{"id":36265,"date":"2016-03-09T15:53:11","date_gmt":"2016-03-09T21:53:11","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=36265"},"modified":"2016-03-09T15:53:11","modified_gmt":"2016-03-09T21:53:11","slug":"six-rules-to-successfully-raise-venture-capital-for-your-business","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/six-rules-to-successfully-raise-venture-capital-for-your-business\/","title":{"rendered":"Six rules to successfully raise venture capital for your business"},"content":{"rendered":"

By Lucia Maffei<\/strong><\/p>\n

So, you have launched your own business. You\u2019ll need money.<\/p>\n

Given this scenario, you have two choices. First, financing your company with your own resources, by scraping every penny from savings or parents\u2019 trust funds. Second, giving up part of your business\u2019s control by partnering with one or more venture capitalists, in return\u00a0for funding.<\/p>\n

Choosing the right time to raise venture capital may be challenging. According to a panel of Chicago-based entrepreneurs who discussed the topic Thursday at the tech incubator 1871 in the Merchandise Mart, these are the six rules to follow when considering the choice between bootstrapping and raising capital.<\/p>\n

<\/p>\n

Organized by Hyde Park Angels and 1871, the event was the first of a series of conferences<\/a> about early-stage investment that will continue till November.<\/p>\n

1. Bootstrap as long as you can<\/strong>
\n\u201cThe longer you can focus on your business, the better evaluations you\u2019ll get from potential investors,\u201d said Craig Vodnik, co-founder of cleverbridge<\/a>, a company that offers support for e-commerce businesses. When he launched his first start-up, he and his friends put one million dollars together from savings and did not take any salary for two years. \u201cWe felt we could do by ourselves,\u201d said Vodnik, who eventually sold the company.<\/p>\n

2. Raise capital when you can, not when you need it<\/strong>
\nEven though you are bootstrapping, meet with potential investors and start networking before you need additional money. \u201cInvestors want to track your progresses,\u201d said Vodnik. As a result, they need time to evaluate your business before making any decision.<\/p>\n

\"The<\/p>\n

The panel of Chicago-based entrepreneurs discussed pros and cons of raising venture capital Thursday at 1871. From left, Craig Vodnik, co-founder of cleverbridge; Pam Netzky, co-founder of SkinnyPop Popcorn; Kristi Ross, co-CEO and president of dough Inc.; Bill Pescatello, a partner at Lightbank; Katlin Smith, founder and CEO of Simple Mills, and moderator Peter Wilkins, managing director of Hyde Park Angels. (Lucia Maffei\/MEDILL)<\/div>\n

3. Make sure you can learn from your investors<\/strong>
\nChoose carefully the people you plan to bring onto your board. \u201cMake sure they are people you like, because you are going to be married with them,\u201d said Katlin Smith. Last year, she was included in Chicago\u2019s Top 20 in their 20s<\/a> by Crain\u2019s\u00a0Chicago Business\u00a0as founder and CEO of Simple Mills<\/a>, a food company.
\nAlso, consider your investors as resources. \u201cRaising capital is not only adding cash to the table,\u201d said Kristi Ross, co-CEO and president\u00a0of dough Inc.<\/a> An entrepreneur with a strong background in accounting and finance, Ross created an online platform to help customers become better investors. She soon realized that her company needed marketing experts, and she chose her investors accordingly. \u201cInvestors have connections and skills you can use,\u201d pointed out Ross.<\/p>\n

4. Plan carefully the first meeting with your investors<\/strong>
\nBe ready to list your business\u2019s numbers: revenue, net income, number of employees, any transaction. \u201cNo investor likes to be given \u2018I don\u2019t know\u2019 as an answer,\u201d said Ross. Also, be prepared to explain what you do every day at your company. Providing a visual presentation is a good idea; spending time on it, a better one. \u201cInvestors will use your PowerPoint to present your business to others,\u201d explained Ross. Try to make your slides as easy to follow as possible. \u201cKeep in mind that you are not documenting your company,\u201d said Ross. \u201cYou are trying to generate interest.\u201d<\/p>\n

5. Ask your investors for more capital than you need<\/strong>
\nWhen the moment to declare a number arrives, think before speaking. \u201cI\u2019ll tell you, you are going to make mistakes,\u201d predicted Ross. As a result, ask your investors for more money than you think you\u2019ll need. How much more? \u201cWhatever you think you need, multiply by two,\u201d said Ross.<\/p>\n

6. Think carefully before getting legal advice<\/strong>
\nRaising capital requires a lot of legal documents to be filled out, and legal experts are ready to help \u2013upon payment. \u201cThere\u2019s no need to pay a lot of legal fees,\u201d said Bill Pescatello, a partner at Lightbank.<\/a> \u201cTemplates of documents you need are out there.\u201d For example, the website Seed\u00a0& Startup Capital<\/a> offers a template set of model legal documents put together by a group of venture capital attorneys.<\/p>\n

Photo at top: “When to Raise Venture Capital or Bootstrap” was the first of a series of events organized by Hyde Park Angels and 1871 about early-stage investment in business. (Lucia Maffei\/MEDILL)<\/div>\n","protected":false},"excerpt":{"rendered":"

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