What you need to do to make sure you get the funding you deserve.
Making the move into full-time entrepreneurship is an act of courage and nowhere is this truer than for big ideas that require significant capital to get off the ground.
It’s intimidating to leave a well-paying job, build a company out of your imagination and then go out to raise money for the first time. The process, however, doesn’t have to be as daunting as concerned parents, spouses, or friends would have you believe.
Below are lessons I learned while raising my first $1 million dollars for ZappRx. At the time, I was only a few months into the business, a company of one operating from my kitchen table, with less than $100 in my bank account. Here are a few underlying principles that I followed. I hope they can add some insight to others in a similar position.
1. Make your lawyer your first investor.
The first thing I tell entrepreneurs just getting started is to find a good lawyer and set up your company–legitimately. If you’re going to raise money, you need someone who knows what a term sheet looks like, who knows what asks are reasonable and unreasonable, and someone who will prevent you from going off course.
Do not work with a lawyer who is not an expert in startups. A good startup lawyer, like an investor, can be sold on you, and will defer fees if he or she believes in what you’re doing. If you find a lawyer with an impressive track record of working with startups, who will defer his/her fees and make a bet on you, you’re on to something. Failing that, go back to the drawing board and don’t quit your day job just yet.
2. Trust your gut.
Recently, I went into a meeting with an investor who wanted to know how much I was going to be raising for a Series C round. I was seeking seed funding, and he asked me with a straight face how much I would be raising for my Series C. I looked at him and I said, “Do you know what the name of your fourth grandchild is going to be?” He replied, “What? Of course I don’t,” to which I responded, “Precisely.”
Investors sometimes ask crazy questions. The truth is the investor wasn’t really looking for a numerical answer, he was looking for reason and rationale in my thought process. I told him that his question was impossible to answer. I said, “I’m focused on the milestones that are relevant right now. If you want to know how much I’ll raise in a Series C, you should get on board today; we can answer that question when it’s appropriate – together.”
3. Negotiate everything.
Be consistent when negotiating. Don’t take any deal on the first pass. You don’t want to set the expectation that you don’t negotiate, which can give the impression you’re a pushover. On the flip side, don’t lose out on a deal by becoming hostile or aggressive. Set the tone that you will negotiate everything but do so in a way that is friendly, calm, and reasonable. Remember, business is done on relationships. Always discuss rationally.
4. Practice your poker face.
I was closing my first round of funding during the holidays, which are notorious for being the worst possible time to raise capital (sidenote: investors only prioritize deals they like during these times – thus you can turn the holidays and August into a great “investor litmus test”). I had less than $100 in my bank account, the investor I was speaking with had jetted out for vacation, but I was negotiating the last points of the deal. I had no other offers on the table–and I was resolute that I was not going to balk on important points. It was the best poker face I’ve ever made in my professional career.
The first person to believe in you has to be you, or no one else will. The least useful emotion is fear, so simply get rid of it. You have to go all in if you are trying to build a startup, and truthfully, you only see what you are truly capable of doing when you throw yourself into the deep end. Dive in after your startup idea–hook, line and sinker. Then learn to swim.
Zoe Barry is the Founder and CEO of ZappRx. Formerly of AthenaHealth, a Fellow in the Boston Startup Leadership Program. Zoe began her career originating and executing high-return strategic investments at hedge fund Dawson Capital in New York. She graduated with a B.A. in Anthropology from Columbia University in 2007 and currently mentors undergraduates in the Columbia College Women in Business Society. Follow her @zoebarryceo
SPRINGBOARD ENTERPRISES is where influencers, investors, and innovators meet to build great women-led businesses. Our 537 women-led companies have raised $6.2 billion, including 10 IPOs. Springboard is a non-profit 501c3 organization based in the USA but acting globally to accelerate women entrepreneurs’ access to growth capital.