Burning a hole at the top of a long list of needs for a startup entrepreneur is good old Benjamin Franklins.
Yes -- stacks of capital needed to fund dreams of a vast and bright future.
And what entrepreneur among you couldn’t use a few more dollars for your startup?
Yes -- just what I thought.
So reaching out through the ranks of my connections I came across the good fortune to pick the brain of Paul Jones, former Silicon Valley resident with Cooley Godward and current Chair of the Venture Best group for Michael Best and Friedrich.
Jones is a serial venture capital backed entrepreneur; angel investor; and Co-Founder of a $26 million early stage venture capital fund. He was Entrepreneur of the Year and President of the Council for Entrepreneurial Development in North Carolina and also serves as the Fund Investment Adviser for Angels on the Water, a Wisconsin Angel investment fund.
So in an hour long rapid fire discussion; Jones gave me his 12 best tips on raising venture capital any aspiring entrepreneur would be wise to listen to:
1.) You Have to Decide: High Impact or Small Business Entrepreneur?
Yes -- you call yourself an entrepreneur. But hold the phone -- because unless you have a pretty clear idea going in what your aspirations are; you could find yourself flailing around like a ship without a rudder.
As Jones explains it; “You have to know going in what you really want; because you can’t have it both ways. If you go into high impact venture-backed entrepreneurship; you’re trying to build a business that’s going to scale and make people wealthy. And you’re not going to be your own boss for long. Whereas a small business entrepreneur wants salary security and to be their own boss. So you really need to ask yourself which world you’re trying to be in. Are you trying to be a business owner who’s well respected in the community; has a nice income and runs his own shop or are you trying to create the next Microsoft or Twitter? You have to choose because these are two very different rides.”
2.) You May Have to Move
Did you pick the high impact entrepreneur road? Awesome. But brace yourself -- because unless you already live in Silicon Valley; you may have to move.
Jones puts it frankly; “No one ever said life is fair and I’ve written and told people that if raising money at the best valuation fast is your sole objective in life -- you probably need to move to Silicon Valley.”
3.) Get On The Team -- Even if You Sit the Bench For Awhile
Never been an entrepreneur before and have zero experience? Have no fear. You can still get in the high impact entrepreneur game.
As Jones explains; “Put yourself in an environment where you can get exposure to good deals and successful entrepreneurs. There’s an incredible training ground out there. Go to conferences with pitches by entrepreneurs. Find a place to work where the company works with high impact entrepreneurs. You have to be willing to go and do it and realize you’re not going to get a big paycheck -- but at least you’re in the game.”
4.) Focus on Your Own Team
Now that you’re on the path to superstardom; are you interested in the most important thing for you to work on? According to Jones -- it’s your team.
“Money follows people. The majority of VCs I’ve worked with over the years would say the most important thing is the team. Also, in my experience, the proximate cause of most startup failures is because the team is not up to the next task. It’s usually at those various pivot points where a team proves dysfunctional under stress and implodes because of it. So your team is of paramount importance.”
5.) Get a Mentor -- But Choose Wisely
One of the smartest players you can find for your team as an entrepreneur is a mentor, coach or counselor.
Jones told me this; “Get counsel and be very careful about who it is. Not to confuse the fact that someone who can run a billion dollar corporation does not necessarily mean they’re a good adviser for your startup. So really find people who have experience and wisdom in the trenches of the kind of thing you’re trying to do. The CEO of some Fortune 500 company is not a great person to be an adviser. They might be a great person to leverage for money -- but they’re probably not going to have a lot to tell you about the realities of building your high tech business on a shoestring.”
6.) Treat It Like A Game
Too many entrepreneurs aren’t having any fun with their businesses. I see it all the time. But Jones has some good wisdom for you:
“I used to say when I was an entrepreneur that what I’m doing is a game. I want to win and I play really hard. You follow the rules but at the end of the day, going to work is like going to play golf. Pure fun. And as I say, if you want to be the best golfer in the world, one thing you can say about Tiger Woods is he hits an incredible number of practice shots. If you want to be the best pianist in the world, you’re going to practice a lot.”
7.) Failure is Acceptable
Think you’re going to hit grand slams every time at bat? Think again.
According to Jones; “One of the great things about being an entrepreneur – and I used to say this about even being a venture investor too: You’re supposed to strike out a bunch. You have to be one of those people who realize that if you’re going to hit 714 home runs, you’re probably going to strike out over 1,300 times like Babe Ruth did.”
8.) Learn the Lingo and Know What’s Going On
You have the team put together and are ready to play the game -- but you don’t know the rules. Not good. According to Jones, not understanding the terminology and what’s going on in the world of venture capital is a real deal killer.
“Take some time with the lingo and figure out what’s going on. How do venture deals work? What is the real valuation? I mean most of the entrepreneurs I run into these days, they just don’t know what the valuations are in the market and when they do, they will compare themselves to an entrepreneur in Silicon Valley. But by the way -- that person has made a half billion dollars for themselves and his investors. What have you done? So I think a lot of it is just learn the lingo. Know what convertible preferred stock is. Know that you don’t go to a venture investor and give him some high valuation number. You’re a startup with no prior experience in the venture world. That’s just a reality.”
9.) No Cold Calling Investors
Pouring in from all points across the globe to angels, VCs and investors are unsolicited requests for funding. Business plans not even opened and sitting at the bottom of the trash can. Don’t let yours be one of them.
Jones put it this way when I asked him one of the major things not to do when seeking funding; “Well, one of the obvious ones is do not cold call investors. You should try to identify investors carefully and not just send around a plan to every investor in the book or everyone you can find from some list of VCs. You should work to find a referral -- which is an obvious one you still see entrepreneurs not doing.”
10.) Have Situational Awareness
Topping off your need to know the lingo and avoid cold calling investors is this one: Know your space.
As Jones explains; “It’s not good enough to have the best web commerce company in your backyard. You have to go out and really figure out who’s in your space or near your space everywhere. Not just insular in your own little environment. I see so many entrepreneurs who just aren’t aware of what’s going on in other parts of the world even though it’s easy to find out these days with technology and the Internet.”
11.) The Right Investor Should Add More Value Than Just Greenbacks
Getting someone to write you and your team a check is the easy part if you have a great idea and proven business model. But what’s even more key is getting the right person to write the check.
Jones told me; “It’s much more significant for a startup entrepreneur to work with super angels and accelerator type things where you get a little bit of money and get some real valuable help. It sets you up for sophisticated investments. There are a lot of good venture capitalists out there and they really do add more than money to the equation. If you’re an entrepreneur who hasn’t done it before; I think the discipline is having an outsider who knows something about the business and investment climate. It’s a good thing.”
12.) Stop Crying in Your Milk When Things Don’t Go Right
Again, you will fail -- but that’s okay. The problem lies not in the failing -- it’s what you do when failure crashes through your door. As Jones explains;
“If I look at a bunch of little companies to invest in and 12 months ago they were all in the same place. But one is doing things. They’re not waiting for the phone to ring. They’re changing the pitch a little. They’re finding a way to get some sort of deal done; finding a way to go visit people in different markets and get more information. The ones that ultimately succeed are the ones where if six months go by and they have no funding; they change the deal. It looks different. Better. These people are on the move and that’s really critical. Successful entrepreneurs tend to be very driven and let’s face it; if you want to be a really successful entrepreneur, it’s a 24 by 7 job. You’ve got to demonstrate passion and energy and the ability to think on the fly and to make things happen with either trivial or no money.”
NOTE: If you don't know me, I'm Eric. Husband, father &life-long entrepreneur...
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