If you’re only talking to us about raising money (Blossom Street Ventures), then you’re doing yourself a disservice. There’s a few things you should absolutely do when raising money:
Shop around. Make sure and talk to as many VC funds as time allows. You’re not only looking for a personality fit, you’re looking for a philosophical fit as well. For instance, we want to exit deals in 3 to 4 years tops so if you want to run your business for the next 10 years, we’re the wrong VC for you.
Make sure you really want it. Having investors sucks. All of a sudden you have to answer to someone, if you have a bad month you’ve got to explain it, and if you’re unlucky enough to get an overly hands-on investor, he’s going to send you down all kinds of rabbit holes on how to run the business. By taking money, you just gave yourself a boss. Although you may not grow as fast without the capital and your exit may not be as big, there is something to be said for the quality of life you enjoy when not having to answer to investors.
Take your time. If a VC is rushing you to make a decision or sends you an exploding term sheet, walk away if you have the luxury. You’re about to get married to someone for a few years so taking your time to think things through and meet as many funding sources as you can is critical. If a VC is being pushy now, imagine how they’ll act if you stumble.
Evaluate alternative sources of capital. We only invests in equity which means we’re an expensive source of capital. Look for debt financing or royalty financing because it will almost always be cheaper than selling equity. Lighter Capital is doing some great things for entrepreneurs and for royalty financing, Cypress Growth Capital is a good go-to.
Raising capital is a pain, but sometimes it’s a necessary evil to grow. Make sure you talk to as many firms as you can, make sure you want the money, and go slow if you can afford to.
Visit us at blossomstreetventures.com. Email me at firstname.lastname@example.org