Following my post yesterday on ‘What Investors Really Want’ I have been speaking with a number of people about the issues around funding and the stages that a startup moves through.
I drew the diagram below as a means of crystallising my thinking (you will begin to notice that I like whiteboards) and thought you might be interested in having a look. It outlines the process that is advocated in Running Lean and was alluded to by Sandy McKinnon (the VC) on Tuesday night.
This seems to be the common approach in the startup scene reflected both in the literature and what investors are looking for, however in my short experience I have spoken to a lot of startups and a lot skip right over the 1st stage.
While I am nowhere near looking for funding this is the plan I intend to follow. However, I would love to hear from those who are more experienced and who have gone through it on both sides of the fence (investors and startups) as it throws up a number of questions. Is this too theoretical? Is this how it works in real-life? Is this the way it has to/should be? Do startups risk their potential for success looking for investment too early in the process i.e. before they have achieved Product/Market Fit?
Where in the process are you?
The learning continues….
Hi – I’m following your blog with interest so I thought I should chip in…
The common factor about Friends, Family and Fools at the bootstrap stage of investment is that most of them have known you for a long time, and are investing in you as much as in the company and business idea.
I think it’s quite important to get to know potential Angel/VC investors during stage 1 and 2, so that by the time you get to stage 3 and want to raise money they have known you for a while too. They have watched you develop your buinsess, realised what you are capable of, and are eager to become partners.
There are plenty of good events (like the iVenture Tuesdays one you mention in an earlier post) where you can meet investors, or even stand up and make a brief presentation about what you are doing, and I’d encourage you to take full advantage of those.
I really like your diagram – but I think it needs an additional arrow to represent the “getting to know each other” activities with investors early on.
All the best of luck with your venture,
Ian
Thanks for taking the time to comment and thanks for your input Ian, very much appreciated.
I have always thought that it would be great to start to build up a relationship with the investment community early on in the process and can see that it would be in my interest but are investors keen to ‘invest some of their time’ to getting to know very early stage businesses?
I guess putting myself and the idea out there in the blog from the early stages there is a chance that someone in the investment community starts to get interested and that starts to develop a relationship…who knows?
Scott
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