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Of course, you want to own 50 percent of a company that makes $10 million a year.
You know what the difference is? Venture capital.
Today, I'm going to share with you how to raise venture capital.
See, over my lifespan, I've raised more than $20 million.
That may not seem like a lot.
It's because I've learned that you shouldn't raise more than you need.
Sure, some people raise hundreds of millions of dollars and then their company fails and the VCs take the whole thing.
The key is with venture capital is to not raise too much, just raise a little bit more than you need.
The reason I say a bit more is because things always go wrong.
You may think, oh, I just need this much money, and then things will go right, I can do this and that, but things always go wrong.
always add some padding.
Now here's the thing that most people don't tell you about venture capital.
When I first started off, I would go to VCs and pitch them like here's my idea; it's cool, it's the next best thing since sliced bread.
You have to invest. And you know what they said?
Oh, cool yeah, I'm interested, let us think about it, and we'll get back to you.
You know what they did? They never got back.
Why? Because I didn't build a relationship with them.
See, venture capital is all about who you know. It's not about going out there and just raising money from random people.
It's really about raising money from the right people. And what I learned about venture capital is when you build up a relationship and you get to know people, they're much more comfortable giving you money.
Why? Because the idea they invested in, and they see this, is probably not going to be the idea that your company ends up with.
Ideas change over time. What you first start with is rarely what you end up with. Things pivot and adapt. So people invest in those that they know.
Twitter started out as Odeo. Odeo was a podcast company, and it wasn't working.
Then they came up with Twitter.
Podcasting. Twitter. Do you see the resemblance? I don't. The investors didn't either. But they understand ideas change.
So, go to events like TechCrunch, they have conferences.
Who are at the TechCrunch events? Investors.
Mashable has meetups. Who are at those kinds of events? Investors.
Before you pitch them, you have to get to know them first.
That's the biggest mistake entrepreneurs make.
People go and try to raise money, which never really happens, from random people that they don't know. And it usually, in most cases, ends up in disaster.
You need to create a deck.
There's a lot of amazing decks. If you go to SlideShare, Dave Mcclure once released a deck that shows you how to raise venture capital.
I understand technology's changed, but the same pitch that worked back then works now.
If you follow these steps, you will be better off, and you should have an easier shot at raising money.
If you're not passionate, you're probably not going to get money.
If you don't have a co-founder, again, it's going to be hard to raise money.
VC's know you're not going to be able to do everything.
If you're a business person, find an engineer. If you're an engineer, find a marketer or a design or a product person.
You want to have at least two or more co-founders.
Now that you've got your co-founders, you have to pitch a big idea.
Ventur Capitalists are looking for the next Uber, Airbnb, eBay, Google, Microsoft; you get the point.
Create something that's huge.
They'd rather have you swing big and lose money than not take any risk at all.
They don't want you to create a company that does $20 million a year and sells for $50 million. It doesn't do much for them.
So go after a big idea, or no one's going to give you money.
After you raise the Venture Capital, you should always be fundraising.
Before your money runs out, raise more money.
You want to have a healthy cash reserve, or else you're going to have a much harder time raising money.
If you ever tried raising money or struggled out there, just leave a comment below, and I'll tell you what you did wrong.
I hope this video helps you. If you liked it, please subscribe to this channel, like the video, share it, let other people know about it.
Hi Neil, that was an excellent explanation of the value of connections over technology when you go for that first raise. I figured that to a pretty good extent it's about who you know, not what you know, and you hammered that point home. I have 2 small questions in line with this reasoning:
1) Isn't forming connections a way of using people? How do you right this in your mind?
2) How do you network if the VC's whose expertise/experience you need are in different geographic markets?
1) If you go out looking for connections to get you to investors, aren't you using people? It seems to me that if all you're doing is using people as a ladder, they'll avoid you, making it harder for you to get where you need to go. How do you handle this viewpoint? My character won't let me make connections if I feel like I'm just looking for referrals (Humans are Underrated, as Elon Musk would put it).
2) So you decide to go out there and start forming connections. What happens if you're geographically restricted from the firms that are objectively best suited to guide your vision into a young, healthy startup? For example, I live in Michigan, and to put things delicately, I don't have a whole lot of discretionary income to travel to San-Fran for a TechCrunch meet-up. What I do have is a fundamentally new hardware technology, still very much incomplete, but in my view with a lot of promise. I don't want to apply to random VC firms in my area because they're all doing software and fintech, or lifestyle products. VC's really do bring more than money to any engagement, and I would prefer to work with firms that have strong tendencies to support the kinds of hardware technologies that other VC's would stay away from. So how do I network with Silicon Valley's best hardware VC firms (eg. Khosla Ventures, Kleiner Perkins, DFJ) if I can't attend all the fancy meetings? I'm working on something that really needs to get out there, and I need the best team to guide my decisions. Cold emails and stuff seem (maybe I'm wrong) like a non-starter, so how do potential founders in different geographies with no prior-networks form these sacred connections? How did you tap into the VC landscape? Sorry, that's a lot.
