Do More Faster India, 2nd Edition

Chapter 57There’s More than One Way to Raise Money

Brad Feld

Brad is a partner at Foundry Group and one of the cofounders 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 coworker. Sometimes this category is called the 3Fs (friends, family, and fools). Mostly it’s 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 and 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 who periodically invest together. Each category is different and as more organized angel groups have appeared, a wide variety of activities—some good ...