When raising capital, it is salient to keep in mind certain ‘facts of life’ that will not only keep you sober, but will keep you sane.
Let me give you my view on “the three facts of life” when raising venture capital. You won’t read much about this – it’s sort of like parents trying to explain the facts of life to their kids. Sometimes it’s easier to avoid the subject.
Fact of Life #1
Chasing equity investors is the toughest and most drawn out ordeal faced by entrepreneurs. It will take forever and you’ll be jumping through hoops of fire to meet the investor’s requirements.
Fact of Life #2
The success rate ranges from 0.005% to 2% depending on how you define the boundaries, the economics at the time and if the investor is having a good day! So you need to be good to get that very elusive venture capital. The rate may be better for angel investors, but no one really knows because these guys operate underground.
Fact of Life #3
In about 50% of early stage companies that actually succeed and raise venture capital, the founder will be out of the business in 12 months. And not necessarily on his/her own terms. That’s a bit scary!
You know what you’re up against. It’s a tough business and you’ll need to dig really deep and put everything into it to make sure that you get the money.
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I’ll look in more detail at deal flow to give you a much better understanding of what happens when a venture capital firm is approached to invest.
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