How Do You Get Funding Before You Have Paying Customers?
What comes first, your funding or paying customers? Well, it depends on the type of funding you're trying to get.
I'll explain, in this short video, what's your best bet for raising your early funding. I hope you like it.
Read The Video Transcript Below:
Is it possible to raise funding when all you have is a prototype and a team? Well, the answer is yes, but there's a huge but.
Here's how you can raise funding, with aprototype and a team right now. It's probably going to be with your friends and family. That's probably going to be the only network that's available to you.
Unfortunately times have changed. And it's really tough to raise funding from venture capital firms or even angel investors when all you have is a prototype and a team. Now there's an exception to this, which I'll tell you about in just a second. But the reality is it's really hard.
I've done it. I raised money when it was just myself, my team, and a PowerPoint pitch deck, but there was a huge reason why we were able to do it, and you're not likely to be able to do it.
Here's the reason: We had a name. We had a brand behind us already. We were already successful and therefore investors were willing to take a risk on us. Plus times were different back then. It was 10 years ago when we raised our initial funding. Times have changed. It's gotten even tougher for you as an entrepreneur to do it.
Now I've worked with an entrepreneur recently who did the exact same thing that I did. And he raised $6 million. I raised $12 million and he was able to do it. Then he went on to raise another $25 million in his next round of funding. But, you know, he had already built his team. They already had moved along, so he was able to do it, but he also had the same thing going for him that I did. He had a name. He had a track record of success.
That's what you're likely to need too. So what do you need to do at the beginning? It's pretty simple. Focus on friends and family. Those are the people that are going to invest in you at the beginning because they know you and they believe in you as a person.
They're not interested in the big return. They just want to help. That's going to be your likely source of funding at the beginning. It's not going to be angels. It's not going to be VCs. For angel investors, you have to have some sort of traction, which means you've got to have revenue.
You already have to have customers for VCs. The bar goes up even higher. So don't expect that miracle to happen. It's likely not going to happen for you. So what do you need to do? Focus on friends and family. Scrape any money you can together and just survive at the beginning. That's what you're going to have to do. I'm brett@brettjfox.com. Have a great, great day.