10 mins with Raj on Venture Funding

Working Backwards to Attract Venture Financing

So you have a great idea and want to get it funded, so you get funding from a Venture Capitalist, build the product, get customers, go IPO! And repeat to become a successful serial entrepreneur. As a thought experiment, let’s run this backwards. Say you have an idea and you first make it public on your website (without revealing the secret sauce of course).

Then you raise initial interest in your product from one of the modern crowdsourcing platforms like Kickstarter, AngelList, Indiegogo, and many others soon to pop up thanks to Obama’s JOBS Act. You build the product and ship to your customers.

Now that you have established a niche you approach a Venture Capitalist. Isn’t it interesting how everything we took for granted as the proper process has now been completely reversed?

Forget about VC’s and look for Syndicates

What’s even more interesting is that the source of angel investment itself has changed. There is no need to even approach traditional Venture Capitalists for most fresh companies.

The clever approach to funding is to find a syndicate of investors, say for example, on AngelList. The flexibility of syndicates is rapidly democratizing the access to capital for startups, and access to deal flow for angels.

The backers of the syndicate get to pick specific portfolio companies to invest in, without being required to invest in everything the syndicate picks. This is much more appealing to backers as they have more control. The startup company gets more committed investors as backers who may even provide customer leads and operational advice.

Moving to Silicon Valley

Although it is true that technology incubators are sprouting all over the world, the epicenter of innovation in angel financing is definitely in Silicon Valley. Thanks to multiple generations of savvy angel investors willing to push the boundaries, and savvy lobbying with Washington DC to relax funding laws, we are seeing a major shift in angel investment financing centered in Silicon Valley.

Even the pre-IPO market is booming with valuations approaching billions before the company is forced to go public – all because there are forums to sell private company shares on forums such as SharePost and Second Market.

When early employees from pre-IPO companies cash out a portion of their wealth, they then create syndicates to fund other early stage companies. And thus the virtuous cycle continues.

So no, you don’t need to be in Silicon Valley in order to create new technology, but it sure helps when you are looking to get funded!

Instead of moving here though, you could just contact SDI, California’s young and leading app development company helping entrepreneurs and startups worldwide to help you in this process.

We are great Designers, Marketers, Sellers and most importantly the best Business partners you could find to help you take your idea from concept to money. email us today at team@sdi.la Let’s start something Amazing!