As the founder of a newly launched startup, I can personally tell you that you'll face countless hurdles -- from developing a business plan to building a team -- to acquiring customers and so on. One challenge, however, stands out among the rest -- raising money. As CEO of EverlyWell, I've been through a few funding rounds, and I've experienced firsthand how difficult the process can be. While getting funded may sound intimidating, it doesn't have to be if you take the right steps to prepare.
With that in mind, here are my top pieces of advice for raising your first round of funding if you're a first time entrepreneur.
1. It's all about relationships.
When it comes to raising money, it's all about relationships that are built over time, and for first time entrepreneurs -- you may not have the same connections as other startup veterans when you first get started.
I think it's helpful to have a small group of founders/CEOs that you can connect with in your city. Be sure to have actionable networking meetings with them and start building investor relationships 6-12 months out from a fundraising round.
2. Make your introductions thoughtful.
Before raising our first round of capital, I did a significant amount of pre-work qualifying investors across several areas including people I knew, funds that invested in similar companies in healthcare and/or the consumer wellness space, and entrepreneurs that could help move us forward.
I made a small list of about 20 investors and then figured out the closest connection I had to each funder via LinkedIn as well as my college and MBA alumni networks. I never cold-emailed anyone. When it comes to introductions, try to find a mutual connection (even if it's a similar location, school, etc.). I recommend keeping your email to 3-5 sentences and requesting 15-30 minutes for an introduction.
3. Choose the right type of investor for your business.
From my short list of investors, I spent a lot of time looking at the funds, stage of fund, how much capital was available, and the types of companies and entrepreneurs they had funded. You can waste a lot of time talking to great VCs or angels who just structurally or philosophically don't fit with your company. Know exactly why you want to work with them and why they should fund you. You need to know how it fits in with their portfolio and vision.
Also, give them the opportunity to say no if the deal isn't interesting to them. Fundraising is a full-time job, and it's a waste of your time and theirs if you aren't speaking to investors who are really interested in the deal. For example, I had a VC that told me they were only investing in a certain area of the country and were highly unlikely to ever fund a company outside that geography. It saved us both a lot of time!
4. Focus on the lead to close the deal.
Instead of using crowd sourcing, I relied on my network to get introductions to highly-qualified and relevant funders. We ended up closing the round 8 weeks after I started fundraising for the $2.5 million series seed because I got a commitment immediately from a physician entrepreneur to lead the round.
My best advice is to focus on the lead first because that gets everyone else on board quickly! Otherwise I've found that funders tend to just circle around the deal and wait for someone else to commit.
5. You know your business better than anyone else.
Listen to feedback from advisors and investors, but ultimately remember that you know your business best, and you are the one building it with your team! If you hear a consistent theme, figure out how to address it. But if you take every piece of feedback seriously, you'll never be able to move forward. You have to have a healthy amount of confidence in your business and path forward to be able to stay focused and incorporate advice sparingly.
About the Author
Julia Cheek is the CEO and Founder of EverlyWell, a digital health startup empowering consumers to order, self-collect, and understand lab tests. Based in Austin, EverlyWell launched in June 2016 after raising $3M in capital and garnering awards from TechCrunch and Rock Health. They are on a multi-million dollar run-rate less than a year after launch. Julia was also named the number one female entrepreneur to watch by CIO magazine for 2017.