Raising Startup Funds in Today's Environment ...

Whether its one guy/gal with an idea or a more developed business ramping up rapidly, one thing they all worry about is cash. Funding. Where - in this environment - is the money coming from to move the idea/product/technology/business to the next stage?

Because I have a track record (I've raised over $80m in venture capital in the last 10 years for a range of startups) - and because I'm a finance guy - founders and execs in startups tend to turn to me for help in figuring this out. Well, there's no magic wand, that's for sure.

Consider the range of traditional funding sources at various stages and what's going on out there. In the rough order from very earliest stage to the later stage funding rounds, here's what its like out there now:

Friends and Family:

These are the traditional backers of the Next Big Thing to help Johnny get it under way. With a group you might raise $100k or so. However my guess is your Mom, best buddies and Uncle Bill have all seen their home values collapse, their 401k's beaten up and their own jobs disappear in the last year. Not a great environment to invest in your latest harebrained idea, really.

Angels:

A traditional Valley source for a few $100k's. However many of these have also seen a big drop in personal wealth. But they are more risk tolerant than Mom, and probably understand the idea and the opportunity a lot better than Uncle Bill. And at least you won't have to face them at the Thanksgiving dinner and explain why there's more than one turkey in the room. Still pretty hard though ...

Alpha, Micro-Cap and Seed Stage VC's:

Better. Collectively, perhaps with Angels, you might still raise up to $1 million or so. Stiff competition for the cash. But they are "risky idea" stage investors and the money is still out there.

Series A Venture Capital:

So your idea has turned into technology and thence into a product/service. And, wonder of wonders, its getting traction in the market. Assuming you've checked all the boxes - team, market opportunity etc etc - then this is still a viable source. Here we're in the $1m - $3m range these days.

Venture Debt and Equipment Leasing:

As I've said before, don't borrow unless its a clear bridge to a next equity funding event. Otherwise its a pier to jumping into much deeper water than you really want. But don't worry, no-one is lending anyway.

Strategic Investors:

These are the big corporations who might invest as much as a few $m for the right opportunity. Still possible these days, particularly with a real strategic partnership. Problem is, in true shortsighted American business knee-jerking, many strategics have pulled way back or have even moved to stop any new investments in this environment. These are the same companies now downsizing or divesting the acquisitions of the last few years in a "change of strategy" because the "market environment has deteriorated rapidly". Don't get me going ....

Series B, Series C etc etc ...

Hard, hard, hard. You'd better have the engine running on all pistons ...

Tough? Yes, of course. But you know what? This is STILL a great time to start a tech business. And there is money out there. But you need to really work hard to earn the right to have it