to get because the banks (not investors really, they are lenders) have security and do not take risks like early-stage investors.
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Although revenue is helpful, and opens many more options, it is not required by angel investors. Most VCs require some revenue to know you have a proven “proof of concept” meaning both a product and a market/sales process that can close deals. This is less true in biotech, pharmaceuticals and medical where product development approvals are far longer and may require FDA approval.
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What kind of capital should I raise?
This table shows the typical sources that are best based on your company’s stage of development. Your mileage may vary.
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| Friends & Family | Angel Investors | Venture Capital | Crowdfunding |
| Usually Called | Friend and Family Money | Seed or Bridge | Series A, B, C etc. | Several types depending on size. SEC regulated. Types are CF, A which have different requirements for reporting, etc. |
| Employees | 0 to 10 | 1-15 | 10+ to 500 | 0 to infinity |
| Annualized Revenue | $0 to $500K/year | $0 to $2M, more the better. Path to profits with scale clear | Rarely $0 or less than $500K annually, but can be any amount. | $0 to $2M, more than that you may have better sources that can be more helpful. |
| Product Maturity | Idea to prototype | Close to or have an MVP already. | Working product with likely improvements in the pipeline but operating at many customers. | Idea to $2M annual revenues. |
| Deal Structure | Convertible or SAFE note with a discount on the... |
How much capital can a company raise at each stage of its development?
These stages have evolved over time and the ranges are somewhat elastic, mainly based on the quality of the team involved. If you have three top people with 15+ years’ experience and success each as CEO, Chief of Product Development and head of sales/marketing you may be able to get a pre-money valuation of $5M to $10M today with a quality deal. With just a founder and a business plan, your company is likely worth less than $500K. This assumes a $1B market potential, $100M+ revenue potential in five year (top 5% of all companies ever) and some nice progress on product development or actual revenue.
Do not try to do this alone. For that, we offer a flat rate package here. Or hourly consulting. Call (619) SCALE06 from 9am to 6pm CT.
Bootstrapping – This is where the founders are putting in sweat equity, and possibly a small amount of cash investment as well. Founders often bootstrap longer to keep more of their own companies by investing $50K...
Should you use a finder raising capital?
Absolutely not. These people are usually pretty much scammers. It is illegal for anyone, except SEC licensed brokers, to sell stock to other people. There is some gray area here, as they can make introductions, but these usually have no weight at all with investors. And they can never take a percentage of the stock or cash in the close for these “introductions”. Run, don’t walk from anyone seeking a percentage of funds closed to be your “finder” or “Consultant” to do introductions.
Click here to get this Financial Package
How to Raise Millions for Any Company - Online Video Course
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Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over...
How do you find someone to help you raise capital?
Firstly, there are several categories of help, and some deserve the cost and effort while others do not.
Finders, people that claim they will introduce you to investors are generally just conman, or women. Rarely, if ever, do these people have any real influence or credibility. By definition, if they are getting paid something to do this, then they have lost all credibility by creating a conflict of interest. They have an instant conflict of interest. A “warm referral” is free because the person knows enough to be confident in you and your pitch, at least enough not to embarrass them – which frankly most pitches would do because they are so poorly crafted.
Investment Bankers typically are interested when you wish to raise $5M+. Some have no interest until you are seeking $20M or more. This means you are already an established company with revenues, a quality team and a proven product already. Typically, some profits too. So, this is...
Build the company of your dreams and Raise Millions from Outside Investors
This $1,695 package includes four private online sessions with me working on your financing, and the offline work needed to review and edit your deck. It will greatly improve your BUSINESS, not just your deck. You will be "Level 5", or at least "angel ready" by the time we are done if you follow the guidance I give. This process usually takes 4-8 weeks, depending on your ability to focus on that work. Nothing worthwhile is easy.
And remember to not operate based on these common myths of financing:
1. Your idea alone is worth millions. NOPE! Pre-money valuation is only created when you put a team, plan and some value behind it via sweat equity and/or cash invested to create value - Unless you are Elon Musk.
2. Raising funding is easy - Not! Over 80% who try will fail. You need some experience on your team that has done this before to guide you to shorten the process and avoid...
What are options to raise venture capital?
You create value by doing the following before even calling a VC:
- Build a team of 2–3 committed founders with 10+ years' experience each.
- 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).
- 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)
- 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”....
