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December 14, 2011

Year-End Top 10: Early Stage Funding

Always lots of ideas from entrepreneurs, angels, vcs about how best to raise Seed & Early Stage capital.

‘Tis the season for end-of-year lists.  So, if good enough for “Top
10 NFL GameDay Hits” — surely a list is good enough to help the cause of
Building Founder Value.

Having spoken to a ton of folks who raised capital during 2011 (as
point of scale, @dogpatchlabs had almost 2,000 folks apply for community
residency over the last year) — here’s my real-time two cents on what
can repeatably work well:

  1. Articulate a Killer Opportunity & a Great Company in the Making.   Kind
    of obvious, but lots of teams don’t spend the time to prepare a
    discussion about how to take a solid shot at being really great.  Not
    just really interesting — really great.
  2. Be Relevant.  Why the team is a dead-on fit for
    what you are doing.  And what the next several team members to-be are
    all about.  And where you’ll get them from.
  3. Have a Crisp Plan. Even the earliest of great
    technology Seeds should have a tight set of choices to develop about how
    money will be made & scale achieved.  And what the milestones are
    heading into Series A.  And “What Success Looks Like” beyond that.   
  4. Keep it Simple. Current & go-forward user growth, unit economics, revenue plans should be Comfortably-Grokked.
  5. Always Be Talking. Informally getting to know
    potential investors when not in raise mode can only help. Be careful to
    not be “too cute”.  It’s about getting to know folks over coffee &
    exploring common ground.
  6. Create a Sense of Urgency.  Investor competition is
    obviously helpful to the cause.  But more important (& more
    sustainable in any market condition) is the value of articulating a
    legitimate opportunity window that needs exploitation – now.
  7. Be Prepared. Think of questions that you’d have if someone talked to you about being an angel investor in their deal.  And go from there.
  8. What, Me Worry? Talk through how you will learn, adjust & iterate.  Product, model & team.
  9. Talk to Investors Like You’d Be Partners. There’s a
    time for selling.  And a time for Straight Talk.  The end of the
    meeting — on both sides of the table — should be about Straight Talk.
  10. Do Your Work.  This is the opportunity to really check into Investors Who Would be Partners. Ask
    around about what value they’ve helped to create already — with those
    entrepreneurs with whom they’ve already partnered. How they work. How
    they behave (when there are bumps in the road or worse). Bill Belichick
    says “Do Your Job”.  The best thing you can do before weighing a Term
    Sheet (or multiple Term Sheets) is to Do Your Work on whom you’ll be
    working with for years to come.

Dave
Barrett
is a General Partner with Polaris Venture
Partners
.  You can find this post, as well as additional content on his blog called I Know You Know
You can also follow Dave on Twitter (@davebarrett4) on Twitter by clicking here.