Even Twitter, which has been around for more than five years and is valued at $8 billion (according to the tech blog AllThingsD), recently raised more money by authorizing the issuance of 25 million new shares, priced at $16 per share.
While visiting San Francisco this summer, I dropped by the FileBlaze office to talk with Baker about how he was able to build capital, retain equity and keep his company on track. Watch the video and read below for his insights.
Invest in your intellectual capital. You need more than a vision to ask people for money. This means if you can’t bring money to the table, then bring your skills and experience. Investors will fund you if they trust that you or your team has a solid business or technology background. Find people who can fill in the gaps where you lack skill or experience. “If you’re a business person, find a chief technology officer. If you’re a CTO, find a business person that has experience bringing products to the market,” says Baker, who also previously worked as director of strategy at Village Ventures, a VC firm.
Fund to the next milestone. Don’t try to raise $1 million and tell investors that they will see something in a year. Instead raise $100,000 to $150,000 and deploy an alpha or beta prototype, or try to make your company revenue positive. This way you can reach a milestone and fund a second round with a higher valuation because now you have shown investors that you’ve accomplished something. That will help you avoid diluting the equity.
Focus on niche markets and niche consumers that you understand. A lot of times new media companies focus on the broad appeal of the Internet and all of the potential customers therein. Instead, Baker suggests that you focus in on a niche community. “Take a page out of Mark Zuckerberg’s playbook. Focus on that freshman in your dorm at Harvard and offer the best product for that niche and hopefully that niche will become something that everyone can get excited about and reach a broader audience. With FileBlaze Baker focused on digital professionals, because he had worked in the industry and he knew the ins and outs of the needs of that community.