Atit is the co-founder at Gigstart.
My last post was about bootstrapping a company, but you need to move ahead in your journey. After Gigstart successfully raised $210K in its first round of funding, I sat down to analyze my entire journey till now, things I shouldn’t have done and the things I did which helped me. The following article is a synopsis of that. Please feel free to ask me to elaborate on any point in the comments section below, I would be happy to…
In the early stages of your journey you will feel that the lack of funds is the only thing that is stopping you from building a big business. Though that is not the case, funds will definitely help you build yourself bigger.
- Spray and Pray – As mentioned in my last article, approach as many people as possible for your funding.
- An accelerator is the first important boost you may get but it will not get you all the way.
- Let your co-founder focus on business at all times. Not more than one person in your team should be involved in the process of fund raising.
- Don’t waste too much time on business plans and estimations.
- Don’t waste time chasing VC’s but do meet them.
- Progress mailer – make a list of people you meet and mail them your progress regularly (once a month), but don’t spam them.
- 25-30 rule – In the first fund raiser you will need to dilute anywhere between one-forth to one-third of your company. Calculate your valuation basis this. In simple terms, your funding Ask should be 25% of your valuation. You don’t need to find someone who will invest this entire amount but focus on finding that one person who will commit at least 30% of this amount. Once you have a credible person ready to put this money, everything else will fall into place.
Once you have gotten a commitment for your 30% funds, the approach needs to change for the remaining amount
- Early bird gets the prize – don’t shy away from giving something extra to the early committers. It is not unfair at all. Don’t sweat over 1-2% equity. It won’t matter if you are able to build what you set out for.
- No doesn’t mean No forever – Mail your mailing group about the 30% fund commitment and you will be surprised to see how many ‘No’s’ convert to ‘Yes’s’. Ask them to make introductions for the interested people.
- Reach out to startup portals like Inc42 etc. to make introductions. Many investors approach them for good deals.
- Lawyer plus CA – Get the best you can in both these departments. Contract terms like board seat and right to offer are very important.
- New Companies Act is a bitch but please abide it.
- Clearly identify areas in which you need help and choose investors accordingly
- You will not be able to accommodate everyone you like. You will need to choose. But please remember that no matter what, don’t increase your funding Ask and dilute more at this stage.
- All this while, please remember that business should go on as usual.
- Share funding updates in as much detail as possible with your team.
- Celebrate but don’t relax.
- Funding is a means but it is not the goal.