I was 27 years old when I had the idea for my business, and 28 when I incorporated the LLC to officially launch. In hindsight, there’s a good chance that my young age actually helped contribute to my early success, but youth can be a double edged sword. Young entrepreneurs are seen by the market as having new, fresh ideas, as well as the potential to become “the next big thing.” However, it can be challenging for younger entrepreneurs to raise the money necessary to start their own business. Lacking the experience and proven track record of more established entrepreneurs, they are viewed as riskier investments. With this in mind, here’s some advice for younger entrepreneurs as they seek funding.
Find the right investors
When looking for investors, family and friends are the logical place to start. One challenge in raising venture capital money is borne out of an information asymmetry issue: the VCs don’t know your qualities or your true capabilities, while family and friends have a much more intimate knowledge of your capabilities, character and potential for success.
Further, when raising a round from institutional investors, it’s helpful to have a good portion of it closed (between one and two-thirds) to convey scarcity and urgency to the VCs. This will help them make an investment decision, instead of stringing you along. If friends and family aren’t an option, try leveraging connections with people in your alumni network, especially those who’ve successfully started and sold businesses themselves. They’ll be able to relate to what you’re pursuing, and will likely have the money available.
Present yourself well
One of the most vital steps in raising capital is developing an investor deck that tells the story of your business in a compelling way. The deck should include:
- The problem you’re solving and its solution
- The size of the market for your solution
- What your competition looks like
- The progress you’ve made on the venture to date
- The makeup of your team (and why it’s qualified to solve this problem)
- The business model and any projected financials you may have
Your deck should conclude with your “ask,” i.e. how much capital you’re raising, high-level terms of the capital raise and how you plan to use the funds to grow the business.
The deck is meant to be reviewed in meetings or calls and sent as a follow-up to the investor after the first meeting or call. However, don’t share it with anyone until you’ve met either in-person or on the phone. This could skew their decision before you’ve even had a chance to pitch them. Rather than share the deck, give them a one-page executive summary, which should be a paired-down version of the deck.
Speak with people who’ve been in your shoes before. Organizations like the Young Entrepreneur Council offer excellent networking opportunities. I’ve learned that some of the best contacts are retired serial entrepreneurs who have started and sold businesses. They have both money and time to invest, and many are happy to help someone in the same position they were in years prior. Better still, it’s beneficial to seek people out who you have some personal connection with. These people will care about you, and are excited to spend time coaching you. People you meet at a conference or event are not good suitors, as they probably won’t give you the time, energy and devotion you need.
I turned to people I trusted to coach me as I went through my early fundraises. I didn’t have the wisdom that came from going through the experience before, but these serial entrepreneurs did. They were willing to give advice on both the strategic and the tactical sides of entrepreneurship. Experience is helpful, especially as you’re navigating fundraising opportunities, and need to take action in near real-time. You’ll gain a lot from these coaches now and find it rewarding later on in your career when you can “pay it forward” and help entrepreneurs of a younger generation.
Get the most out of your education
My undergraduate education at Emory University’s Goizueta School of Business taught me the building blocks of business. While at school, the practical knowledge I gained gave me the confidence necessary to thrive in business interactions. During my time as an entrepreneur, I’ve been able to keep up and contribute to most topics of conversation, even if the subject wasn’t related to my expertise.
The MBA program at Wharton also allowed me to build a circle of friends with similar passions and goals. These friendships were fundamental; they acted as a critical support system during many of the challenges I faced in building a business. They also opened up many opportunities that would have been beyond my purview otherwise, such as access to Wharton’s Venture Initiation Program (VIP), which was extremely valuable in helping me launch my own business.
No matter how you slice it, it’s not easy to get going as a young entrepreneur. Finding the money to kick off your business takes both time and persistence. But once you’ve secured funding, you’ll then be in a position to start deploying capital to take your business to the next level.