As an entrepreneur looking to launch & grow a tech startup, you need to raise money to get off of the ground. If you don’t get the funding you need, your company is toast and your vision will not see the light of day.
To help you increase the likelihood of securing funding for your venture, I sat down with Luke Schneider, CEO of Silvercar (Austin, TX). During our conversation, Luke blew my mind. His approach to fundraising is unlike any I’ve uncovered in that it’s both creative and highly strategic. Heck, he’s definitely got the experience to back it up. All in all, Luke and his Silvercar team have raised over $31M from investors like Eduardo Saverin (Co-founder of Facebook), Dave Morin (Founder of Path), and Chris Dixon (General Partner at Andreessen Horowitz).
Now is the time for you to leverage what he’s learned along the way to raise money for your venture. Below you will find nine actionable takeaways that you can apply during your fundraising process.
1. You are always raising money
It’s in your best interest to consistently invest time in developing and fostering the relationships you will need to raise your next round of funding.
2. There is an increasing demand for capital efficiency by investors
While this might not be true in Silicon Valley, says Luke, it is true around the rest of the country. Take this into account as you develop your go-to-market strategy and begin executing on your vision.
3. “…the fundamental concept of using venture capital to fund your company is to compress the timeframe by strategically applying capital to a company in its earliest stages.”
It’s important to be able to articulate why you are raising money. Luke’s overarching concept stated above will help you think through your fundraising strategy including where t0 apply the capital and how much to raise.
4. “…one of the cardinal rules of raising a Series A… is don’t talk about building a brand. If you do, you’ll scare away a Series A investor…”
Instead, focus on solving a real problem and generating quantifiable proof of product/market fit.
5. “The most important thing, especially when you’re raising a B round, is that you’re demonstrating growth.”
While sharing your vision for the future is crucial, what’s more important is backing up your vision with metrics that show you know how to execute.
If you’re in Austin and want to learn how to find developers, build your team, or craft a powerful business strategy, check out Austin’s Startup Brain Trust. There you can learn from the entrepreneurs and executives that built Austin success stories like HomeAway, Capital Factory, & Bazaarvoice. Check out Austin’s Startup Brain Trust today!
6. Leverage your company’s Net Promoter Score (NPS)
When talking with partners and potential investors, Silvercar is able to strongly position itself against bigger companies like Hertz and Avis with their NPS score. This metric allows Silvercar to quantify how their target market views their experience with their service as compared to their competitors’ services.
7. “The fastest way to go out of business is to spread yourself too thin and focus on too many things.”
It’s really important that you show potential investors a sense of focus and determination. Be strategic in how you apply your limited resources.
8. “…before you approach anybody, an existing investor, about raising money, realize you’re doing the equivalent of, kind of, smacking them in the face a little bit at first.”
The first thing your investors will think about is dilution, explains Luke. It’s important to step them through the reasoning and explain where you are going to apply the capital and how that will result in a stronger company.
9. “When you want to raise additional money for an existing entity, it’s something that is best done outside of a board meeting.”
Board meetings are great to ratify and to approve decisions, shares Luke, but the real work happens in the evenings at dinners and over coffee. You need the flexibility of an informal meeting to pull and push ideas around and to talk about the pros and cons of raising additional funding. As Luke previously suggested, remember to be logical and direct in your discussions here too..
10. “Taking a lot of money might allow you to focus on the business for a long period of time, but the cost of that money is just so dear that you don’t want to do it.”
Be cautious. It may feel like a great opportunity to raise more money than you need, but that money comes at a price. Sometimes it’s better to take less money and focus hitting your next set of milestones. Doing so will enable you de-risk the investment allowing you to secure friendlier terms.
Want to learn from more successful, Austin-based entrepreneurs? Check out Austin’s Startup Brain Trust today.
Luke, CEO, is leading the Silvercar team in defining a new car rental experience for the technology-enabled traveler. Prior to joining Silvercar in early 2012, Schneider served as CTO of Zipcar, Inc., the world’s largest car-sharing company. He came to Zipcar by way of Flexcar, the United States’ first car-sharing company (acquired by Zipcar), where he served as CTO and VP of Strategy.
Schneider conceived and drove development of new products, including the award-winning Zipcar iPhone app, which Schneider debuted during a keynote presentation at Apple’s 2009 Worldwide Developer Conference. Schneider began his career at Ford Motor Company in 1992 and also served as SVP, Operations for Verticalnet, Inc., where he led post-merger integration efforts and product development for the software-as-a-service (SaaS) provider.
Luke earned a bachelor’s degree in Mechanical Engineering from the University of Texas at Austin and a MBA with specialization in Operations and Strategy from the Tepper School of Business at Carnegie Mellon University.