The Funding Guru

There are books, blogs, websites and gurus spanning just about every element of starting and running a business – in fact, there are so many types of help and expertise available, some even free, that you would expect it would be near impossible for a new business or entrepreneur to fail.  Surely with all that fantastic help and all those free resources we can all be starting and building successful businesses like mushrooms?                                                  

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Unfortunately, despite more resources than an entrepreneur can shake a stick at, the data of startup successes and failures has changed little over the decades – sadly, about nine in every ten companies still fail within their first few years, leaving behind the shells of companies that could have made it, along with the dreams of their founders.  But what has become clear, with the successful growth of companies like Microsoft, Google and Facebook and others, is that starting a company is perhaps the best track to achieving billionaire status through the creation and the ultimate sale of that business to the public market or a much larger company. In recent years, so many fortunes have been made and so quickly, that this era is unlike any in human history. Company founders are making more money, more quickly than ever before.

The question I think those of us who have the inner need to build businesses need to ask is – how are they doing it and can we do it too?

This time will soon pass and which of us want to look back and realize that the best opportunity of our lives was right in front of us and we had failed to grab it?

So again, how do people start and grow successful world changing businesses?

The answer to that question is broad but one thing I know for sure – funding and how and when its used – is a critical element.  When ever a business fails, central to that failure is nearly always the fact that business ran out of money and in my mind there are usually two reasons for that….

Either the processes and systems which underpin the business are flawed or the funding strategy and its execution are flawed.

Knowing when, how and under what terms to raise funds (and from whom) is critical for any companies foundation, growth and ultimate success.

I have spent the last twenty years focused on trying to understand what makes an entrepreneur and a startup successful.  I started my first company at college and over the last twenty years have both started and helped others start many businesses. In 1995, I left England and came to the United States to attend Harvard Business School and from the beginning, focused on getting under the covers of what makes a startup and an entrepreneur successful. While at Harvard, you guessed it….I started another business from my dorm room, a business that Inc Magazine called “One of the Hottest Startups of the Year” which ultimately paid out seven figures to its shareholders.

Returning to the United Kingdom, I focused on two projects – first, fixing a three hundred year old bank with a handful of business builders and sitting on the Board of the Department of Trade & Industry where I joined twenty entrepreneurs rigorously chosen by the UK government to advise them on startups and entrepreneurial ventures. My area of focus was funding and how critical it is to startup success.

Anyone that knows me well would probably be surprised that I focused on the fund raising side of the entrepreneurial equation – raising funds seems so ‘dry’ right?  I am what most would consider a people focused business builder – why did I focus on fund raising?

Its simple – having started multiple businesses and having helped friends start businesses, in my opinion its often the lack of the right kind of funding at the different stages of the business that cause many to fail. Raising capital may seem dry but just like any part of the successful startup fund raising equation – it’s both a science and an art form.

Like I said before, I am NOT a finance guy…I think if you persuaded someone at Harvard Business School to show you my transcripts from the finance test – you’ll probably laugh your ass off…from memory it was a ‘pass’ at best. I wish I could tell you the exact percentage but I’ve blocked it out as too painful to remember. But what I have done is go through the sometimes tortuous cycle of raising capital for businesses from angels and venture capitalists. I probably spent a full year or more walking up and down Sand Hill Road, the Venture Capital ‘Strip’ in Silicon Valley, looking for funds for one of my start-ups and a few more times after that with friends for their startups and high growth companies.

I’d like to underscore that last point – while building a business, I spent just about a full year diverting some of my attention and energy from the core business so I could focus on raising funds for it. At this point you may be saying – wow!  A year! Surely it didn’t take a full year? Well having hung out in too many coffee shops (read – free office space) and talking with other entrepreneurs walking up and down the same Venture Capital strip – spending up to a year to raise capital is not unusual. After all, we’re talking about a process which, if successful, can mean an injection of millions of dollars into your business while adding a seriously connected and motivated investors to the team. 

But a year? Seems like an awfully long time right…

Its true – and part of the reason for it taking that long was because I was learning the whole time…I was learning to raise decent amounts of investor capital.  Each meeting I managed to get, each presentation I prepared for and made, each lunch and negotiation I had was all part of the learning curve.  When I add up all the time spent raising capital, both from angels and from VCs – its quite a few years of learning.  Add to that the time I spent on the board of the Department of Trade & Industry for the UK government and fund raising has been a critical element of the startup process. 

 NOTE: Part of the reason why it’s an intense process if because it’s a serious amount of money.  The first Venture Capital round I completed brought in just over $5m to the business…and that number increased – for example, the next Venture Capital funds I raised came to just over $15m.

 …but despite fund raising being a critical element of the startup process – I’ve found little real support for people starting businesses.  Yes there are blogs and sites that will take you through the bare essentials of what an angel and a venture capitalist are, their addresses, websites and even some of the difference between them all. But I still haven’t been able to find a step by step system that helps a person starting and growing business to raise the funds they need. Like any process, there are ways to do it well and pitfalls to avoid – yes, you can spend a year or so focused on raising the cash you need for your business and who knows, maybe you’ll get lucky and it will take only six months.

Or if you are here, maybe you’ve already started that process and are surprised at how tough its been so far to raise the money you need. One idea I’d like to get across right now is if you have already started on the pathway to raise capital and are finding it hard – you are probably thinking that Venture Capitalists and Angels are all tough S.O.Bs that wouldn’t know a good investment if it kicked them in the pants.  I’d like you to think about flipping your thinking…Why? Because I can absolutely state – without knowing which Angels or Venture Capitalists you’ve spoken too (if any!) – that they would like nothing better than to find the perfect company to invest in. If they met with the company they believed were perfect for them tomorrow – they WOULD invest. That’s their business, its why they get out of bed in the morning and how they pay for their kids braces and how they expect to send them to college.

So flip your thinking – if you have already tried to raise capital from different angels or a handful or more of venture capitalists and haven’t locked that cash in yet…the problem isn’t with the investors you’ve been speaking with – I can tell you…without knowing anything about you or your business…that your business, you and how you are going about raising the money you need, are the problem.

As I said – its part science and part art – oh yeah, and luck has its role to play too.  This system will help with the science and art parts – if you get those elements right, the luck will probably take care of itself. After all, luck can only do so much…and if you do it right, you can help create your own luck. But if you want to just rely on luck, why not try all those free resources – after all, only 9 out of every 10 companies fail using that route.  You might find out, after a year or two, that you were one of the lucky ones…

Interested in finding out more?

Join my email list and I’ll send you an update when we have more information.

Good luck with your funding.

Andrew

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