Even when successful entrepreneurs seem to speak candidly in interviews about how they raised capital for their company—sharing how hard it was to pitch to a boardroom of men or how they gave the perfect elevator pitch on the fly—there still isn’t much transparency around where to even begin the process of fundraising. As a founder, what if you have absolutely zero connections in finance? What if you have no idea what the difference is between a Seed Round and a Series A? Or what if you literally just googled what an “elevator pitch” is? Well, that’s why we’re here! We want to help demystify the basics of fundraising and set you (and your business) up for financial success.
For those of you just starting to explore your options when it comes to funding, you’ve come to the right place. We’ve broken down some of the key terms you need to know, resources that will absolutely school you in all things finance, and some tips from Girlboss network members who have done it before.
Now, let’s get down to business.
Vocab To Know
Angel Investor:Early investors in your company who help to get it up-and-running (before big-time investors are interested) in exchange for equity in the business.
Bootstrapped:Starting a business without the help of any outside funding. Basically, every dollar is either coming out of your pocket or directly from the business.
Business Line of Credit:A lender will approve you for a set amount of funds that you can draw from for purchases, and you’ll be charged credit only on the amount used. You can then make regular payments to the lender and can keep using your card so long as you don’t go over your limit.
Crowdfunding: Sites like Kickstarter or GoFundMe allow friends, family, and people on the internet to help you raise a certain amount of funding, without any expectation of paying them back. It’s also an opportunity to show future investors that people are willing to invest in your company.
Dilution: Every time you raise more capital, you technically own less and less of your business—AKA the “dilution” of a company.
Grants: Money that is given by the government or an organization (generally after applying for it and proving the potential of your business), which requires no payback.
Incubator: An organization that helps early stage businesses to develop their business plan, growth strategy, etc. in exchange for a stake in the company.
SBA Loan: The Small Business Administration is a government agency that’s been around since the 1950s and it provides one of the most popular kind of business loans: the 7(a) loan program. An SBA loan is an ideal option for a business that’s been open for two years or more and has some solid finances.
Seed Round: When a series of investors put their money into a company that’s at the very beginning stages (we’re talking the research/product development/still figuring sh*t out stage). This group of investors usually includes friends and family, angel investors, and crowd-funding.
Series A:When a group of venture capitalists (VCs) invest significant funds into a company (we’re talking millions) with the expectation that it’ll grow quickly and make them very rich, very fast. Some people skip the Seed Round entirely and jump into Series A, although that much money typically comes with significant dilution of your company.
VC Fund:A venture capital fund manages money from investors who want a stake in a startup or business that has major potential for growth.
Resources To Check Out
U.S. Small Business Administration: This government agency’s site has plenty of helpful resources for small business owners, including databases to help you find investors, loans, and grants. They also have offices across the country where you can find business counseling and other IRL resources.
SCORE: Powered by the SBA, SCORE can help you find a mentor (virtual or in your area) who has successfully done exactly what you’re trying to do right now: Get that $$. You can ask them all of your questions about raising capital, like where to make connections and how to pitch your business.
Stella Labs: A non-profit designed specifically to help women get their business off the ground, including creating plans to successfully scale your company, connecting you with angel investors, and match you with mentors.
Pitch Decks From Successful Companies: Check out this running list of fundraising pitch decks from companies like Airbnb, LinkedIn, Uber, WeWork, and more. Exactly the inspo you need to crank out a deck that will impress investors.
Tips From Girlboss Members
“If you’re making money, then put off fundraising for as long as possible. Unless you have a massive growth scale business and you’re ready to receive a LOT of money to scale, just invest the money you’re making back into the business and grow it on your own as much as you can. That will give you a much stronger position when you do raise financing. When researching investors, look at other companies like yours, who funded them, and reach out to those founders and find out if they like working with their funders. Always interview folks who have been funded by an investor before working with them.” –Emily Best, Founder of Seed&Spark
“I’ve bootstrapped all three of my companies using little cash injections I created on my own. In more recent years that looked like short term products, affiliate income, and audits, or one-on-one coaching offers that I wouldn’t usually take. A lot of that early hustle taught me more about marketing than any of my certifications did. Want to learn sales copywriting? Try to sell everything in your apartment over Facebook marketplace and Craigslist for more than you paid for it. Trust me you will walk away knowing how to write a headline that sells. There’s a lot of unspoken value in bootstrapping.” –Cara Parrish, Marketing Agency Founder
“I sacrificed going out, being social last couple years of my 20s, and worked my ass off babysitting to invest $20k into my biz. Don’t wait around for someone to hand money to you. If you can’t find funding, go create it yourself! I wouldn’t be where I am today if I waited for someone to hand me a check.” –Fabiola Segovia, Founder and CEO of Thrive and Align
“I hadn’t previously considered entrepreneurship before because I hadn’t known that it was an option. Once I realized that it was a career path, I decided to take the plunge and I gave myself two weeks to come up with an idea. Thirty-six hours later I had the idea to create ClassPass. At that point, I had worked for six years and saved enough money that I knew I could survive even if ClassPass didn’t end up working out. However, I was passionate about the idea for ClassPass and thought that our mission was too powerful to fail.” –Payal Kadakia, Founder of ClassPass
“I’m able to save [and fund my business on my own] because of something in Jamaica we call ‘partner’ (in Haiti and African countries it’s called ‘susu’). It’s a savings scheme where a group of people pool their cash together and one person gets their ‘draw’ each week until everyone gets a turn. The person who controls it is called the ‘banker.’ The length can be four months, six months, or a year.” –Dacia Thompson, Founder of Chillology + Covet Space
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