What To Do Before You Look for Venture Capital w/ Philip Kennard
The 5 Point Checklist Before Raising Capital
In this podcast, we’re going to give you the scoop on what you need before you even think of hitting that long and dusty trail to raising capital. We spoke to Philip Kennard and he unleashed the secret sauce on the 5 Things you need before raising capital and approaching VC’s.
Philip’s story reads like this: minority co-founder of the multi million dollar Futurestay, a digital platform that allows users to put their vacation rentals on autopilot, raising 2 million in capital in 2 years. Simply said, Philip experience with maneuvering through the pitching circuit, forced him to pay attention to feedback.
Being a founder of color, “Raising capital can be easy if you’re ready to raise capital, impossible of your aren’t ready to raise capital”, Phillip’s opinion strikes a chord that may sting a bit, because less than 1% for founders of color receive capital. But to prevent pitfalls there are some gems that can be seen as “requirements” to setup first before seeking funding (4:00) . Without these, don’t even think of approaching a VC because you’re not yet ready to raise capital.
Give the following a serious attempt and resist the urge to skip steps. Of course having these five requirements do not make anything guaranteed, such is life,you’ll have increased your odds for sure. Let’s face it, you could use a little shark bait when getting ready to roll with the big dogs.
The bottom line is that proof H.E.L.P.S in raising capital.
- Hustle — you’ve invested your own resources into this, and have convinced others to do so as well
- Evidence — validating that people want your product or service
- Leadership — strong vision and have recruited others
- Plan — what are you going to do with the money
- Skills — your team has the following skills to grow this company
Hustle — The Hustle is in you
The first requirement you’ll definitely need is a technical co-founder. Once you value the role of technology in your business, the search becomes that much easier. This applies to any tech business or tech enabled business. Not only is the technical co-founder someone who can help make your dream happen, it’s proof positive that you were able to convince at least one person to take this often long journey with you on nothing more than an idea on a napkin. VC’s believe that the fact that a founder has been able to convince other people on his or her vision is a sure sign that you might be someone worth betting on.
Other startups in your lane with definitely have one so think of this also as a way to stay competitive before you’re even out the gate. You need the flexibility to change direction, add or remove features, or enhance benefits. These are just hard to do while outsourcing especially if you’re on a budget. Without a solid understanding of the technical side of things, you leave yourself open to being taken advantage of by outsourcer who want to milk you for more billable hours or sell you things you don’t need.
Evidence — Hands are raised
The next requirement is that someone somewhere wants what you have to offer. Too often entrepreneurs rush to develop something that only make sense in their minds. They really don’t have any indication whatsoever that their product is actually needed or even wanted in the marketplace. Save yourself the time, money, and heartache. 10 minutes of validation is worth more than 1000 hours of sweat equity and development time.
And sorry to break it to you but being a copy of an existing business isn’t proof enough that yours will fly. Let the spoken words of a potential customer tell you whether you have gold in those hills or are just polishing rocks on your free time. Nothing, and I mean nothing, is a substitute for interviewing potential customers and doing proper customer development. Go build an MVP (the smallest version of your product) and find people on Craigslist/social media to give you feedback. For bonus hustle points, test the offline version of your app manually in the real world. You can even test your app in an app store and see if people will even download it if you’re crafty enough. But okay there is another option, complete a use case. Go through all of the leg work as if you were selling, and really get to the point you’re selling something.
Leadership — The crew and you
This requirement expands on the first one. This speaks to your leadership skills in recruiting others to join your cause. The strongest leaders take care of their people. Having a team to make the magic happen and keeping them motivated enough to stick with you through hard times is tough but shows a lot about your ability to VC’s.
Plan — The end to your means
Next, you need a game plan for what to do with the money. Imagine a friend asks you to borrow money and naturally you’ll say….for what? We all want to know that our money is going to a worthy cause. VC’s know that money only makes a bad situation worse. Marketing/exposure is one common goto answer as to why you’ll need money but there are so many free and alternative ways of marketing your business that it isn’t the best answer. Don’t raise money to figure out how to make money. Money should be use to double down on what’s already working. Its much better to go to a VC and say we know how to get customers and what works on a small scale and need to money to put grease on the wheel.
Skills — Form Voltron
The last requirement is that you already have all the skills needed to grow your company. You are the complete package already and came prepare to talk shop. This demonstrates professionalism and keen awareness in what exactly you need to win. (23:40). Create a tool belt of advisors, who you can refine ideas with, get that push back to the point you guys create something that really might work. You’re long past the dreamer stage and have thought this whole thing through. Sales, marketing, business development, domain expertise….these are like the caster, healer, and tank you need to tackle and sustain your business..
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