Sunday, April 17, 2011

Raise Money Now!

I've been saying quite a bit privately, but I think it's time to say it publicly:
If you are an entrepreneur, raise money now.
It's never easy to raise money. People who say, "It's easy to raise money," usually neglect to mention the second half of the sentence, which is "if you are in a hot space, know the right people socially, and fit the Silicon Valley central casting notion of an entrepreneur (20something white or Asian male with an engineering degree from a prestigious university)."

Nonetheless, it is easier to raise money for a startup right now than throughout 99.999% of history. Thanks to the angel boom/bubble, there are numerous sources of seed financing, ranging from incubators to seed funds to plain old ordinary angel investors.

When I raised money for my first company in 1999, the only way to find angel investors was to network like a maniac. You just sort of heard about people who made investments, and the only way to get to them was via a personal introduction.

Today, a company can go on AngelList on Friday, and have a seed round wrapped up by Monday. I'm exaggerating, but only a little.

And while I think the current bubble (and the associated premoney valuation standard) is unsustainable, the amounts being raised in seed rounds simply isn't large enough to cause valuation problems down the line. If you raise $500K, even if you have to do a down round later on at a much lower valuation, the dilution will be minimal.

By the way, the last time I told entrepreneurs to raise money now? Early 2008.


Peter said...

It's great to finally see the chokehold over capital that VCs have had for decades breaking up. James Ling raised money back in the mid 1950s by selling shares directly to the public at a state fair. He raised a few hundred thousand dollars and went onto build one of the 15 largest companies in the USA in the 1960s.

Travis said...

Chris, Do you think that it's possible for a blog to raise seed money? If so, then what do you think the steps are for doing so? Thanks!

Chris said...

It's possible if A) Your blog is already hugely popular and you have plans for how to monetize it, or B) You're a celebrity or successful entrepreneur.