Not Only Luck.
An essay by John Melonakos

Raising Money Blitz

Shortly after launching our first product in 2009, we had an all-avenue blitz to explore raising money. We wanted to explore all options so that we would be able to make the best choice. We also wanted to keep many lines in the water because we did not know which lines we would ultimately be able to close.

Here is a list of the sources for our blitz at raising money:

  1. Product sales – we were trying to grow our sales as rapidly as possible to be able to avoid any equity, debt, or strategic alliance financing
  2. Government grants – we were trying to get SBIR grants from the government that would be minimally distracting to our core business while also avoiding equity, debt, or strategic alliance financing
  3. Friends & family convertible notes – we were trying to raise convertible notes from friends and family (debt financing initially that turns into equity financing if a Series A is raised)
  4. Y Combinator – Paul Graham invited us to join Y Combinator and we turned him down; one of life’s “wonder if” moves that you just learn to live with 🙂
  5. Strategic investors – we approached our hardware partners and several of our large customers to seek strategic partnership investing; we were queasy about raising money from our partners and we were not queasy about raising money (essentially advances on payment) from our customers
  6. VC investors – we pitched over a dozen VCs in Atlanta, DC, Boston, and Silicon Valley

The list above is given in order of our preferred source of revenue. We ended up leveraging the first 3 lines of cash to stay bootstrapped and avoided all equity financing. Since then, we have paid back the friends & family notes with interest and no longer have any debt financing.

In the next couple of posts, I’ll write about how we approached these various lines for raising money.

What ways have you tried to raise money for your startup?

 

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