February 3rd, 2020 | By: Wil Schroter
Funding doesn't make a lot of sense to first time Founders. In our minds, we think, "Hey, investors want to make money, so if my startup can make money, who cares how big it gets?"
Unfortunately, that thinking overlooks one big fact: that for every one investor check out there, there are hundreds of startups competing for it.
In order to understand how investors look at one deal versus another, we first have to understand how investors look at deals in the first place.
There's no absolute rule here, but investor behavior generally follows a consistent trend. Most "professional" investors (people who invest consistently) gravitate toward investments that can yield an exponential return, such as an IPO.
The thinking goes that all investments are high risk, so if you're going to risk your money, you may as well make the bets that are big enough to wipe out all of your bad bets.
Actually, lots of people, just not most "traditional" investors.
Most small business capital comes from a combination of debt (banks, credit cards) and people within the Founder's network. These checks tend to be $10K - $50K checks that stack up over time.
Walk down the main boulevard of your local town and chances are nearly every business there was funded like this.
Within our social networks. It's a matter of reaching as far into our "friend-of-a-friend" networks and taking a ton of coffee meetings to discuss how folks can get involved.
There's no magic moment for this where we simply raise our hand and say, "I need capital" and random investors fall out of the ceiling. It's an aggressive campaign to root out every possible source of capital we can find.
If that sounds like a lot of work — it is — but that's how most small market startups get funded.
How to Find Angel Investors. One of the hardest things to do is get your foot in the door — anywhere. And that applies to finding angel investors as well. How do you find angel investors? How do you get angel investors to invest in your startup? We’ve got you covered.
How Do I Pitch Friends & Family? How do we ask friends and family for money without it getting totally weird? Is there a way to "pitch" that doesn't leave both sides feeling uncomfortable every Thanksgiving?
Should I Regret Not Raising Capital? (podcast). Have you ever asked yourself, "Do I need to raise capital to be successful?" Wil and Ryan break down why you probably don't need to regret NOT raising capital. At least not yet.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.