Here is Brain York’s (CEO of @bliss_ai and investor via Bassin Ventures) explanation of how to raise your first $100k when you’ve never raised money before. He originally shared this on Medium. Follow Brain on Medium.
Raising money for your first startup can be a daunting task.
The thought of asking for money from investors you’ve never met before is a scary proposition. Pitching investors that have been in the industry for decades while you’re taking your first step into entrepreneurship is understandably difficult.
Rest assured, though, there’s a first for everything and anyone that has raised funding for a startup had their “first-time,” too. So, it can and has been done and it’s even possible with little-to-no contacts in the startup ecosystem.
On average it will take you 6 months and cost you $25k
However you look at it, the process of securing funding is going to take time and money. There’s no real way getting around that, but I want to help maximize your time and minimize money spent!
There are certainly ways to raise $100k faster and cheaper — the easiest way by quickly building a v1 product and getting immediate strong traction. Though, this is a rare scenario and typically reserved for technical founders who could build the prototype themselves.
For the rest of us (technical or non-technical), it’s going to require a significant time commitment as the first viable prototype to start pitching investors with will go through multiple iterations.
Furthermore, since you’re a first-time founder, you likely don’t have many investor connections, so it’s going to require a lot of hustle to capture initial interest and fundraising momentum.
How to meet investors
Securing a meeting with a potential investor is actually much easier than one would think. With some thoughtful effort you can meet with almost anyone. The thing most people overlook is the thoughtful part.
What doesn’t work?
In these examples people spent about ~5 seconds getting to know me before reaching out and asking for money. Zero thought or effort went into their initial outreach, making it highly unlikely I’ll even respond to the message, nevermind take a meeting.
One simple look at my LinkedIn or my AngleList profile would let you know exactly what markets/type of startups I’m interested in.
Explain to me why I might have interest in your company. Relate your company to another investment I’ve made. This does two things: 1) shows you are putting time and effort into your investor search and 2) actually saves you time by increasing your chance of investment as you won’t spend time pitching investors that would never write a check for the space you’re in.
I’ll respond to 100% of cold correspondence (emails, Twitter DMs, etc.) if the person personalizes the message and keeps it short.
Spend the initial time necessary getting to know the investor online and determine if it makes sense to meet. Not every investor makes sense for the business you are building.
Most first-time founders make this mistake — They see a LinkedIn profile with ‘Angel Investor’ and immediately want to meet with them because the person has money.
Find out what they’re interested in, both professionally and personally. Then, if there’s a fit, reach out in a thoughtful manner.
In this example, I Tweeted an investor cold asking him his favorite spot to run in SF (after research showed he loved running). He responded the Mt. Tam area and we set a time to run and talk shop.
I was fundraising for Bliss’ seed round and came across his profile for the first time. I saw he was a partner at a venture firm that focused on early stage SaaS B2B, which is a perfect fit for Bliss.
I had never corresponded with him before. All I did was find out what he was passionate about, which happened to be a mutual interest, and took it from there. A natural, organic conversation led to scheduling a (unconventional, yet more personal) meeting!
Twitter and blogs are two great places to engage. One of the best examples of this comes from Sam Rosen. Rosen corresponded with and got to know Mark Suster over Twitter and Suster’s blog, BothSides of the Table. Then, when Rosen founded MakeSpace, Suster ended up being the lead investor in the first equity round!
Lastly, warm introductions are best if you can get them. So, if you’re fortunate enough to have a mutual connection to a potential investor request the intro!
Breakdown of cost (~$25k)
$15k to build a prototype
“If you can’t be bothered to spend $5k-$10k to build a prototype, of what you want to do, then why should I take you seriously?” — Jason Calacanis
So true! Don’t expect to get an investment just because you have a cool idea. You have to show you can execute on a v1 version of a product.
Jason mentions $5k-$10k, but if you’re a non-technical you’ll probably be closer to $15k between design, front-end and back-end development.
*Tip: Don’t say you need money for development. This is a big (and common) mistake from newbies… no one wants to invest in a first-time founder and have their money go towards building the first product!
$10k for hustle fees
“If you’re in the tech business the best thing you can do for yourself is to move to Silicon Valley” — Naval Ravikant, source
In general, things move the fastest in San Francisco. The startup and venture ecosystem is the strongest among the major players around the country (or world for that matter). The Pay it Forward mentality oozes out of most people you meet with.
If you’re capable of relocating do it. If not, fake it!
Fly out to SF for a week every month. Stay in Airbnb’s, go to meetups, work out of the guest area at Galvanize and mingle. Get out to SF enough to efficiently set up meetings and effectively follow-up with people. The more you’re out talking to people the more influencers you’ll meet. Then, lean on these new contacts for intros to their contacts (but remember to ask for intro’s that actually make sense!).
Four months should be enough to get it done. So, $2k for travel and meals & entertainment each trip, with a little bit of padding (rounded up) equals $10k for hustle fees.
Recipe for success!
Fundraising is not an easy process. It takes time. It took me 14 months to close on the seed round for my first startup (I had a sub-par prototype and a transactional style with most of my meetings). But, I stuck with it!
You’re going to get a ton of “No’s,” but by staying focused and following a thoughtful approach to meeting investors, the “Yes’s” will follow!
Remember — hustle, thoughtful outreach, and a good looking prototype is a proven recipe for first-time founders raising that initial $100,000 investment!
Happy side note: If landing that first $100k isn’t exciting enough, you’ll be pleased to know the next $100k is a lot easier! Your investors will usually pass the deal onto their fellow investors and your momentum can lead to many more first-time meetings and investment dollars!