Our startup, Watchup, has just closed a $500,000 angel round, and since creating a startup is an increasingly appealing idea to a number of journalists, I thought I should share on Idea Lab what I believe every entrepreneur should know before starting raising a first round of funding.
Watchup, an iPad-only app that unleashes the power of video journalism by letting you build your personal newscast, is a winner of the 2012 Knight News Challenge. Knight Foundation invested in it through the Enterprise Fund.
This first round had much to teach, and here's what I've learned so far. But, take this advice with a grain of salt as some of it only applies if you're in Silicon Valley and your startup is in the news space as ours is.
1. Find your safe harbor
Be prepared for the roller coaster. Raising angel or seed money will let you meet with some of the best (and worst) people on Earth. Be ready for rewarding victories and inevitable disappointments -- tons of "hurray" and some sighs or sobs. Also, make sure you have your own way to chill out and relax after a tiring week. In my case, I have my wife and kids. That actually helps (in addition to making you a better leader).
2. Fundraising is distracting
It's not a matter of time. You always end up thinking about fundraising -- all the time. So you want to integrate it into your plan, make it transparent to your co-founders (and significant other), and have as few people as possible doing that in your team. How many? The right number is an odd one -- and possibly less than two. Focus on fundraising, and make sure to complete the process in the shortest amount of time so that you can get back to business as soon as possible. Of course, seasoned entrepreneurs know that you never really stop fundraising because you do want to keep nurturing your investors' network. But, of course, the level of involvement will be minimal when you are not actively fundraising.
3. Beware of the holidays
Summer and Thanksgiving through New Year's Eve are tricky. Make sure you plan ahead since you don't want to find yourself halfway through fundraising during those periods of the year. Remember: By definition, your prospective investors do have some spare money and, after all, you can't blame them for taking advantage of that, can you?
4. Hang out with other entrepreneurs
Peer learning is always key, and fundraising is no exception to the rule. Buy coffees and lunches for other fellow entrepreneurs. You'll learn a lot from those who are more experienced than you. But you'll also find it useful to spend some time with those who are in the same boat, busy raising their first round, so that you can compare notes. This said, I promise you'll also learn from those who are well behind you. Why? Well, "paying it forward" is key in this world anyway, and teaching someone can actually help externalize some of your own feelings and turn them into actual knowledge.
5. Get a lawyer as soon as possible
Other entrepreneurs can introduce you to the right people. Make sure you use them to find a lawyer for your startup. After that, make sure you write every deal in stone, especially when it comes to equity deals among founders. Do that as early as possible. Use vesting and consider a cliff for securing founders' involvement in the long term.
6. Get External advice
Fellow entrepreneurs and your lawyer are key in building your external cohort of informal advisers that you'll want to tap into. You want to build a healthy organization, and a healthy organization is a porous one -- one in which its leaders have the ability to seek fresh advice from close advisers and outsiders in order to challenge status quo views and think differently. The "get out of the building" rule applies to that too.
7. Get into an accelerator (if you can)
As an entrepreneur in residence at StartX, the Stanford startup accelerator, I had (and still have!) the privilege to serve and be connected to one of the best networks of fellow entrepreneurs, investors and mentors in the world. Try to get in one of these accelerators to leverage existing networks. One of the latest that launched recently, Matter, is precisely focused on media startups and is run by awesome people in San Francisco. There is also a great one created by Turner, called MediaCamp, in addition to the usual suspects such as 500 and YC. The No. 1 rule for any network you belong to: Take as much as you give. You'll feel good, and you'll be rewarded.
8. IRL vs. Online
Raising money is like establishing a long-term love relationship. Of course, some of those do start online, but flirting IRL ("in real life"), especially when a common friend provided the introduction, contributes to building the first layer of mutual trust.
Personally, I found online communities such as Angel List superficial. Overall, the meetings I took from there did not result in an efficient use of my time.
Do rely on introductions from people who love your product, understand your space, and can be a good back channel for you down the road.
There is one valuable exception called TheFunded.com that offers Yelp-like reviews of investors written by fellow entrepreneurs (that you'll also want to take with a grain of salt, by the way).
9. Adapt the pitch, but be consistent
Not every investor is the same, and you want to prepare for every meeting by doing your homework and researching who you meet with. That will let you adapt your message to be more persuasive. At the same time, remember that there are thousands of investors out there and you don't want to please all of them. You actually do want to stay consistent with your main vision. And the reason is that at the end of the day, you want everybody in your constituency of investors to stick to the same bold vision for your product and your company.
If you believe in what you do, you'll get there. Be persistent (in addition to being brilliant). There's no better person than yourself for betting on your future. Go out there and kill it.
And once you've raised your first round, remember -- That. Is. Just. The. Beginning.
Image courtesy of Flickr user Tddy.