TEN Capital is ten years old now. We’ve picked up a few lessons along the way in helping startups raise funding and helping investors fund those startups. Here are some key principles for startups raising funding.
Launching a startup and growing a business is hard. It’s supposed to be hard.
Funding is an enabler. Don’t think funding is going to solve all your problems.
Entrepreneurs think investors want big revenue, but what they really want is predictable and repeatable revenue. In an early stage company the revenue is never large, but if it’s predictable based on recurring revenue, repeat revenue or known lead generation funnels that generate consistent revenue, then you have a growth story to tell the investor.
Build and test your funnel so you know it works and can tell the growth story versus telling the “we’ll be big someday” story – which nobody buys.
Sweat equity is table stakes- not valuation metrics.
You need a complete team to start a business- someone building it and someone selling it. No fair, everyone on the team is building it and no one is selling it.
Being all-in on your startup is step one. Part-timers need not apply.
Sell it first, build it second. If you can’t sell it in the first place, there’s no need to build it in the second place. Most startups over invest in their tech and then they search for someone to buy it. A better strategy is to sell it and then build it out with the customer’s input.
Startups who purposefully avoid revenue generation and call it a strategic decision are going to find out what hard living is all about. It’s best to generate enough revenue to prove your model and business rather than keep it at zero and play the “it’s going to be big” game on valuations.
If all you do is take, take, take – don’t be surprised to find your startup ecosystem to be small.
Pay it forward.
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies