How to Raise Money as an Entrepreneur

One of the hardest things in entrepreneurship is raising capital. And I know what you're probably thinking. How do I raise money? I have a great idea for a company. I just need the startup capital to get it off the ground. Over the last decade, I've raised over $100 million across all my ventures, and most of that capital came without venture capitalists. And I can tell you firsthand, it's a game of psychology, structure, and momentum. And most founders get it backwards. In this episode, I'm going to break down how I raised capital for Mode Mobile, and what I learned from investors at every stage and the frameworks I used to get to yes. This isn't theory, it's just a playbook that worked for me and hopefully it'll work for you. Let's get into it. There are 5 core fundraising types every founder needs to understand. The first is bootstrapping. This means that you're self-funded. You don't have any investors, you have full control, and ideally you're already making some money. This is a great place to be. Secondly, friends and family. Early money from your closest networks. The risk is high and expectations are generally low because they're investing in you. But you wanna be careful here because if things don't go right, make sure that your friends and family know that there's a risk they could lose it all. Angel investors. These are wealthy individuals that are writing smaller checks. Often these are pre-product or pre-revenue, and they are looking for the big returns. Venture capital. These are institutional investors, sophisticated funds with big pockets. But the expectations of hypergrowth and exits are also very real, and they are typically the hardest people to raise money from. And lastly, we have crowdfunding. These are retail investors, everyday people, often customers that can back your business if they believe in what you are building, and they also tend to make much smaller investments. And this is also one of the main tools that our company used to raise over $70 million of capital over the last 18 months. Each path has different expectations, timelines, and trade-offs. Some are gonna give you capital, others are gonna be coming with a lot of pressure, and some will let you grow slow, and others will want a unicorn tomorrow. I've been through all stages of this journey, from bootstrapping all the way to the crowdfunding. And let me tell you that the best way to get here is by bootstrapping your company and learning about the type of entrepreneur you are and actually being able to make some money. Nothing screams like a better investment when you see a founder putting their money and time in the game you are much more likely to invest in them if you see that that is the case. So what I recommend for everyone is first start by doing, learn the mistakes, and then go out and raise capital. It's really hard to do it otherwise because the one thing that people always think about is that, oh, I just need a little bit of investment, but investment always comes with pressure, meaning that you are taking someone else's money and you need to make that money go to work. And you really want to know what you're going to do and what you're going to build in order to get those returns. This is one of the early mistakes that I personally made in my journey where I didn't exactly know what my product was going to be at certain times, and we had to ultimately figure it out along the way. That caused a lot of pain and frustration in our early days, and it's something that over the last years, we've really been able to figure out what our vision is. This doesn't mean that you're not gonna necessarily have to pivot your business because you without question have to do it as an entrepreneur., but you should just know that once you take other people's capital, they're going to have expectations of you. The moment they have expectations of you, you are going to make decisions based on that pressure. If you have to make decisions on that pressure that are bad for your business, that might kill your business and ultimately make it so that your company fails. Now, there are tons of videos out there of people telling you how to raise money from venture capitalists, how to raise money from angels and others, and so I'm not going to really dive too deeply into that because there's a ton of other content there. One of the areas that we believe is totally underrepresented is the area of crowdfunding. This is a relatively new space over the last 10 years, but there are companies raising over $100 million from investors that believe in what they believe. And crowdfunding isn't just a way to raise money, it's a way to build a movement around your product. With Mode Mobile, we didn't just pitch investors, we pitched our users. We turned customers into shareholders, and that changed everything. The goal about crowdfunding is to create ambassadorship. The more people that love your product and have skin in the game, the more they're going to tell their friends. The more they tell their friends, the more people know about your company, and the cycle continues on. Crowdfunding lets you raise capital from your biggest fans. You get press and you get visibility from the campaign itself. One of the biggest issues that we personally had is that we had created a completely new business model. No one had ever created a phone and a software that pays you. So we would have to market that idea to the broader populace, but marketing costs money and we may not have a return on that money. One of the benefits of crowdfunding is that we can market ourselves and try and get investors, which brings in money. But for the people that didn't invest, we still get free marketing. So the marketing comes as a benefit. That is one of the biggest unlocks of crowdfunding in the world is because you get marketing and you get capital all sustainably. This also avoids the gatekeeping that comes from traditional VC. If you didn't go to Stanford and didn't get into Y Combinator and you were not a Thiel Fellow, it makes it much harder to raise money from VCs. If you are not in that ecosystem, this is a great way to consider raising capital. You do have to be a great marketer, but this is another mechanism depending on your skill set. Next, you get to retain more control and negotiate your terms. One of the benefits of crowdfunding is that you are raising money from the crowd. Not any one investor owns a large portion of your company, which means that you can set the terms that make sense for you and make sense for the investors. Whereas typically, if you raise money from a venture capitalist, they want board seats, they want control, they may have liquidation preferences, which are all complex financial instruments that