Entrepreneur's Advice on Raising Money

In early June, I did a post talking about Ryan Allis' appearance on CNBC. This morning, his company iContact announced they raised $5.35m. With almost 12,000 customers, it has been no secret that iContact has experienced phenominal growth. Ryan has shared the iContact story regularly at venture conferences. Here is the presentation he did back in April at Venture 2007.

Anyway, you can check out Ryan's blog for several posts about his experiences raising capital. But here is his "Top 12 List of Advice to Entrepreneurs that are Raising Money." Thanks Ryan for sending this over to me today.

1. Get introduced through an entrepreneur or attorney to a VC they have worked with in the past. A good law firm can be very valuable for investor introductions if you can convince them your business would be a good investment.

2. Talk to multiple firms at once. Create a competitive process and seek multiple term sheets if you are able.

3. Read up on term sheets and have a good understanding of them before you start talking to investors. The key terms are pre-money valuation, liquidation preference, participation, share revesting, dividends, board size and protective provisions.

4. Be upfront about the general terms you are seeking to save yourself and the investor time.

5. Know that the pre-money valuation is only one of the most important terms.

6. Get involved with organizations in your community that can connect you to other entrepreneurs who have done it before and then have lunch with those entrepreneurs.

7. Realize that it will probably take at least 9 months to raise money from start to finish your first time doing it.

8. Realize that until you have at least $1 million in annual revenue it may be difficult to get most VCs interested.

9. Know that it may take 6 months of sustained product and revenue progress after your first meeting before a VC will consider your deal seriously.

10. Know how much money you are trying to raise before you begin discussions.

11. Know that it may be easier to seek angel funding or debt funding instead of venture capital early on.

12. Know that once you sign a term sheet it will be at least 30 days and up to 90 days before you actually close on the funds.

Comments

[mathew johnson]

@ your point #1:

Kevin Merritt, the CEO of blist, just wrote a great post on how he went about finding a lawyer for blist:

http://www.blist.com/blog/index.php/2007/09/10/startup-advice-selecting-an-attorney/