Luke Fishback is a bright guy. Upon graduating college with a degree in engineering, he got a job at Lockheed Martin. However, within a few years, he had had enough.
Well, Luke realized he was an entrepreneur at heart. And that he needed to start his own company. In fact, earlier in his life, Luke had been an entrepreneur. When he was 14 years old, he started Luke’s Garbage Service, a waste disposal and recycling service for a rural community in Georgia.
So Luke started a company called PlotWatt.
PlotWatt creates technology (cloud-based algorithms that analyze smart meter data) that helps people reduce their energy bills by providing customized money-saving recommendations.
But there was one thing Luke didn’t have, but desperately needed: money. Luke needed money to build his team, develop his technology, and start marketing his company, and so on.
The good news is this: Luke didn’t follow the failed path that most entrepreneurs take; which is to try to secure millions of dollars in venture capital right away.
Rather, Luke understood Growthink’s Funding Pyramid — the fact that:
1) Some sources of funding are much easier to get than others, and
2) Once you get the easier sources of money and progress your business, it’s MUCH easier to raise the harder (and bigger) sources.
So, Luke entered PlotWatt in GE’s Ecomagination Challenge competition last year. And he won!
Now while the Ecomagination prize was only $100,000 (that’s still a sizable sum, but not as much as Luke needed), it was just what he needed.
Luke used the $100,000 to make progress in building his technology and team, and the press from the award elevated his company’s profile.
As a result of this, Luke and PlotWatt were quickly able to assemble a $1 million additional round of funding. And now Luke and PlotWatt are starting to really grow.
Importantly, Luke’s story illustrates 5 keys to raising money for your company today:
1. Understand that funding is a progression. No matter how unique your company or idea, you’re generally not going to receive a $10 million check from the start. Rather, you will more likely raise several “rounds” of funding. You start with smaller amounts, and then as your business makes progress (and your valuation increases), you are eligible for larger rounds of capital.
2. Find the right sources of funding for now. As I stated above, some forms of funding are much easier to raise than others. And based on your company’s current stage of development (e.g., startup vs. established business ready to scale), different forms of funding are more relevant. The key is to go after the right sources. No matter how amazing your company is or could be, if you go after the wrong funding sources, you’ll fail. Like when Google initially failed when it targeted venture capitalists (Google then successfully raised funding from angel investors, and went back to venture capitalists thereafter).
3. Cultivate relationships early. Even though you won’t get the $10 million venture capital check today (if you haven’t raised money before), you CAN start forming relationships with venture capitalists now who can write you a $10 million check tomorrow. According to Fred Wilson of Union Square Ventures, “The perfect entrepreneur/VC relationship is one where each has established respect and trust with the other well before an investment transaction is broached.”
4. Create your business plan today and keep it up-to-date. Your business is always changing. And as your business changes, different forms of funding become available, and you’ll come across different types of lenders and investors. Importantly, when you meet a lender or investor, you must be able to give them your business plan. So finish your plan now, and keep it up-to-date, so you can send it off at a moment’s notice.
5. Always be a marketer. In raising money, the best company doesn’t always win (in fact, while seemingly unfair, it often doesn’t win). Rather, the best marketers win. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money. In Luke and PlotWatt’s case, their marketing efforts were aided by the PR they received from winning GE’s Ecomagination Challenge. In many other cases, it’s the entrepreneur marketing themselves via networking at events, sending emails, making telephone calls, getting and leveraging Advisors, etc.
Last year, Luke Fishback was bootstrapping PlotWatt. The company was making progress, but funding was holding back its potential. Today, the company has a million dollars in the bank and is poised for phenomenal growth. Funding can do that for you; so go out and get it.