At this month’s sold out Lunch & Learn, we were joined by three professionals in the venture capital space in Western New York. Rami Katz of Excell Partners, Inc., Steve Nicosia of Launch NY, and Dorrance Lamb of the Rochester Angel Network all came together to discuss some of the best fundraising strategies for Rochester-area startups.
For those of you who are not familiar with each of the organizations, here’s a brief overview.
- Excell Partners is a venture capital fund that invests in seed-stage startups that have game-changing tech that is well-aligned with the regional resources we have here.
- Launch NY is a venture organization which helps catalyze early-stage companies through investments and by providing entrepreneur-in-residence services.
- The Rochester Angel Network (RAN) is a private group of accredited investors, which supports seed and early-stage businesses. Since 2005 they’ve invested over $9M. This summer they launched a second fund and are now accepting applications from companies.
Now that we’ve got that squared away, let’s dive into the 6 key takeaways from their discussion about fundraising strategies:
- Don’t start fundraising when you need Start well in advance—at least 6-9 months before you really need the cash. It takes time to go through the process.
- Remember, when you raise a “friends, family, and fools’” round, that’s not a validation of your business. You need to do real customer discovery. Not just by talking to 10 potential customers, but to 100+ potential customers.
- Each time you raise a round, never give away more than 20% of your company.
- Understand the risk investors are taking on you. They know through experience that approximately 60% of their portfolio won’t generate a return—the startups simply won’t make it. To make early stage investing worthwhile, they figure the other 35% will generate reasonable returns (the average is 2-3x the investment in five years or less). The remaining 5%, they hope, will be a hit, bringing in 10x return. The point is, do your homework and be realistic.
- Some startups know when it’s the right time to seek venture funding, while others aren’t so sure. Don’t let uncertainty get in the way. Apply. Share your story. Get feedback. If it’s not the right time, they’ll tell you what to work on and when to reapply. Make sure your pitch is honed and you have answers for every question an investor might ask.
- If it takes you five times longer to answer a question than it takes an investor to ask it, that’s a red flag.
Thanks to Rami, Steve and Dorrance for sharing their knowledge, and to all who came out to have lunch with us! We hope to see you during NextCorps’ Innovation Week, Nov. 12-17. Be sure to follow us on social to stay up to date on all the excitement.