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How the Raising Capital Seminar Helped Me Raise $1.5M for My Startup

Des Moines Startups Three Lessons on Raising Capital

August 7, 2017

In this post, I want to tell you about three things that I learned the Raising Capital Seminar that were critical to me raising $1.5 million for my startup. But first, a little backstory: I’m no stranger to startups. Over the last 10 years that has been my world and I’ve been fortunate enough to experience a few successful exits over that time. With a decade of experience, you would think that I have a lot of this “startup stuff” figured out, but the truth is, you’re never done learning.

During my startup career, I had yet to raise capital. Everything I had started I either bootstrapped, borrowed money from a bank or ran up a huge credit card bill. The latter was my first startup and a lesson that I paid for even after I sold the company. When I began my latest venture in May of 2016, I knew that I was going to need to raise some serious capital for this one. It was my first hardware product and I knew that my financial backing alone would not be enough to see the product to market.

Like many of you, I know that the best way to increase my likelihood of success is to surround myself with great mentors and to try and learn as much as possible. It took me some very hard years to learn how to put my ego aside and graciously seek advice from others. It’s that spirit of learning that led me to sign up for the Raising Capital Seminar in September of 2016.

Lesson 1: Be Prepared

I’m sure many of you probably just scanned down to this point and you’re now rolling your eyes and saying, “duh!” That’s probably what I would have done, too. It wasn’t until I attended the seminar that I understood just what being prepared for fundraising meant.

Read

They suggested a book by Brad Feld called Venture Deals. I ended up reading this half a dozen times and taking nearly a notebook full of notes. It’s essential that you understand just what you’re negotiating for. I also suggest Never Split The Difference, by Iowa native Chris Voss. It’s the best book I’ve ever read on negotiations.

Organize

I learned the proper format for setting up a “data room” using DropBox. I was asked for access to this several times and it was a lifesaver that I had it set up. During the seminar, they talked about many free online tools you can use to manage your raise.

Get Help

It’s not about glory, it’s about success. Don’t let pride get in the way of asking for help. There is a plethora of local resources, including Square One DSM, who can help. Also, seek out folks who have been there and done that. I found that asking for a one- hour coffee with them was a no-go in most cases, but asking for 10 minutes on the phone was much more successful, and you can learn a lot from someone in 10 minutes if you are prepared with the right questions.

Know the Law

You can make some serious mistakes in fundraising that could cause you a lot of grief down the road and even get you into serious legal trouble. Having a good attorney might be the difference between success and failure in your raise. They can help a lot but you need to have a baseline understanding of what you’re doing. They cover this stuff in the seminar. You may also find this article helpful.

Lesson 2: Know Your Options

There are many ways to raise capital and the structure can take on many forms. Convertible Notes, Options, Priced Offering, Mezzanine Financing and on and on and on.

When we first decided to raise capital, we wanted to raise $4 million to give us enough money to finish product development, establish distribution, hire employees, and give us a two-year runway to make things go. We set out to do that, and it was rough. We had interested investors, but for that high amount of capital for our early-stage startup they were looking for an 70 to 90 percent stake in the company, something I just couldn’t swallow. After six weeks of hearing the same story from VC’s (especially costal) we decided to pivot our raise and offer a $1.25 million convertible note to angel investors instead. This allowed us to get significant funds into the company without pricing the company stock and bringing on new shareholders.

This capital will help us reach some critical milestones that will make raising additional capital much more affordable for us (not giving up so much of the company). I won’t go into details on how this works — go to the seminar if you want to learn about your options and how they work.

Lesson 3: It’s A Grind

Local entrepreneur, Matt Ostanik, was one of the speakers last September. Matt has been incredibly successful with past ventures and people have every reason to want to put their money behind this guy. Matt said that fundraising for his latest venture, FunnelWise, was a grind, and I was surprised. Here’s a guy with a ton of experience and success and even he admitted that it’s hard to raise money. His lessons helped me understand that no matter your background and how good your product is, fundraising is hard work.

Be prepared for it to take time, dozens or even hundreds of conversations, a full-time effort, and DON’T TAKE IT PERSONALLY when you get rejections. No matter how brilliant your idea is, the opportunity to invest in your company is not right for everyone. The best thing you can ask for after a rejection is feedback.

I’ve only scratched the surface of the value I took away from this seminar. Even if you are not ready to raise capital right now, there are so many things you can take away from this workshop that will put you in a good position for when you are ready. Best of luck to the entrepreneurs who read this. Keep making amazing things happen!

Learn about other Financing, Banking and Capital resources for your small business or startup in The Partnership’s Small Business Resources Hub or sign up for the Small Business Resources newsletter and stay connected for information about upcoming events, other resources and the latest announcements in the small business community in Greater Des Moines (DSM).