3 Important Questions to Ask Before you Raise Capital with Monique Woodard, Venture Partner at 500 Startups and Co-Founder of Black Founders
Are you unsure about the kind of capital your company should raise? How do you utilize your time as a founder to find the right fit for your company? In this post, we discuss different types of capital and how to pick and choose an investor that will ensure success for your business.
Monique Woodard, Venture Partner at 500 Startups and Co-Founder of Black Founders, shared several important investing tips at Project Entrepreneur’s 2016 Summit | NYC: Fundamentals of Funding. Here are her three questions that every founder should ask themselves before asking for money.
1. What kind of capital is right for us?
Depending on the stage of your business, you need to determine the type of capital you should be looking to raise.
For example, the Friends and Family round is a type of early capital that comes from people you know personally and, in some cases, will be the first round of money given to a business owner. For many people, Accelerators (an early-stage venture fund such as Woodard’s 500 Startups) can become a stand-in for the Friends and Family round, if their personal connections can’t provide capital.
Once you’ve moved up the chain to the Seed Funding round, it’s time to start considering angel investors and venture capitalists. After you’ve proven yourself and are looking to scale your business, then your company will be looking at venture capital financing, known as Series A funding.
2. Which investors should we talk to?
Woodard cautions against talking with every available investor, recommending instead to focus only on the investors that are right for your business and sector.
By being crystal clear about which investors are the best bets for your company, you will increase your chances of getting a positive response. Use your time as a founder wisely by not wasting time on meetings with investors who are a bad match.
To figure out which investor is right for you, Woodard suggests doing your research. Make sure to closely scrutinize the investor’s website, Twitter feed, or blog. Get very familiar with their investment portfolio and business interests to figure out if they are likely to be interested in your company.
3. Who do you want to work with?
Ask yourself questions to determine the kind of investor who would be best for your company. Where is your investor located? How many boards do they sit on? If you need someone to be actively engaged and offer lots of face-time, then you will want someone who doesn’t live on the other side of the country and sits on twenty boards. Be honest about what you will need from your investor. Woodard thinks of venture capital as a service industry and believes she is in service to the entrepreneurs whom she has funded. She is happy to offer her clients advice or talk with them via text, email or over the phone.
Make sure the investor is someone with whom you get along. Woodard says, “While a name may look great on paper…if you can’t get along with them and can’t talk to them and can’t relate to them, that’s kind of a waste.” Take a smaller check from someone you get along with, rather than a large check from someone you can’t stand and don’t want to spend any time with.
Woodard’s advice comes from her #PESummit workshop, “Questions to Ask Before You Raise Money.” Listen to the entire workshop on episode 17 of our podcast. For more expert inspiration, read 5 Tips for Your Best Pitch with Hayley Barna, Venture Partner at First Round Capital and Co-Founder of Birchbox.