Raising Capital: The Process is a Flywheel

  • Create awareness — cold email or get warm intros to investors being the work usually considered
  • Spark interest — if you have traction, and a fit with the fund or partner, you pitch
  • Decisions are made — you go through due diligence and term sheets are offered
  • Action — an investor cuts you a check. Simple, right?
  • Disney runs trailers before movies in theater and teasers on Amazon Prime, creating awareness of the next Avengers film. But consider, that’s in fact NOT the awareness stage of the funnel… the movie industry planted awareness in much more subtle ways before then: the clip leading to the next film after the credits rolled at the end of the previous, leaked news on reddit, and our beloved actors dropping hints to Jimmy Fallon.
  • is generated by our teasers and trailers.
  • As the film date approaches, commercials are aired, word of mouth encouraged, and more talk show hosts chat up our actors. Interest is steered toward a to see the film; now we know when and where it will play.
  • And act we do, with news of the box office opening take, pictures from the red carpet on Instagram, and talk of the movie on radio and podcasts, we find ourselves at the bottom of the funnel taking.

Think Funding Flywheel

  • Awareness is still the right word to use in our Funding Flywheel, and I’m sure you already contemplate how to connect with investors; how to create in them awareness (and interest) in what you’re doing.
  • Opportunity is what sparks interest in investors and it’s opportunity that you must manifest in your venture. Whether that’s uncovering a Problem and Solution or validating a Market/Product Fit, investors seek a use of capital that will create greater value in what you’re doing (and deliver a return) — an opportunity.
  • Diligence refers to the familiar process of Due Diligence in funding; that investor’s decision is a result of doing diligence on you, your team, and your work. Their goal in the process is to get to know you and the startup, reduce risk, and familiarize themselves with how their capital will be put to work, beyond what the pitch deck informs.
  • Invest as that is after all the action we’re seeking in this case. Act.

And our funding flywheel spins.

Fundraising with a Funding Flywheel in Mind

  1. How fast you spin it
  2. How much friction there is
  3. Of what and how it’s created (how big it is and how much it weighs)
  • Awareness : Promoting your work. Do you have a community on LinkedIn, AngelList, or elsewhere? Is anyone in the media, locally or otherwise, socializing what you’re doing? Are you networking at events or working away in isolation?
  • Opportunity : A fundable startup is one in which investors will be able to draw from it a return. Knowing what return you’re capable of providing is the place to start. Is your startup prepared to serve the expectations of a convertible note or are you still at a Friends and Family stage where those “investors” are prepared for the higher risk? What does an opportunity look like for Angel investors or bank loans? Are you developing the opportunity meaningful to Venture Capital?
  • Diligence : Work backwards by understanding what will prevent investment and then overcome that. The due diligence through which any source of capital goes before funding you is pretty well established. If seeking a grant, can you meet the goals of that capital? Will the bank feel satisfied that you can pay it back? Will the check boxes on the due diligence list through which the Associate goes at Local Venture Fund prevent their funding you?
  • Invest : Meaningfully put the capital to work by ensuring the investment of capital is not just cash in the bank, but a purposeful use of funds that spins our flywheel faster. And faster, keep the cycle going as we create greater awareness with that capital, uncover new opportunities, and remove the hurdles and other frictions that the process of diligence should uncover.

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CEO of MediaTech Ventures, CMO to #VC, #Startup Advisor. I get you funded. Father, marketer, author, #Austin. @seobrien & @AccelerateTexas. https://seobrien.com

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Paul O'Brien

Paul O'Brien

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CEO of MediaTech Ventures, CMO to #VC, #Startup Advisor. I get you funded. Father, marketer, author, #Austin. @seobrien & @AccelerateTexas. https://seobrien.com