What's Below in Issue #70:
📰 - Five Different Ways Of Raising Capital in Today's Market
📊 - Data behind checks are being written from outside of SF
🎙️- Podcast #38 w/ Alex Simpson - Raised $800M
💵- Premium startup resources
🆓- Free startup resources
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I meet with countless founders every week, and they all have their own flavor to raising capital; some work, and most don't. Here are the 5 different approaches to raising capital that I'm seeing in the market right now and how they're working out.
1. Complainers talking about how hard it is to raise money and not changing anything about their business or pitch.
👎 Needless to say, these are the companies that should have never been raising capital in the first place and have died or will die very soon. Don't complain...iterate and improve or die.
2. Accelerator & angel group spray & pray.
🥴Just about every first-time founder goes through this if they don't have a network. It leads to a lot of time wasted with very little feedback to iterate and improve. This path sucks, to be frank, but it sometimes works out, and it may be the only option for founders. My advice is to get raw, candid feedback on whether or not your business has a real shot at raising money or if you should just try to build a profitable business. Talk to mentors and other successful founders in your category and get their advice before you go all in chasing money.
3. Founders that met with a lot of VCs and changed direction to start reducing their burn and hyper-focusing on generating free cash flow.
🔥 These are the people who realize that chasing investor money isn't the best use of their time, and they're better off acquiring customers to fuel the next stage of their business. I like these founders. These founders rarely have unicorn outcomes, but generate real personal wealth for themselves with more flexibility. It's rare the broader public hears anything about these companies. If you like a low profile, go down this path. If you love the glitz and glamor...chase the VCs.
4. Founders focused on building something truly venture-backable and taking the time to prove it to investors over an expanded time horizon.
🤝This is what works for most founders in all markets. Relationships. At the end of the day, venture capital is not an algo AI decision, it is a decision based on human relationships and trust, especially at the earlier stages. Don't neglect your relationships and nurture them. This is going to be your best source of capital, but it takes a lot of patience, time-consuming meetings, and not asking for money, but rather finding ways to add value to these prospective investors to build the trust. If you're in the business of hyper-scale, go down this path for raising money.
#5: The repeat founder who seemingly raises money overnight on just an idea. 🤑
🤑It's frustrating to see, especially for the #1 types of founders, but it's true: investors love founders who have done it before and already have the relationships; they can raise money on just the idea alone. I know, because I've done it and most of my friends have too. We often started with path of #3 or #4 to get to this path...but for me personally, I scraped by on my first startup and failed trying path #2.
Figure out what path you're on and adjust accordingly. The sooner you do, the better off you and your company will be.
-------------------------------------------------------------------------------------------------------------------------------------------------------------Data Corner
Checks are coming from everywhere
While it is still true that SF controls the largest amount of VC capital, the number of checks being written from different parts of the country is quite important. Close to 80% of checks are being written OUTSIDE of SF. And a big shout out to NYC, having more founders starting new companies in Q1 2024 than SF.
Just remember, you can start a startup from anywhere
-------------------------------------------------------------------------------------------------------------------------------------------------------------Alex Shares His Secrets to Opening Up Liquidity for Limited Partners from Their Private Investments on Episode #38
In this episode, we have Alex Simpson, fintech founder of OpenStock, who shares his story of transitioning from fintech to tackling liquidity problems for investors in private funds. Openstock helps open up liquidity for one of the largest untapped asset classes — private credit, private equity, and real estate funds to make it easier for people to access liquidity from their illiquid investments without selling.
Alex discusses how crucial it is for fund managers to manage their Limited Partners’ expectations around cash flow. He shares that partnering with private equity and credit funds lets OpenStock give investors more options. He also gives startup founders great tips, highlighting the need to stay unbiased and steer clear of assumptions when dealing with business partners.
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Free Fundraising Resources
🤓 - Free pitch deck reviews - Submit your deck
💸 - Access working capital fast - Explore options for free
😍 - Free list of AI Recommended VCs - Apply for free
👨💻 - Free fundraising coaching session - Schedule 15 minutes with us
📝 - Playbook for Negotiating Term Sheets - Download it Here
💽 - Playbook for Setting Up and Sharing Your Data Room - Download it Here
✉️ - Playbook for Sending Investing Updates - Download it Here
Premium Resources
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