Over the past year and a half, I have spoken to more than 100 entrepreneurs that are in various stages of company building, and are looking to raise money. Over that time, I have gotten better and better (at least I think I have) in outlining the best way to frame the story of the startup.

BTW: If you are looking to really understand raising money and everything that goes with it, stop reading this and go buy Venture Deals by my friends Brad Feld and Jason Mendelson. They are smart; I just have a big mouth.

What I can tell you is how I look at the world of raising capital. Also, this is for seed rounds, after your first money, I am no longer really helpful. (And, please this is MY VIEW. You might disagree. Great comment away.)

There are four investor types:

1. Friends and Family: These tend to invest 100% in the person and less worried about the idea. They are your friends and family after all. Most expect to lose the money, but want to be helpful. Usually are just money not great advisors or rolodexes.
2. Personal Angels: These are rich people who invest their own money. Often they have had a successful startup and want to see other entrepreneurs do well. Often they invest because they have a real interest in a market segment (They just love location based gaming!!) but really invest because they become passionate about the team. They do 25 – 40 deals over the course of 18-24 months, and expect one or none of them to really return anything meaningful. Usually these guys are great money, but not great advisors since they tend to not want to get super involved. Can have fantastic rolodexes. You have probably never heard of them, but should.
3. Professional Angels: These folks are investing their own money, but are doing it as a job. Sometimes, they invest other people’s money as well. They are better as advisors, but also tend to be bigger “names” and in higher demand, which leads to their inability to sit on boards or get super involved in anyone startup. If you have professional angels in your round, you need to make sure that you effectively communicate with them to get the most value, which can be immense in terms of connections and advice.
4. Venture Capitalists: Stop caring about the fund’s name. Worry about the partner. A great partner can add more value than having a big brand name fund investing in your startup. Being able to call a partner 4 times a week because you are freaking out is worth more than you will ever know (until you are freaking out and have no one to call). They are professional investors. That means they do more due diligence, want to see more traction and make bets that mitigate risk for their LPs as much as possible. They tend to work the hardest for you, but you also tend to give up more of the company and expectations explode. The cadence of your company you’ve been running out of your living room changes, and its about knocking it out of the park, not about slow growth and organic success.

In terms of how a company is evaluated, its pretty simple: Team, Problem/Solution and Market are the three levers. (There might be micro-levers, but on a macro, story telling level, these are it).

Over simplistic? Yup. Accurate. Damn straight.

Your team is probably not as strong as you think it is. Really evaluate the skill set of each member, and make sure that everyone is filling the role they should. If you are flipping a coin for CEO, guaranteed an external CEO will be placed, or one of the founders will be gone. Think it through. You spent a lot of time on technology and infrastructure choices why bullshit on executive roles?

All of this should boil down to a 6 slide deck:

Fund raising is about the story you tell. Whether its during a couple minute pitch at a Techstars/Y-combinator/500startups demo day or a two hour meeting with the partners at a big firm.

Think about the story you are telling; and as importantly, to whom you are telling the story.

Now go raise millions.

Related articles

• 14 Key Findings of the Startup Genome Report (mojosimon.wordpress.com)
• Angel Investors Won’t Swoop Down on Your Startup (businessinsider.com)
• Fred Wilson: Startup Financing 101: How To Sell Preferred Stock (huffingtonpost.com)
• Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist (feld.com)
• Be Smarter Than Your Lawyer and Venture Capitalist (avc.com)

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Before I dive into this post I want to make a few things clear:

• I am not referring to freelancers or folks in the service business. Frankly, if you are not bootstrapping (at least in the beginning) you are a moron. Grade A Idiot, as my dad used to say. (Not really, I just wish my dad would use cool lines like that, so I could tweet them and get a god damn show. Seriously, what is this world coming to?)
• I am not being “shocking” or “Dave McClure-ian” by using words like: bullshit, fucking, moron or venture capital.
• I am also not speaking specifically about the choice of taking (or not taking) investment in building a business.

What I am talking about is the fucking bullshit beliefs that seem to permeate the Bootstrapping world.

There is no special badge on Foursquare if you have bootstrapped your startup to success. There is no slight you are afforded because you bootstrapped. Venture capital is not evil. You are not good. You havent “beaten the odds.” You arent better, or worse, than other entrepreneurs.

The concept of bootstrapping is solid. To be clear, a bootstrapped business is one that is completely self-funded either by its founders or by the revenue it generates (usually a mix of both) and the expectation is that the growth of the company is usually slower than if the same business had received investment.

Im assuming that because entrepreneurs that have bootstrapped their businesses believe that have undertaken a Herculean effort, their success is somehow more valuable than the entrepreneur that took investment.

“Its all about the exit.” bootstrappers say. ” I would rather than 100% of a small exit, than 10% of a large exit.”

To that, I say, “cool. But, please shut the fuck up about it.”

I know that bootstrapping is hard. I know that there is even an art to it. Ive bootstrapped a business. I built a company on credit cards and had a successful exit. I get the awesome-ness of bootstrapping.

What I dont get is the attitude that mooching is awesome (Im sorry, I mean “free-sourcing”). I dont understand why exploiting young talent (oops, I meant “outsourcing to less experienced freelancers”) rocks. I am mystified how the concept of micromanaged control (damn, I mean “freedom from a board”) somehow ensures success.

Go be that entrepreneur that finances their own success, drives towards profitability quickly, and focuses on lean startup principles to accelerate your business.

Be proud of your ability to build a business with no outside help. Just dont be That Guy. Because those guys are not bootstrappers, they are dicks.

Related articles

• Bootstrapped, profitable & proud (marsdd.com)
• The Art of Bootstrapping: Funding Startups the hard Way – Part 1 (wolpers.posterous.com)
• Here’s How I Bootstrapped My Company To 25 Employees In 3 Countries In 4 Years (businessinsider.com)
• Five reasons to consider venture capital (jondale.com)
• Optimize for Happiness (Followup to my Startup School talk) (tom.preston-werner.com)