Over the past eight weeks of Startup101, aspiring founders have received inspiration and insider tips from business owners who have experienced firsthand the trials and tribulations that arise on the entrepreneurial journey. Participants have been taught the basics of what’s involved in turning an idea into a viable product, and how to protect that idea and product from competitors. But even the most brilliant and dedicated entrepreneur needs something more than a great idea and an unbreakable work ethic: they need resources that will afford them the time, tools, and people to grow their idea. In other words, they need money. Raising capital for your start-up is one of the most difficult yet important parts of being an entrepreneur. While not every entrepreneur will be in need of investors, every startup looking to raise money will need them — whether that means venture capitalists, angel investors, personal investors or government funding. This week, TimeHero co-founder and CEO and proven technology leader Bernie Aho took the Startup101 stage to describe his experience with startup funding. Bernie provided an overview of the main avenues to raising capital, and the lessons he’s learned over the year. Some key takeaways:
- Go in with your eyes open. If you don’t know how the process works to raise capital and get funding from angel investors or venture capital investors, you won’t be successful at raising capital. Read everything you can, find a mentor who has experience in raising capital and keep your expectations realistic – you probably won’t walk out of your first meeting with a cheque in hand.
- Don’t ask for too much, and set milestones early. Instinctively, founders want to raise as much capital as possible, because they figure it will give them more resources, better chances of competing and more time before having to do another round of asking. However, this money is raised before anything with measurable value has been created, or the product has been proven to work. As a result, the capital holds a high degree of risk. Founders should ask for just enough to get to the next milestone –achieving milestones not only significantly reduces risk, but also creates more insight into the scale of the business and demonstrates the abilities of the leadership team to reach milestones they set for themselves and the business.
- Get all the pieces right. While it may be tempting to begin asking for money as soon as you’re hit with a great idea, you have do the legwork to ensure you have a great pitch to target potential investors. Venture capitalists may have deep pockets, but they only got that way through calculated and precise investments. Most venture capitalists have more than likely only invested in 1-2% of the businesses that they evaluate. What qualifies your businesses to fall into this percentage? If your product is meant to solve a problem, you have to prove not only that the problem exists, but how you solve it better than anyone else, and if the market even cares.
By increasing your awareness of the common mistakes made in the funding process, you enhance your chances of raising capital for your startup. For more valuable lessons to take with you on your startup journey, register for Startup 101, the Innovation Mill’s free 25 week program that provides practical, relevant and hands-on knowledge for those interested in starting their own business. The course features 25 lectures and runs on Wednesday evenings from 6:00pm- 7:00pm at the NORCAT Centre.