Oh, and I'm probably a year, maybe 2, from even considering a raise, so you can treat everything as hypothetical. I've got time....... I just want to do things right, slowly, patiently, and with the best advice from people like you who have been there.
Thank you! This is awesome, some of the most concise / real insight I've found so far and all of it has been 100% - from my experiences so far (bootstrapped a startup to profitability - building a game changer now). I am very interested in narrative - in how you decide how you go into a meeting and do you drive massive vision, do you give realistic, conservative projections or pitch aggressive projections. And finally, how much do you position the "now" v. "future"
Hey, Neil Thanks for this precious Knowledge. The Value you are creating for us is unmatchable. My question is How to find that person with whom I can Co-found the company? I guess its a silly question but I seriously don't know :/
Hey Neil, love your content! Keep shouting and doing your thing! Do you have any tips for raising funds for a nonprofit association or social entrepreneurship that's focused on the local community by solving issues in agricultural industry with the use of upcoming technology?
Thanks for your support! I think content marketing is a good place to start. Educate people about the need in the community or whatever cause you're targeting. Then let people know about your fundraising efforts to get them involved. Social media can be a huge help. You might also want to join local forums and communities.
In the spirit of this comment, I suggest this: "Because too many people are afraid of failing and not enough people are willing to succeed."
If I raised $20M, I doubt I'd be quiet about it either. Everything Neil Patel is saying is true. This video is spot on.
We are bootstrapping our company and we wanted to raise capital through crowdfunding or crowdsource what are those websites.But nothing for healthcare based crowdsource sites. Anyways we are yet to source our VC and our business catchment area is a very much new concept and its an app based solutions and we are serviced based e-commerce company. Wanted to know what is the best pitching techinics I can meet VC's. Appreciate your genuine feedback and let us know what is the best way to move forward with SEED FUNDING or ANGEL FUNDING.
Not here to argue but look at the video without the sound and tell me it does not look like you are screaming. I understand the hype up but it s a bit too much. And the excitement is one thing but imagine we would be together in the same room. Would you talk in the same way? Just constructive criticism here.. P.s. I think there is reverb in the room and that does not help. Sound is really important for video.
Then you are in the wrong place, wrong community, wrong friends, and wrong school :) You want to hang out with those people who have the same or similar goal as you have. If they want a secure job, and you dont. You want to hang out with friends that want to start as an entrepreneur.
Neil Patel the question was should I give up my small agency targeting small business owners whilst it's gaining traction or should I take up on an offer and become a partner with highly skilled devloper and a designer to create a new brand to target larger SME clients?
I am starting a news/ media website for the Brazilian market which is huge. The idea is not innovative, it is going to be just another news website, but knowing that the market is supportive, and competition is not large, I still believe that it can be a good thing to do. I wish I could rise some money to start. DO you think that American investor cares investing to the audience in Brazil? yeah, that is a 3rd World country, but the company will be American, and I am inspired by BuzzFeed which has also been making a big buck over there. please let me know your thoughts. The page is almost done and in few week it is going t be launched.
OK.. So, can we talk? :) maybe you or someone you know are interested in taking a little risk with me? I am totally committed and full of energy. I love the marketing/internet business.. So I think that is my turn to make it happen . Thank you ! :)
The problem is not that Facebook and Google are the only advertising platforms. The problem is that they are considered mainstream media and without these two, the trend of cryptocurrencies gaining legitimacy is delayed. That is right, I said delayed not blocked or prevented.
The World Has Changed.
Five years ago, when bitcoin was unknown to most people, this might have been a fatal move. Today is a different story. I recently traveled to a remote mountain town in the interior of Mexico. Everyone I met had heard about Bitcoin and eyes lit up with excitement when I ask if I could pay for lunch with bitcoin.
Today are dozens of websites dedicated to cryptocurrencies, either holding them, exchanging them or just writing about them. Probably the most effective advertising remains on Google, it is called Google Search and it is free.
If someone wants to learn about owning bitcoin or any other currency, there is a ton of educational information.
The Flipside Is Being Ignored.
Not All Regulation Is Inherently Bad.
If we examine the full spectrum of regulation to this point on a global scale there is one common target most everywhere. That is the practice of exchanges. So far there has been little or not regulation, threatened or enacted, to protect investors from loss of funds due to security breaches.
Capitulation Is A Good Sign.