Know When to Say "No"
Raising money has been one of the most challenging experiences of building my businesses. The ‘ask’ has always been difficult for me, even though I made a nice return for investors from my last business. Clearly, I believe in the business idea- and put my own money in. This has always been the case whenever I started a business. And, to date, there have been three business I started. My most recent being Wicked Start, the software as a service (SaAS) business to help aspiring entrepreneurs navigate the startup process. The one thing though that I’ve always needed in every business that I have started has been outside capital.
Going out and pitching to investors is a time consuming process and you never have the same pitch twice. I’ve learned a lot from doing it, along the way I’ve enhanced my pitch and got insight on how to improve my product. The biggest lesson is to not always accept a potential investor’s money simply because they said “yes”. It’s important to understand the investor, in particular, you need to make sure the he or she can afford the investment, both financially and emotionally. This is especially true of friends… make sure that if their money is ‘lost’ that the friendship won’t go south. Also, it’s important to learn about your investors’ expectations… are they going to a silent partner, sitting on the sidelines, or are they going to be active in advising you? If you want a silent partner but you’ve got someone who’s very active and vocal, you will run in to issues and it’s usually not pretty, leading to lots of headaches or even litigation.
In raising capital for Wicked Start, I turned down a potential investor. Though he could well afford to make the investment, he had emotional limitations that would have made him very hands on and vocal. This would have been difficult for me to manage his expectations and build a growing business. Though it was hard, turning down the money was the right decision for me in the long run. An investor who believes in your mission and in your ability to execute is going to your best investor.