5 Tips for Raising the First Round of Capital for Your Startup
Black and Latino entrepreneurs are struggling for capital access. Companies with all-white founders receive a higher median investment from venture capitalists, according toÂ research from CB Insights. In Silicon Valley, 83% of teams getting seed and Series A money are all white. CB Insights found that a mere 1% of seed and Series-A funding nationally went to black founders. On the upside, there are a growing number of venture funds intended to help entrepreneurs of colors better access capital, including Intel Capital Diversity Fund, Comcast Ventures Catalyst Fund, and Groundwork.
Rounds of Funding
Series A, B, and C have nothing to do with the alphabet, but rather, they are the different rounds of venture capital financing and stages of development for companies raising capital. Funding rounds begin with seed capital–typically from friends, family, and the founder, also through angel investor networks and crowdfunding platforms.
Young Entrepreneur Council, an invite-only organization comprised of the world’s most promising young entrepreneurs, who generate billions of dollars in revenue and have created tens of thousands of jobs, recently posed the question: What is one piece of advice you’d give a fellow founder preparing to raise a Series A for the first time?
Here’s five of 10 tips that their membersÂ shared on BusinessCollective, YEC’s free virtual mentorship program platform.
1. Be Pitch Perfect
“While knowing your numbers inside and out, as well as proving your concept prior to pitching, is absolutely crucial, you must develop a pitch that ‘sells the shave, not the razor.’ This means a succinct, well-considered presentation that appeals to multiple personalities. Investing in professionals to design your powerpoint is also an excellent idea (i.e. copywriting, logo, branding, and so forth).”
–Nicole Munoz, Start Ranking Now
2. Remember That It’s Not Only About Money
“When we raised our first large round of capital, we wanted someone from the U.S. with deep connections and experience building e-commerce, global travel businesses, and, in particular, emerging technology markets like the Middle East, Asia, and Africa. We realized it’s not all about money, when we were trying to secure as much capital as possible.”
–Obinna Ekezie, Wakanow.com
3. Choose Investors Wisely
“Before raising a Series A, ask yourself if this is the right path for your company. Remember that money is a commodity, and you can get it anywhere. When you sign your Series A, you are committing to investors for the long-term. Make sure that you check references from previous investments they’ve made, and ensure your objectives for the business are aligned.”
–Arian Radmand, CoachUp
4. Remember Metrics are More Important Than Vision
“First, accept that raising a Series A round is going to be significantly harder than raising an angel round, no matter how easy (or hard) that was. Second, practice your pitch relentlessly and discuss strategy with other founders or friendly investors. Third, recognize that angel rounds are raised on vision, while Series A rounds are raised on solid business fundamentals and metrics.”
–Joseph Walla, HelloSign
5. Get Your Books in Order
“Nothing will torpedo a deal faster than poor accounting practices. You can do everything else right, but if your financials aren’t in shape, no reputable investor will want to put money into your company. Make sure you have a good accounting firm prepare your financials and taxes, and that everything is up to date, when it comes to tax payments.”
–Sathvik Tantry, FormSwift