Growthink Blog

How to Raise Capital as a First Time Entrepreneur: An Interview with Brad Feld

Print
Categories:

Yesterday I had the opportunity to interview Brad Feld, who is considered among the elite investors in privately held companies.

For those of you who are not familiar with Brad, his background includes starting and selling his own software company, investing as an angel in 40 to 50 companies, and founding or co-founding three venture capital firms: Intensity Ventures, Mobius Venture Capital and Foundry Group, where he currently serves as Managing Director.

While there were several invaluable points for entrepreneurs seeking capital in the interview, I found the following to be most interesting:

1. Your VC firm is your partner.

Many first-time entrepreneurs view VCs simply as providers of capital. In actuality, VCs are partners. They exert control over your company. They have experience in product development or scaling companies, or both, and can provide significant value beyond the money they infuse in companies.

Because VCs are partners that exert control, you need to assess them much like you would other partners. Mainly, you need to make sure that there is a really good fit.

2. Angel investors are the friend of the first-time entrepreneur.

First time entrepreneurs should strongly consider angel investments prior to venture capital. Angel investors often have financing experience which can help entrepreneurs navigate the VC waters when they are ready (there are a ton of terms and issues involved with venture capital that most first-time entrepreneurs don't know about).

Angel investors also tend to have relationships with VCs. Also, angels often have the operational experience to help grow the entrepreneur's company. And finally, the angels' funding can help the company grow to a point where it is more suitable for venture capital.

However, when structuring angel deals, it is imperative to keep the pricing/valuation fair and the deal terms as simple as possible. If not, raising subsequent venture capital rounds becomes more challenging.

3. Don't look for investors who are not a good fit

Brad mentioned the 80/20 or even the 99/1 rule. Essentially, entrepreneurs should spend a ton of time on the 1% of investors who are a great fit. And not waste their effort on the other investors.

Two key aspects that Brad mentioned for ensuring a good fit are 1) geography (many VCs will only invest in certain geographic regions) and 2) sector (Foundry Group simply doesn't invest in Clean Tech; no matter how exciting the company looks). I would also add "stage" to this list as many VCs focus on companies at specific stages (e.g., some only want post-revenue companies, etc.)

You can listen to the full 30-minute interview by clicking the blue triangle on the audio player below:

 

Are you an entrepreneur looking to find angel investors for your deal?  Gain all the tips and advice you need with our Growthink's Angel Investor Guide.


Share this article:


Steven says

Great Article Jay. Good Words.
Posted at 5:10 pm
yasser says

Dave, Thanks very much for your connection it is amazing when a person connects with different people how the thought process changes. I used to have 10 hours of TV in the background while I did my work. Last three years that is cut down to 1/2 hour to update myself with the worldly affairs. This process definitely impact how I planned and performed. I assit small businesses in incresing their profits and help others to look beyond themselves in personal growth area. Having had this opportunity to be connect with your weekly emails; I feel I owe you one. Thanks for being there and consistenly inspiring, moivating in times of need, keeping me going and growing for that I am grateful and would like to share my gratitude. Thank You.
Posted at 7:38 pm
philip says

Dave, Thanks, that was very helpful. I have sent it to several of my friends who are also entrepreneurs. I needed to here a VC perspective on looking at first time entrepreneurs.
Posted at 7:19 pm
doobie says

good - tangible information
Posted at 10:02 am
bonbon says

Good article. I am looking to start a small chain of hotels, and this article has miraculously made that possible. GEE WIZ THANKS!
Posted at 12:26 am
DIY says

Great interview. Thanks. Getting investors is hard!! I keep finding that investors want a return on their money so quickly. I can offer a return, but it will take time. " years maybe. :(
Posted at 12:52 pm
Hector Dambuza says

I am looking for mining investors who want to buy or invest in African mines, Canada mines and South African Mines
Posted at 6:46 am

Most Popular
New Videos

"Business Plan
SHORT-CUT"

If you want to raise capital, then you need a professional business plan. This video shows you how to finish your business plan in 1 day.

CLICK HERE
to watch the video.

"The TRUTH About
Venture Capital"

Most entrepreneurs fail to raise venture capital because they make a really BIG mistake when approaching investors. And on the other hand, the entrepreneurs who get funding all have one thing in common. What makes the difference?

CLICK HERE
to watch the video.

"Brand NEW
Money Source?"

The Internet has created great opportunities for entrepreneurs. Most recently, a new online funding phenomenon allows you to quickly raise money to start your business.

CLICK HERE
to watch the video.

"Old-School Leadership
is DEAD"

"Barking orders" and other forms of intimidating followers to get things done just doesn't work any more. So how do you lead your company to success in the 21st century?

CLICK HERE
to watch the video.

Blog Authors

Jay Turo

Dave Lavinsky