Startup School: Capital Raising Demystified with Joe Rouse
What is Startup School?
Startup School is a series of practical workshops inviting industry professionals that will help your turn your idea into reality. From taxes, legal structures, to patents and capital raising, these workshops offer entrepreneurial and business development so that you can successfully take your idea through to fruition. Today’s topic is about Capital Raising.
What is Capital Raising and why is it important?
In order to scale up, many ventures will seek funding externally from investors, a process that seems daunting and confusing to those who have not been through it before. It is an inevitable and crucial progression that every expanding venture goes through and for this reason it is an important addition to the Startup School series.
Joe Rouse, a commercialisation manager at UniServices, was the speaker of the hour and demystified what capital raising is. He has over 20 years of experience in venture capital, technology business operations, innovation commercialization and entrepreneurial education. The lessons he gave can be summarised into three points: identifying your investors, defining vision and establishing expectations.
Identifying Your Investors
Early companies and startups that go through phases of capital raising are destined to meet two specific types of investors: angel investors and venture capitalists. This relationship is the bedrock to success, so identifying your investors and understanding their goals is imperative, says Joe. How do you distinguish them? Angel investors are individuals who invest with their own finances and make decisions on their own or with a partner. Venture capitalists are people who have access to capital from a fund or a pool of money and report their performance to a boss.
Subsequently, Joe emphasised the significance of vision and the presence of a strong team. Having a vision that investors align with is a safeguard against potential friction in future decision making and business operation. Investors are intolerant to complacency and underwhelming ambition, a lack of market validation, and an unresponsiveness to investor requests. The same can be said for teams with weak alignment, weak employee retention, and poor relations with existing investors. He continued by saying that solo-founders and part-time founders are generally turned away by investors.
The final key point was about expectation and due diligence. Angel investors and venture capitalists have very clear expectations: to make great returns on investment. But there is a trade-off that founders should be aware of, that investors can offer so much more than dead money. Expectations are reciprocal, and founders must tend to due diligence and decide what they want out of their investors. Investors can offer wide range of expertise, such as operational experience, social networks, assistance on human resource matters and mentorship. Finally, Joe left the audience with a triad of thought-provoking questions: Why should investors pick you? What impact can you actually create? And why should the market care?
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