3 Tips for Raising Venture Capital Funding – Page 2 – Black Enterprise

Entrepreneurship

3 Tips for Raising Venture Capital Funding

  • RAISE ENOUGH MONEY BEFORE OPENING FOR BUSINESS
Redding opened up Amy Ruth’s in 1998 with a $73,000 investment and it went on to become a $3 million company. While that achievement is to be lauded, under further inspection it should also to be avoided because Redding launched his business undercapitalized, a trend that he believes is all too common for many African American-owned businesses. “As Black people we always end up opening businesses underfunded,” he notes. “Due to that we rob Peter to pay Paul and don’t pay taxes or purveyors or utilities. Redding knew that opening his latest restaurant would mean securing enough funding—$2 million to be exact. The only way he was able to achieve that round of fundraising was by revising his business plan, something that he recommends for every entrepreneur looking to start over. “You have to put your new business together with a solid business plan so that you can get proper funding.”

Every upstart wants to know how they can raise money for their venture. Johnson offers three tips for catching the attention of VCs and gaining monetary support:

There is strength in numbers. At the seed stage, angel investors focus a great deal on your team. “[Investors] are betting on your ability to execute and succeed against the odds, as most startups will inevitably fail,” explains Johnson.

Have a great product. “A common phrase in the area is ‘code wins arguments,’” says the startup’s co-founder. “Having an amazing product–a truly amazing product–will get you attention. Build something people love, and you’ll become attractive really fast.”

Show your social proof. Demonstrate social proof before approaching investors is critical. Having lots of users is great, but having lots of revenue is even better. “Lean Startup guru, Eric Ries, is one of SendHub’s investors/advisors now, but told us ‘no’ months ago because we didn’t have the ‘social proof,’ says Johnson. “We explained our ideas and assumptions. He simply replied, ‘That’s great, but I don’t believe you. Show me some numbers.’”

— Terrance Gaines


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