Every founder wants to “raise a round”
It’s understandable – we’re living in the golden age of startup funding.
As you look around, you see unicorns, billion-dollar valuations (even at early stages now), and global VCs pumping lots of cash into promising young founders across various industries.
It’s almost like this is the end goal now –RAISING. A. ROUND, and then another…and so on.
Rather than building a sustainable business that will bring consistent revenue by solving real problems, and making for a happy, satisfied founding team, everyone is chasing cash. Where does this stop? In a pit of failed start-ups where 7 out of 10 go in the first 5 years and 3 of them end up there because they run out of money.
Founders who are less fortunate end up chasing rounds with a “spray and pray” approach, and taking money from the first investors that will help them. Investors that don’t have any industry expertise, contacts, or operational experience. Investors who need a long time to understand what the start-up does and who need a lot of convincing too.
This is when the founders lose control over the vision, having to meet vanity metrics in order to satisfy the investors, who are already thinking about an exit. Instead of focusing on the value, the product, the customers, and the founders, it’s all a short-term game of returns.
But there are others too who play the long game. You might not hear about all of them because, well, the game they play is not so glamorous but it is definitely more fulfilling – For them, for their investors, and for their customers too.
They are what we call SMART Founders – the founders that know exactly what their start-up needs to achieve success (real success, not vanity metrics) and are doing anything to get those things – capital too, of course, but also connections, exposure, industry expertise, technological assets, talent, coaching and access to more rounds and sources of funding. Basically, they are getting shortcuts to growth by trading assets for equity instead of getting the cash needed for them. Most importantly, they are saving A LOT of valuable time that would’ve been needed to get those assets by themselves.
Luckily, investors, both traditional and non-traditional understood the benefits of this and are now more than willing to provide all those assets for smart founders in their industry. Those assets are called SMART MONEY.
On one side, you have VC funds and angel investors who niche down and gain expertise from assisting multiple similar start-ups, and on the other side, there are CVCs (Corporate Venture Capital) which are trading their capital and assets for access to innovation, new technologies, and the agility that up-and-coming start-ups have. And in this game, they all want to invest as early as possible!
There are 3 things you can do too, to find these investors which will help you achieve your start-up goals faster and more efficiently. They are – PRIORITIZE, NETWORK, and CONNECT.
To find the smart money, you need to know exactly what your priorities are, not for fundraising but also for your business
For example, a founder can accelerate their time-to-market by as much as 9 months by opting for the tech-for-equity option. That is getting their product developed by an already built team of developers, with experience in the founder’s industry.
This was the case of NRGI.AI, a start-up we work with that chose this option, instead of raising only capital from us or other VCs or Angel Investors. They are a start-up in the energy market and while this article is written, there is a global energy crisis going on. This means that their solution needed to get out there as soon as possible and by opting for the tech-for-equity option, they could accelerate their time-to-market with as much as 9 months, time that would’ve been spent finding the talent and building the right team.
Try to find stakeholders and potential partners without any pressure to raise money, and ask for recommendations. This will ultimately help you find the people which can introduce you to the right strategic investor or company.
On his website, J.D. Davids talks about the cost of not raising smart money. As the founder of an early YouTube competitor, he raised more money than YouTube, in the same round. But because he focused on finding the first investor, not the best for his start-up, he ended up losing $1.65 billion. YouTube raised from Sequoia Capital, a top VC firm in Silicon Valley.
“YouTube’s investors could literally march those founders into Larry Page and Sergey Brin’s office and tell them why they should buy the company and how much it was worth. We had very intelligent and wealthy investors, but they didn’t have these kinds of relationships.”
In the end, YouTube was acquired by Google for $1.65 billion.
Connect with smaller companies or corporations, strategic partners, other founders, and entrepreneurs, don’t limit yourself only to traditional investors. Smart money comes in many shapes and from many sources.
We are a CVC fund and we offer capital and smart money (technical development, business and industry expertise and help with marketing, sales, and recruiting) for founders in HealthTech, FinTech, EdTech, and Manufacturing. If you know what your start-up needs, let’s have a talk about how we can help.Contact us