Navigating The Funding Landscape & Getting Your First Check
Fundraising? Grants? Angels? Bootstrapping? How do I fund this dream of mine and support myself on the journey? Here are some key insights from our Financing Your Startup Workshop Series to help you navigate your funding options! There are also some golden nuggets of wisdom for first time founders on how to get your first check from investors!
Follow the money: the money sitting in your bank account is called cash, the money leaving your bank account is called expenses, and the money coming into your bank account is called revenue (excluding the money you’ve raised, borrowed, or put in yourself).
Not all expenses are equal: fixed costs are pretty much the same regardless of how much you produce or sell, for example, rent for your office space and your legal costs; meanwhile, variable costs will change when you make more or fewer units, for example, costs of your raw materials and labor cost for assembly. Venture investors are particularly interested in companies with high fixed costs but low variable costs.
Be aware of your average monthly burn: this is how much money you’re using up each month, and it will tell you how much time you have left to survive if you don’t raise more money
Choose your funding options based on your goals and the expenses that are specific to your business model. Are you able to generate revenue? What do you need to spend money on in order to meet your 12-month goal?
Bootstrapping gives you control and keeps you focused, but you risk being overtaken by well-funded competitors and financial stress can also be detrimental.
You can raise outside funding at any time but it’s hard to go back to being a fully owned company.
Grant options aren’t a full strategy and can be time-consuming but can be helpful for demonstrating early progress, fueling science-related work, or bolstering a mission-related part of the business.
Angel funding is from individuals, while institutional capital or venture funding is from professional investors who will be able to provide more resources. The more money you raise - the more expectations and accountability.
The length of the diligence process with an investor should be proportional to the amount they are willing to invest. If they are taking too long or negotiating really hard early on, move on!
Here are some helpful questions to vet an investor: What’s your typical check size? How many checks do you write a year? How do you typically support founders?
Don’t spend too much time or energy on a "no," move on quickly but focus on building a long term relationship
Check out FounderPass for the recording of our Financing Your Startup Series and for ongoing workshops, coaching, and community. Build your founder skills, mindset, and network!