So, you decided that it’s time to make that dream come true and do something about that business idea that’s been bumping around in the back of your brain since junior high. You need money to take that idea from the dream stage into reality. Before you ask Uncle Lester if he has some spare change to invest, be sure that
You already have your idea well thought-out
You’ve talked to an intellectual property lawyer to ensure that your idea/product is protected
You’ve developed a well-constructed business plan
You’ve identified a real need and a market opportunity
In other words, before you ask for any kind of funding, from anyone, your fundamental business concept must be rock-solid. Self-confidence is great. Recklessness — especially with other people’s money — isn’t.
When Is The Right Time to Raise Capital?
The short answer to the above question is this: Start looking for capital before you need it. Don’t wait until you’re about to fall off the proverbial cliff. At that point it may already be too late to save yourself.
A: Early-Stage Private Funding
Friends and Family
Angels (We are not talking about the Heavenly Host here. Angels are private individuals with money they wish to invest.)
Ask friends and family only for the amount they might spend on a fun weekend at Lake Tahoe. Uncle Lester may love you dearly, but if he’s living on Social Security, rely on him for moral support, the wisdom of his years, (and maybe stuffing presentation folders).
Perhaps you’ve heard about SAFEs (“simple agreement for future equity”) and think such an instrument sounds like a great idea. You certainly would not be wrong, SAFEs are great, but DO NOT attempt to sell equity or shares in your business on your own. Work with a qualified lawyer! Private equity is heavily regulated. The last thing you need is problems with the federal government.
B: Venture Capital Funding
Friends and family use their own money. Venture capitalists use other people’s money.
Venture capital exists to fund extraordinary returns.
VC groups have targeted lines of investment. Do your research before approaching one!
Friends, family, Accelerators and Angels provided gasoline for your car. Venture capitalists provide jet fuel for McDonnell Douglas F-15 Eagles. Don’t waste their time if you don’t have one.
C: Public Markets
Going public is only appropriate for well-established, revenue-positive, fiscally-sound business entities.
You’ll know when you get there.
Sacramento Regional Investors by Stage
Sacramento Kings Foundation: “Do Good. Impact the World. Make Sacramento Proud”
RAILS – Now known as SUTL Innovation Grants, City of Sacramento.
Capital Region Family Business Center: “To help family businesses in the greater Sacramento region grow and prosper.”
HaneyBiz: “Helping Entrepreneurs Be Entrepreneurs”
Sacramento Angels: “The GPS for Startups”