Editor's Note: The Grind is a weekly column that asks a revolving cast of young founders to dish on the daily rigors of running a business and how they've overcome obstacles. Follow The Grind on Twitter with the hashtag #ENTGrind.
Regardless of your industry or product, the tie that binds all startups is the need for capital.
While some startups are able to bootstrap their way to success, others have followed the fundraising path. We fall into the latter group.
My startup Travefy -- a tool that solves the coordination headaches of group travel -- has raised hundreds of thousands in invested capital to date. That includes grants and prize money and a recently closed seed round of $320,000. We have been fortunate to not only raise the necessary capital to support growth but to work with passionate investors who double as advisors.
For us, fundraising was a vital milestone for our growing startup for two reasons: Being able to fund growth and cultivate valuable relationships.
Having a big idea is one thing, but having the cash on hand to support that idea can mean all the difference. Further, some investors can provide insightful advice in addition to making meaningful introductions. And the signaling of a successful funding round can also assist in legitimizing any startup to potential partners and hires.
Related: How to See Your Startup Through The Eyes of Investors
Still, the process was neither quick nor easy.
When we launched last year, we started out bootstrapping. It wasn't until this past January that our fundraising experience began. We qualified for a state grant for our expense-management tool and raised a matching angel investment. We managed to live off of that, along with prize money from startup competitions, while seeking a larger seed round -- capital necessary for scaling.
For us to close on a seed round this month, we kicked off conversations with potential investors in February and fully ramped up in May. To meet the right investors we entered every startup competition possible, and had coffee with any angel, angel group or VC that would have us. By going through this process we were able to build partnerships with the right investors for us.
From our fundraising experience, we learned several lessons, many of which we wish we’d known six months earlier:
Budget your time realistically. It is easy to underestimate how time consuming fundraising can be. The combination of preparing pitch materials, arranging meetings and continuous follow up across all of our potential investors is essentially a full-time job. Be sure to allocate the right amount of time into your weekly schedule, as well as the duration of time it will take to close a round, which can often take several months.
Related: What Every Entrepreneur Should Know About Valuations
Ask for capital. An invaluable lesson we learned from a mentor Brendan Burns is to always “Ask for the order.” Don’t ever assume that your potential investor knows exactly what you want from them, even in an explicit pitch meeting. Be direct and ask for money.
Look for "smart money." All money is not created equally, and no matter what you think, you need more than just money. The best investors are also thought partners who offer advice and make valuable introductions. Be confident and discerning in your fundraising ability.
Raising startup funds can seem like a daunting task. Nonetheless, with the right planning it can be a game changer.
What other advice do you have for fundraising? Let us know in the comments below.