Forget everything you’ve heard about raising a seed round of capital. The stories you read on TechCrunch where ideas not as cool as yours got funded? Ignore them. Lessons your professors taught you in business school? Disregard them. The best lesson about raising capital probably came from figuring out how to sit with the “cool kids” in the middle school cafeteria.
Most entrepreneurs weren’t likely at that table – I certainly wasn’t. But three painful lessons you may have learned in around that time are significant.
1) Fake it until you make it. No one knows what they’re doing in middle school. Everyone is insecure, trying to prove their worth, and hoping to fit in. The same is true in early stage investing -- no one knows which investment will pan out. Understand that forecasting future value is tough. Most people write checks just to tell their golfing buddies they are in on “The Next Big Thing.”
2) Find someone to vouch for you. Most entrepreneurial communities have small groups of active individuals who make 80 percent of the investments. Of this group, you need one person to vouch for you and your company -- and to back that up with money. Once you have one person who believes in you, it’s much easier for that person to bring their friends along (remember, they don’t want to be left out when chatting about The Next Big Thing.) It takes time, but invest in building a deep, authentic relationship with two or three people rather than a “spray and pray” approach of trying to be everything to everyone.
3) Don’t try to sit at the "cool-kids'" table until you are ready. Cool kids gossip and getting rejected from the table too soon can have disastrous effects. Keep building important relationships and bootstrapping until you have enough interest confirmed to pull the trigger. Stay under the radar until you have the product, pitch and traction honed to the point where you know they’ll say “yes” (the folks with whom you are cultivating relationships should advise you here) -- then move in for the kill and get them to bring their friends along.
Sure, the substance of your company and team all matter in this game, but psychology, emotion and momentum are just as important. Learn the game, build relationships and be patient. Investors are just people too. As they accept you it will be dramatically easier to raise money.
Erik Severinghaus is a Chicago-based serial entrepreneur and business leader. Erik was part of the founding team for iContact (a leader in email marketing) and spent six years as a consultant in IBM’s IT Optimization Practice before founding his current company, SimpleRelevance. SimpleRelevance helps companies easily send the right email content to the right person at the right time, leading to revenue increases of 30-300 percent per email campaign. Learn more at SimpleRelevance.com.