15 Mistakes to Avoid When Raising Capital

This afternoon, the Daniels College of Business at DU invited me to speak to an Executive MBA entrepreneurial class about my experiences. I graduated from the EMBA program this spring, had spoken to a class this past summer, enjoyed it and (hopefully) provided value to the students, so I happily accepted the invitation again.

I spoke on our experience with FullContact, TechStars, our path to funding, what I’d do differently, and what I’ve learned. I also provided the class a list of 15 mistakes to avoid when raising capital.

Raising capital isn’t easy. It takes persistence, extraordinary effort and unreasonable belief in yourself and your co-founders. But, you can make it easier by not making silly mistakes along the way. Trust me, I’ve made a ton of them, and witnessed other entrepreneurs make them too.

Here are 15 mistakes I’ve learned to avoid when raising capital:

  1. Don’t SPAM VCs. Get warm intros through your network.
  2. Don’t waste time on business plan. Focus on your investor deck. Your business plan is for you, not investors.
  3. Don’t forget IP Assignment agreements.
  4. Don’t form anything but a Delaware C-Corp. Ignore tax accountants.
  5. Don’t make your corporate structure complex. You’ll just have to undo it.
  6. Don’t forget vesting agreements with co-founders.
  7. Don’t go too high on valuation (& ignore your finance professor’s lessons on DCF when it comes to pricing your company)
  8. Don’t ask for NDAs.
  9. Don’t forget – investors talk.
  10. Don’t try to be someone you’re not. Be authentic. Be yourself.
  11. Don’t pretend you have all the answers.
  12. Don’t optimize on price / valuation.
  13. Don’t waste too much time when you’ve got a deal on the table. Time kills deals.
  14. Don’t forget to study up on the option pool shuffle.
  15. Don’t forget to perform due diligence on your investors. Do you want to have beers with them?

Got more tips for entrepreneurs? Feel free to post them below!

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