5 Harsh Truths About Raising Money

In the last few years, I’ve had the amazing opportunity to sit on both sides of the investor table. I’ve made pitches trying to raise money and I’ve sat on the other end listening into the pitches of entrepreneurs who are trying to raise funding.

From these experiences and chatting with tons of angel investors who are close friends of mine, I have learned a lot about raising money. I’ve learned an array of different things about the art of raising money, which can help other entrepreneurs in that position.

In this article, I’m going to discuss 5 harsh truths about raising money:

1. Credibility Trumps All

I have seen entrepreneurs who hold a lot of credibility come into a room with a shitty idea who manage to walk away with a deal. It blows my mind to this date, but investors really care about credibility.

Think about it. You’re basically trusting someone with your money and hoping that they don’t lose it. Would you trust the guy with no experience who talks the talk? Probably not. You’re probably more keen on trusting the guy with credibility who has proven he can not only talk the talk, but walk the walk.

2. Everyone Has The Next Million Dollar Idea

One sentence turns off more investors than any other. The sentence is, “I’ve got the next million dollar idea or opportunity and I’m sure it’s a winner.” Take a ticket and wait because your person #480484093 to say that.

Investors don’t want to hear about the next million dollar opportunity, they want to see it. You need to have validation (proof of concept) that shows them you know what you’re talking about. I constantly get emails from people pitching me their next big idea, but it’s just a thought until you prove it.

3. The Investor’s Money Is Better Than You

Almost every single investor I have ever met always truly believes their money is better than you. It’s tough walking into a room where you know a group of people have an advantage over you.

See, if you end up making waves – investors will come to your door. That’s when you become better than their money. However, anytime an entrepreneur goes door to door looking for an investment, the investors automatically value their money above you.

4. No Amount of Cash is Worth Losing Control

It’s really frustrating pitching to tons of investors and leaving without a deal. When desperation and frustration kicks in, entrepreneurs make poor decisions. Some of these decisions include losing control of their business or giving up too much equity.

I have learned that raising money isn’t the most important thing of all in a business. I’ve bootstrapped all my businesses and found that to be a far better choice. Money looks really appealing, but comes with a lot of headaches most people would probably want to avoid.

5. Going to Silicon Valley Doesn’t Guarantee an Investment

I spent this weekend in Northern California when one of my friends said, “I’m going to go to Silicon Valley in the next few weeks because I’m sure to get funded down there.” I laughed.

It was a really funny statement because he’s not the only person that thinks like that. Some people think that if you go where the sharks are everywhere, you’re bound to get funded. I won’t deny that you probably have a higher chance, but nothing is guaranteed in the world of startups.

Conclusion

In this article, I shared 5 harsh truths about raising money I have learned over the past few years. Have any tips of your own? Feel free to share them in the comments below.

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