Is it Possible to Raise Over $1M from investors for Free?

VentureCatalyst

There seems to be two schools of thought in the marketplace regarding this topic and I`d like to get Start Up Nation`s opinion.  Many universities,  incubators and startup centric networking groups offer forums for entrepreneurs to connect with investors for free and these are GREAT to get exposure and experience in pitching investors. And for the record, we believe every entrepreneur should be able to raise their first few hundred K from their rolodex, networking and with the old "who do you know" approach.  It takes a lot of time and many cups of coffee, but can be done.   But unless an entrepreneur has a track record in producing profitable exits and can tap into a happy investor pool,  it has been our experience, that when a company needs to get beyond their affinity group to objective investors to raise $1M to $3M in their initial outside round, they must plan on paying for travel, legal fees, presentation fees, consulting fees, and application fees.  They often have to pay to get access to large groups of investors.   And in this economy, the most important thing is to get the business opportunity in front of the potential investors to create the buzz and begin the courtship.   http://www.sePrivateEquity.org  Is a place that seems to be trying to fill the nich of helping early stage companies get in front of a large group of angel investors.  This is unique to the Southeast, although I think these kinds of conferences regularly happen on the west coast.

robertj

Karen,
Like you, we agree that "virtually" every entrepreneur can acquire some initial funds through their "expanded" network - provided they are Capital Ready (with the skills, documents, language and strategy) then use a proven process to identify, approach and engage with potential capital sources.
 
Regardless of the business stage or the amount being sought, we think entrepreneurs should expect and budget for the types of  expenses you mentioned.
 
From our perspective, the acquiring capital is a bit like building a house- you have to lay the foundation first and then build on that with each succeeding round paving the way for the next.
 
 

menexis

Karen;
 
I think that most entrepreneur can get some initial funding for a venture but going forward, before serious investores fund the venture, I will have to show some sort of sign of promise that it will be a success.
 
I agree with you that getting 1M from investors will required that one taps into networks and resources other than what they have and it can at times get expensive. 

patentandtrademark

no, it is not possible.

AdvisorGarage

Yes it is possible except for the costs of the legal work necessary to go through terms sheets and so on - a fund raiser will need a few things - people that can help guide them through the process (perhaps people from this forum?) and a good lawyer and those are aside from having a business that is investment ready. But it IS possible to raise money through angels or VCs without paying fees to 3rd parties.
 
One tip - lawyers are often networked, especially at those law firms that focus on early stage or growth businesses - so if you have the right lawyer, thay can be a good way of connecting with VCs or angels and they will not expect a refer fee. This is a good technique if you do not have a network that typically includes such possible investors.
 
Hope that was helpful and please let me know if you have any follow up questions.
 
Andrew

http://www.AndrewIve.com