For a few weeks I’ve discussed numerous methods for funding your start-up business. The most recent articles have included information on angel and crowd funding. In today’s blog post, I’m passing along several tips in regard to the abovementioned types of funding and also methods you can use to find funders.
Tips for Crowd and Angel Funding –
- Resist your desire to raise $1 from a million people. Think about the maximum number of people you can manage while still protecting your vision?
- Don’t take money from just anybody. The funding you accept must be legal and should support your vision.
- Stay in control of your company for as long as possible; be sure to only share that control with those funders who share your same vision.
- Determine, in advance, how many shares you want to maintain control of before offering any equity to funders.
- Map out an investor relations plan for term, communication and exits.
- Investment terms should be communicated early on and in clearly outlined. These terms should spell out what the investor is getting right now, how you reached this price, how it may change in the future, and your rights are in the event that there are further rounds of financing. In particular, crowd investors must understand that an investment of $1,000 that represents 10 percent of the company at the time of investment, will no longer represent 10 percent of the company if the company grows and gets new rounds of investments.
With these tips in mind, here are ten ways you can locate the funders that you need:
- Call your chamber of commerce
- Call a Small Business Development Center
- Ask your accountant or call a Big Four accounting firm.
- Ask your attorney.
- Call a professional venture capitalist and ask if he/she is aware of an angel investor group.
- Contact a regional or state economic development agency.
- Call the editor of a local business publication.
- Look at the “Principle Shareholders” section of initial public offerings’ (IPO) prospectuses for companies in your area. This will tell you who cashed out big.
- Call the executive director of a trade association you belong to. Ask if there are any investors who specialize in your industry.
- If you use a large commercial bank, ask your lender.
Now that we’ve spent time delving into angel and crowd funding, in my upcoming blog posts, I’m going to help you do some do diligence regarding Venture Capitalists funding your business.