Raising money is very difficult and only possible for companies that can grow large and provide a nice return to investors that warrants the risk. This is for “Equity” or stock sales. Debt can be used with home equity loans, credit cards, friends and family though if you are just starting and have no product or team.

I recommend you do not start a company without at least 6 months personal expenses in the bank. Most of your input to create value (so shares can be sold for something over $0.00) will be from sweat equity. This “bootstrapping” creates value and shows investors you have the skills and a plan.

For a “real startup” with a product that must be created plan on a year to develop a plan, do market research, competitive intelligence, design a product, validate it by showing to prospects (before you build) and then building the MVP. If you do not know what an MVP is, you need to read The Lean Startup first. Service companies require less...

Valuation increase is all about reduction in the risk by achieving new milestones. Any startup worth outside investment has risks because it is doing something new, driven by innovation. If it is not new (differentiated in the market) it cannot demand the high gross margins needed to grow rapidly and pay investors the high return needed for that risk. Each risk that is removed by proving metrics around it is eliminated from the list and bumps the valuation significantly, sometimes by 2X or 3X even. This can mean millions more cash in a financing round and millions more net worth for the Founders and investors too. 

Although the risks can vary, most are pretty generic for early-stage startups. Here are the top ones to think about and set as goals, timed with your financing timeline:

1. Team - Attract a top team of seasoned executives in innovation, marketing and sales. Finance and operations are less critical early on and have more generic skills, as they need less...

Typically, no less than fifty percent compound annual growth rates after sales start will be needed to clear the minimums. More often, no less than one-hundred percent compound annual growth rate (CAGR) will be required at some point.  Of course, growth rates can vary by year, and these are just the average over a five to eight year investment before a liquidity event to cash out.

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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 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in...

Learning and preparation should start at least a year in advance. Once you are prepared, allow six months. It could be shorter or longer, that will depend on your deal and the market at the time in that industry space. Hot deal areas can get done quickly, most will be several months at least.

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Pitching and corralling investors with interest is not in your control.  I can take three to six months. Often the partners become unavailable (on their yachts and at vacation homes, presumably) for summer and winter holidays.

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Nothing you can do because usually a partner meeting and vote is required to finalize any deal. Due diligence can take sixty days. Generating a sense of urgency is always a challenge as they have a hundred deals they can do every...

My favorite technique is approaching the CEOs they have invested in before, which are often available in public records or on their respective websites. First you need to target very narrowly the right investors for your type of deal by industry, stage and sometimes geography. Then with this focused list you can find their portfolios, and the CEOs of those companies. Although many CEOs will not take your calls the right approach, asking for help, not money, can get you their sympathy and a lunch. Not long ago they were you and the founder, bond can be powerful.

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Lawyers can be approached that do deals with these companies, and top-level accountants. Often public records like Edgar where SEC IPO disclosures can be found will point you to these relationships.

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Networking is the key strategy. You need to get out there and meet other CEOs, investors and key referral sources at physical events. LinkedIn can be a way to find them, but cold approaches are difficult. I get invitations to invest every week from people I do not know, and I am certain most are not high-quality deals within seconds from their email, deck or type of approach.  Bad English, missing key data, no team background and a hundred other red flags mean an instant rejection. Too many to even send five minutes looking at them when the CEO cannot hit the key points to sell the deal in a few sentences. That is the only thing that will get me to read a deck, unless I want to sell them the help they need to raise funds because I like their idea and think the CEO/Founder has potential.

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Warm interdiction are best. This is best if it is a CEO that made an investor money, introducing you to their past investors. Lawyer, accountants and...

The more money that is poured into a deal, the lower the risk and more market share they are likely to garner. And hot deals where growth and financial projections are getting real can create a feeding frenzy among investors. It is also likely that these larger investment can scare off smaller competitors.  It is often assumed there are a limited number of winners in any given market.

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Furthermore, it could be three or ten, but limited. Therefore, more money means lower risk and higher upside. Sometimes these deal with blow up, proving to have false expectations. WeWork was a good example of this, and so was Theranos. Both we run by entrepreneurs with questionable ethics. And that’s why the most good investors will want to see strong integrity in the CEO and management team. No one wants to invest in a company with a dishonest management team.

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This table shows the typical sources that are best based on your company’s stage of development. Your mileage may vary.

Report Highlights

•  Nationally, the rate of new entrepreneurs in 2021 was 0.36 percent, meaning that an average of 360 out of every 100,000 adults became new entrepreneurs in a given month. The monthly rate increased substantially from 2019 to 2020 as the economy went through the shutdowns, job losses, and re-openings that characterized the early stages of the COVID-19 pandemic, and has only partly returned to pre-pandemic levels.
•  The opportunity share of new entrepreneurs rebounded substantially to 80.9 percent from its low of 69.8 percent in 2020, but remained much lower than its pre-pandemic level of 86.9 percent in 2019. The decline from 2019 to 2020 during the first year of the pandemic was 17.1 percentage points, which is much larger than the one-year decline of 6.9 percentage points from 2008 to 2009 during the Great Recession.

There is a free video course on this page explaining this Entrepreneurial Journey.

•  Startup early job creation in 2021...

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. A company has value on 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.

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