After founding Camelback Ventures four years ago, Aaron Walker has some wisdom to share. He offered five tips that every entrepreneur should know about raising capital when he addressed an audience of entrepreneurs at an event in Newark New Jersey.
Following the tagline, “Genius is equally distributed; opportunity is not,” the venture capital firm is looking to level the playing field by supporting and investing in underrepresented entrepreneurs.
In four short years significant progress has been made. They’ve invested $800,000 in 33 entrepreneurs, and those companies have turned that money into $15 million of follow-on investment.
At the Rutgers Business School’s 4th Annual Entrepreneurship Awards Ceremony in November, Walker passed on five pieces of advice for entrepreneurs looking to fund their startups.
1. Know whether or not you actually need to raise money.
“There’s a perception that raising money equals building a business, but those are two different things,” Walker said. “Raising money is a means to an end.”
He added that while browsing the web or leafing through an entrepreneurial magazine, it’s easy to see the success stories of completed fundraising efforts. However, 90 percent of businesses fail – even the ones that successfully raise money – so understanding whether or not you need to raise capital is crucial during those early steps.
2. You have to be your first investor.
“If you don’t invest in your idea, it’s hard to ask others to do the same,” Walker said.
Being financially invested in the success of your company is key, and when others see that, their confidence in you and your business will build as well. As Walker put it, you have to be willing to put in the time.
3. Venture capital isn’t the only answer, and it isn’t always the best answer.
“When we think about entrepreneurship, we tend to think about Silicon Valley, looking at what Facebook raised, or Twitter or Slack,” Walker said. “The truth is that 98 percent of businesses don’t need venture capital.”
It’s vital to ask yourself whether you have a business worthy and needing of venture capital funding. If not, there are plenty of other places to go.
A huge alternative source of funds, Walker noted, are friends and family. He said that each year, businesses raise $60 billion in funding from personal sources.
4. You’re going to hear “No” more than you’ll hear “Yes,” and that’s okay.
“One thing I learned when raising funding for Camelback was that you learn more in the “No’s than in the “Yes’s,” Walker said.
Negative responses are always an opportunity to learn something. When someone says “No,” you have a chance to change something up for the next pitch, or realize a new audience that you haven’t yet gone after.
5. The best investors provide more than just capital.
“There are lots of people who can just write you a check,” Walker said. “But the best investors provide more.”
Camelback looks to provide three things to entrepreneurs: capital, coaching and connections. He encouraged entrepreneurs to seek “smart money,” which is capital from investors who can take the money and make it work for the individual needs of your business.
“Sometimes when you’re looking at your bank account and it’s getting close to zero, it’s easier to just take the check and cross your fingers,” Walker said. “The better thing to do would be to say no and find an investor…who can move your business forward in the way that you need it to.”