Intimidated by a term sheet? Scratching your head on SAFE versus convertible notes? Don’t even know where to start when it comes to approaching an investor? It’s not uncommon for bootstrapped startups to be a little lost when it comes to the concept of asking for funding, but luckily, Hyde Park Angels is willing to share their wisdom.
At their latest panel of the Entrepreneurial Education Series, hosted at 1871 September 8 and moderated by HPA Managing Director Peter Wilkins, some of Chicago’s top investors and seasoned entrepreneurs took to the stage to share their experiences and best practices when it comes time to raise.
Members of the panel included:
- Joe Beatty, Former CEO, Telular
- Sean Chou, Co-Founder and CEO, Catalytic
- David Cohn, Founder and CEO, Regroup Therapy
- Mike McMahon, Partner, Jump Capital
- Bailey Moore, Vice President, Wintrust Ventures
Thinking about beginning your journey toward that first seed dollar? Consider some takeaways from the event:
- Fundraising is kind of like … dating? In a way, yeah. First, the panelists all agreed a warm introduction is a really, really helpful way for a startup to get their first meeting with an investor. Just like blind dates are often pretty awkward, so are cold pitches from entrepreneurs to investors. Additionally, it is essential for founders to do a lot of homework before choosing who to approach with their pitches. A bad match rarely results in success, so the more prep a company can do before making their list of who to call upon, the better.
“A board is like being married to your business partner.” —Peter Wilkins, Managing Director, Hyde Park Angels
- Communication is key. Too often, startups fail to communicate properly with their investors. Even if things aren’t going well, all the panelists agreed honesty and candor are very much appreciated from founders. Even when the investors are just friends and family, entrepreneurs should keep in mind that any investor is going to want to have a clear understanding of their investment.
- Speaking of friends and family: Oftentimes, a startup’s earliest investors will be relatives, roommates and people who they have close personal relationships with. As David Cohn of Regroup Therapy put it, this can “make Thanksgiving dinner very awkward.” Founders should be cognizant that these types of investments, while almost always in good faith, can cause strained relationships. On the other hand, as Bailey Moore very bluntly stated, those who invest in a friend shouldn’t ever expect a return.
“Mentally light that money on fire. It will help you in the long run, it will certainly help your friendship.” —Bailey Moore, Vice President, Wintrust Ventures
- Know your terms. And term sheets. And cap tables. Young entrepreneurs’ heads often spin when presented with all the terminology and complicated concepts when it comes time to start negotiating for funding. Good thing there’s a friendly, local resource that dedicates time to educating and coaching startups through the process -- Hyde Park Angels! Along with really insightful articles on pretty much all fundraising topics, the group recently produced a clear-cut guide with everything founders need to know before and after the big pitch.
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