Evan Carmichael explains why early founders should bootstrap first, then turn to angel investors who fund based on trust rather than demanding huge equity stakes like VCs do. Wait until your business generates revenue before spending, and raise expansion capital only after you've hit product-market fit.
How do I find the first few investors and keep them happy in my business?
Yeah, I think it's a great question. And, you know, one of the things when I was in the startup business, I kind of went down Sand Hill Road and VC money and all that sort of stuff. I think what I would advise generally, if you've got a great business idea, you really believe in it, probably start, if you can do it, and we did some research, 70% of our customers actually use their own life savings or remortgage their homes to fund their businesses. I would be advocating, if you can do, go friends and family first, and then you keep control. And you kind of, you know, again, you can waste a lot of time going to banks, going to finance houses, going to VCs, when you should be building your businesses and loving your customers and following your dreams. So I kind of put more emphasis to that But the time to go is when you've got something that you think is real, tangible, and they'll call it a kind of proven business model. But ultimately, then you kind of have P&Ls and cash flow projections and all that sort of stuff underneath it. But the longer you can defer that, I would be a big advocate of that. And the only way that I'd argue against myself is if you come across something where you have got the next Facebook. And it's going to be so massive and so big and you've got to invest at scale and got to go global because you know you're just going to miss that window of opportunity and then it might make sense to go through the routes. And you know there's lots of people, Evan, you know tons of people in Canada or in Toronto who can actually fund businesses. In the UK, in the US, angel investors probably I'd advocate is the best route because again they're non-invasive, they won't interfere, and they'll give you capital based on a business plan and trust. And it allows you to get on and really kind of fund the next stage of your business.
I hate spending money till I'm making money. Just as a general rule, I think anybody can spend money. If I gave you $1 million, you can find a million different ways to spend it. Not everybody can make money. And so that's the discipline you need to learn. And when you are out getting investors, the hardest— I used to be a VC. I was raising $500,000 to $15 million for companies. The hardest money to raise is the startup capital, 'cause it's the riskiest time, and they'll take the biggest chunk of your business, right? They could take 30% of your business for a small amount of money because there's high risk. Where if you can show them that you can deliver a result, that you can get some revenue, that somebody's willing to actually pay you for this, the easiest kind of money to raise is expansion capital. Meaning I've already selling, I have some sales coming in, now I need to grow. That's easy money to raise, you'll get a much better valuation. And raising capital can be a full-time business for you. And like Steven said, that takes your eye off the ball of actually running your business. And so if I were you, I would try as much as possible to focus on the execution, find little ways to get started, invest my hustle, my time, my energy, not dollars, and especially not other people's dollars until I got to the point where I had a product that was out that was, I'm making some money. I may not be profitable yet, but I'm making money. I have a path to profitability, because that really reduces the risk and you'll get a much better deal from investors.
