Tag Archives: venture capital

Raising money requires you to “connect the dots” for investors

You would be foolish to believe that the first time you meet an investor that they will fall in love with you, your team, and your idea.

This just doesn’t happen, unless of course you’re some type of rockstar entrepreneur that the investor knows through press.  We’re not talking about these rockstars in this short post on raising money.

We’re talking about “no name” entrepreneurs like most of us are.  Guys and gals taking their first swing at the bat.

When you first meet an investor you are creating a proverbial dot on a chart, as described by Mark Suster in his famous blog post titled Invest in Lines, not Dots.

This concept described by Suster is critical for first time entrepreneurs to understand.  Suster states:

The first time I meet you, you are a single data point.  A dot.  I have no reference point from which to judge whether you were higher on the y-axis 3 months ago or lower.  Because I have no observation points from the past, I have no sense for where you will be in the future.  Thus, it is very hard to make a commitment to fund you.

For this reason I tell entrepreneurs the following: Meet your potential investors early.  Tell them you’re not raising money yet but that you will be in the next 6 months or so.  Tell them you really like them so you want them to have an early view (which is what all investor’s want).

Suster goes on to describe how in every subsequent meeting you have with an investor that you can demonstrate how you’ve done what you said you would do creates another dot.

These dots eventually get connected to form lines that an investor can then invest in.

I love this concept.

Please go read Mark Suster’s full blog post on this strategy to raise money here and let me know what you think.

Solved: Step 1 to raise money from VCs

Earlier this week, Ash Fontana published a post on TechCrunch that is going viral through the entrepreneur community.  The post covered how much traction a startup needs to have in order to raise money from VCs.  I think the reason it is being shared and re-shared over and over again is because it simply demystifies something that every entrepreneur wants to know.

Bottom line, for the startup I’m working on I would need to grow to 50k a month in revenue.  David Cummings followed this coverage of Ash’s TechCrunch article with this informative post suggesting that the milestones Ash suggest would need to be hit within about two years after launching to have a chance to level up with VC money.

According to Ash, the VC milestones are as follows:

If you’re a social company, you’d do well to have at least 100,000 downloads and/or signups before going after your million-dollar round. If you’re running a marketplace or e-commerce company, you should be aiming for around $50K in revenue each month. If you’re going after the enterprise, you’ll want at least 1,000 paid seats at $10 per seat per month (or the equivalent for your pricing model); if you’re focused on big enterprise, you should lock down at least two huge (pilot) contracts.

Read the full TechCrunch article here.