Yesterday I wrote a post suggesting that the funding landscape in Dallas is favorable for startups. I contend in the post that it is easier than ever to raise seed capital in Dallas and that institutional funding is available to ALL viable startups here in North Texas. I was surprised to hear from several people who vehemently objected to my post. Based on the tone of some of the messages and comments I feel like some people took the post personally – i.e. that I was suggesting that there must be something wrong with THEM. Please don’t get me wrong, I know first hand that is VERY hard to raise capital for the highly speculative investments known as startups. Two things are true in the venture world – a) most entrepreneurs fail to raise venture capital and b) most entrepreneurs who do raise money fail. I don’t care where you live – convincing investors that you can take a dollar from them and return ten is almost impossible.
1% Success Rate. When I sought venture funding for my first startup, LayerOne, I talked to approximately 99 venture capital firms before I found one willing to make an investment. Most entrepreneurs I talk to who suggest that the funding landscape here in Dallas is bleak haven’t talked to 10 venture capital firms, much less a hundred. Be honest with yourself. If you aren’t willing to do what it takes to convince a venture capital firm to invest in your startup are you really willing to do what it takes to actually make your startup successful? Raising money is hard, but building a startup is infinitely harder.
Adapt. When I was out raising money for my first startup I actually listened more than I pitched. Every meeting helped me understand what I was doing right and what I was doing wrong. I’m a pretty hard headed guy, but I knew that the investors weren’t going to change. I had to change. I had to make my deal more attractive to the investors I was pitching. We reinvented the company in a rental car on I-280 on our way to Sand Hill Road just before a pitch and it worked. We raised $15M in our first round of outside capital because we listened.
Bad Deals. Seriously, your deal sucks. The market you’re going after is too small. There are too many competitors. There are huge technology risks. You’re an untested manager/leader. Your credit sucks. Your beard is to big. Your grades sucked. Your numbers are bullshit. Your logo is all wrong. You don’t listen to your mentors. You don’t listen to potential investors. You’re a trainwreck and you know it. Go get a job and quit your bellyaching. If you can’t take this abuse from me, how do you expect to deal with the rejection you’re going to be getting from the venture world? I was channeling some Glengarry Glen Ross there (watch it if you don’t know what I’m talking about).
The fact that you live in Dallas is not the problem – the real issue is that raising capital is REALLY hard regardless of your ZIP code. Here are some interesting statistics you might find helpful:
• Only 1350 Startups Get Funded Each Year (of that 800 raise seed).
• Less than 1% of Startups Seeking Funding Actually Raise Capital Each Year.