I have the privilege of meeting a lot of entrepreneurs in my dual role as technology investor and university entrepreneur-in-residence. Many of these entrepreneurs are first-timers and are out looking to raise capital for their fledgling companies which very often have no product, no team and no customers. A good number of these folks are also under the illusion that there are investors out there that would be interested in providing them with seed capital nonetheless. This is simply not how things work in the overwhelming majority of cases.
Here are a few quick thoughts for those of you out raising money pre-revenue, pre-customer, basically pre-anything:
- At this point you need to realize that your sources of funding are limited to either grants, friends and family money or your own money.
- Without some traction in the form of a product, customers, revenue and other proofs of concept, very few investors in the world will even consider investing in your company.
- The sooner you accept this reality, the better off you will be, because you will be spending your time achieving these milestones as opposed to wasting your time trying to pitch investors.
Are there exceptions to this? Of course there are.
- Biotech/Drug Discovery is one of them. For example, if you are a world class scientist in biotech and make a break-through discovery in an area with a huge market and demonstrate this with animal studies, investors will be breaking down your door.
- If you are a serial entrepreneur with a big success or two under your belt, you will be able to raise capital, oftentimes from investors who have backed you before, even if you are at the idea stage.
- Lastly, if you have what I call the X-Factor, then there are no rules. You will be able to inspire certain adventurous investors to bet on you and help you make your vision a reality.
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