Raising money is like painting
Every first-time entrepreneur is excited and intimidated by the concept of fundraising. It’s a world that they don’t know, and it lures them while scaring them:
What is my company worth?
Will I still have control?
How will I find investors?
What will the deal look like?
Will my investors want to run my company?
How will I provide the return that investors require?
What I tell these early stage entrepreneurs is that fundraising is like painting a room. Have you even painted a room a beautiful color? It’s gratifying, right? BUT, in my experience, painting is absolutely the LAST THING THAT YOU DO. First, you have to scrape all the crap off the walls from previous, probably bad paint jobs. Then you have to fill all of the nail and drill holes. Then you have to spackle over all of the uneven sections of the wall. Then you have to sand. And sand. And sand. Then you get to paint on the primer. Starting to look pretty good? Oops, I forgot. You have to sand the primer coat. And you may need to spackle more than once, with sanding in between. My husband trained me well. Even after I have done all of the prep, he goes over it once himself with his eagle eye to make sure that I haven’t missed any obvious spots. ONLY THEN ARE WE READAY TO APPLY COLOR, or, in my analogy, to fundraise.
Another way of looking at this is what I call the Pinocchio effect. You all know the story of the wooden puppet who wanted to be a real boy. If you, as an early stage company, like a wooden puppet, want to be a real company, a real boy, which means a fundable company, then do your prep! Walk, talk, act, and look like a real boy: have a strong board of advisors and a small but engaged board of directors (or managers depending on your legal entity). Once you get funded, chances are, the investors will want a board representative. If you, the first-time entrepreneur, have never been on a board or are not experienced about boards, then use your initial board to train you as to what a board is, what they do, how they function. Put someone on your initial board who will train you how to run a board meeting!
In addition, if you are thinking of raising money in the future, take a good look at your team. Generally, investors, particularly at the early stage, invest in people. People means more than one, and often more than two. Find co-founders or team members that fill in the gaps of where you need help, where you are weak. Don’t wait, thinking that you can raise the funds and THEN find the co-workers. You may not need to bring them all on board if you don’t have the funds and if they need to be paid in order to eat, but you can identify them and tell your future investors that.
So, new venturist, do your prep work before painting. Find out what it takes to be a real boy. And when you go out to raise money for the first time, be ready for the final transformation that a coat of paint can give to a room!