Do More Faster: TechStars Lessons to Accelerate Your Startup

Chapter 54. There's More than One Way to Raise Money

Brad Feld

Brad is a managing director at Foundry Group and one of the co-founders of TechStars.

As a venture capitalist, I regularly hear the question "How do I raise money from a VC?" My response is usually "Why do you want to do that?"

Many entrepreneurs view raising money from a VC akin to finding the Holy Grail. Very few companies are VC-backed, however; most raise money from other sources, including friends and family, angels, customers, partners, and grants. Let's look at a few of these.

• Friends and Family: This is the most common form of a seed or early stage investment. Your first $10,000 will likely come from someone you know, like a parent, sibling, or co-worker. Sometimes this category is called the 3Fs (friends, family, and fools) mostly as a tongue-in-cheek way to signify how much of a risk your early investors are taking. Recognize that they are betting on you, which is why they are often the first ones to invest.

• Angel Investors: Angels come in many forms: the lone angel who is a successful entrepreneur who likes to invest in and get involved with startups; the super angel who invests in a large number of early stage companies; the newbie angel who has recently made some money and is looking to make some investments; or the angel group, which has a collection of angels that periodically invest together. Each category is ...