Optima Law Group Blog

So You Want To Raise Private Funding? Dos and Don’ts

DO…

1. Your research (on your customers, types of private funding, investors, etc.).

2. Get to know your target audience first and get feedback from them. Be prepared for and open to criticism. Listen, then revise and improve your product again and again. Learn to anticipate what questions your target audience will ask you and proactively address them to remove the roadblocks keeping them from investing, one by one.

3. Make a complete business plan including an over-estimate of the capital you will need, hypothetical problems that can arise and how you have anticipated them and will resolve them.

4. Invest in yourself. Investors will want to see that you believe in yourself and your product – if not, why should they take a chance on you?

5. Make sure you are complying with state and federal securities laws as to not put your company in jeopardy and not scare off investors (look like you have been here before).

6. Solicit friends, family & coworkers and consider nontraditional techniques such as crowdfunding, but beware of disclosing too much information with this latter option which can put your product/idea at risk (other sources include banks, grants, venture capital, and angel investors). Consult with your attorney about the funding avenues available to you based on your specific situation and needs.

 

DON’T…

7. Be unorganized – recruit a great Board, have a structured team and make sure your corporate documents and minutes are orderly.

8. Begin with fully developing your product before you know what your target audience wants. You don’t want to financially strap your company before it’s even up and running.

9. Forget to hire an experienced attorney. There are a lot of rules and regulations that must be complied with during the startup and fund raising process, by consulting an attorney, you can avoid legal issues and focus on other business logistics.

10. Enter into agreements you do not understand or engage in “handshake deals” (oral agreements). Another reason it is especially important to hire an attorney and discuss with them, as agreements can be very complex.

11. Ask for investment from people you do not have an existing relationship with or use the internet to solicit investment, unless your attorney says it is okay.

12. Fail to raise enough money, understand your burn rate (how quickly you burn through cash), or move quickly enough to raise your next round of funding.  If you wait too long for the next round, you will be at a serious disadvantage with the next group of investors.