could ultimately hurt you in the long run if you are successful. So one of the benefits of crowdfunding is that you can retain more control, negotiate your terms, and essentially get free marketing and build ambassadorship. A lot of people ask me how I got into crowdfunding and why that is the path that we ultimately chose. In addition to the benefits above, one of the main reasons that we also got into crowdfunding is ultimately our company was in a unique place. We had a ton of growth from 2019 to 2022, and we are technically what is known as a Series B-sized company, meaning that you were no longer a seed company, meaning you're just getting started, or even a Series A, which means you're a a little above that, but still relatively junior. But at the same time, the market had just crashed. And so we were unable to raise capital as a Series B company because the market had just crashed. A lot of the investors that invest in later-stage companies were underwater with their companies because no one could go public. And we were no longer a seed-stage company, so we couldn't go to seed-stage investors. So I had to think, where do I go and raise more capital? And what am I good at? What is my skillset? And I knew that I was a great consumer marketer. And so I looked into the concept of crowdfunding because we knew that we had millions of consumers that really loved our product and that we knew how to market on a consumer level and likely could attract investors. Now, one of the things about crowdfunding is that you're gonna have to get audited financials. The thing is, if you plan to be a crowdfunding company, audited financials are pretty easy because you start off by being audited. And there is a cost to that. It's not as much as people think. Where it's gonna cost you more than $10,000, $20,000, $30,000 a year when you're just getting started. Now, when we decided to do our first crowdfund, we did something called regulation crowdfunding, which is called a Reg CF. You could raise up to $5 million a year through this mechanism. Now, we ultimately took almost 1 year to get our audited financials 'cause Mode had been an operating company that was already generating tens of millions of dollars in revenue. So it was really complex for us to get our audited financials,, but it made our company better. At that point in time, we then launched our first ever crowdfund, and within 3 months, we brought in $5 million in capital into our business. And when we saw that, we were hooked, and we wanted to do something now called a Reg A, which essentially allows you to raise up to $75 million in capital. This completely changed our business because over this last 18 months, we sold out our entire Reg A, and in total have now 60,000 shareholders as part of the Mode Mobile ecosystem. And so this has been a game changer for our company. We've been able to not only attract a ton of investors, we've been able to get a ton of amazing people that apply because they see our ads and they see what we're building, and the company has had a ton of momentum. So this has been one of the most powerful unlocks for our business. And there's a way that you can essentially run these crowdfunds. There are platforms that you can go like WeFunder, Republic, StartEngine. We personally didn't go through any of those platforms, because you do not own the audience. So one of the benefits of going on those platforms is that they have a ton of investors, and they'll sometimes market you to those investors, but when you drive a new investor because of your marketing campaigns, that investor belongs to StartEngine, it belongs to WeFunder, it belongs to Republic. So it's easier to get started, but at the same time, you do not own your audience. And owning your audience is very important. It's the same thesis when you go into Twitter or when you go into Facebook. And you have a fan versus an email subscriber. You can email that person anytime, but the algorithm may decide not to show your content to that user because the algorithm at Facebook owns that user, not you. So for us, we used a platform called DealMaker and we hosted the crowdfund on our own website. And that is essentially what we did to scale our business and to scale our crowdfund after doing marketing to our own site. Like anything, crowdfunding isn't perfect. There's a lot of pros. Democratizes access to capital, aligns your users and investors with what you're building, it builds loyalty for your brand, and it gets people talking. The cons is that it's a full-time campaign. It's a full-time job. If you are not dedicated to that crowdfund and to fundraising, you are not going to succeed. Someone at the company, whether it's you, the founder, or your co-founder, or someone that really understands marketing, needs to be fully dedicated to this. It requires a serious marketing effort. People think that they're gonna launch a crowdfund and they are going to magically raise $5, $10 million, and that is not the case. You're gonna launch it and it likely will be crickets if you do not have your own audience. And so you need to understand how to buy traffic, how to sell your messaging, what channels are going to work for you. And it's not just simply as posting on Facebook that is gonna get you these investors. You need a strong community or customer base. So you don't necessarily need to have a built-in community, but if you do, this is a big unlock.. It will help you get that early momentum, and investors act based off momentum. The more people they see investing, the more excited they get. The more excited they get, the more dollars you'll raise, and the bigger your customer base will get. People think that the crowdfund itself is the hardest part, and the crowdfund is hard, but a lot of people forget that there is post-raise investor relations. If I invest in a company, I want to know how that company's doing. Having monthly updates, Quarterly updates, earnings calls are all part of building a community. One of the biggest things that we did that unlocked a lot of value for investors is that we created an investor club. Our investor club has content, it has access to special perks and opportunities, and we use it to communicate with all of our investors on a timely basis. And if you don't do this properly, you are going to get people that get upset, and you will need to manage that with investor relations. And the last thing to be aware of, that it's not as simple as just snapping your fingers and launching one of these campaigns. It takes a ton of planning, but also a lot of regulatory work, meaning that you need to get the right attorneys that work on these types of campaigns, you need to get audited financials, and you need to get the SEC everything they need in order to approve your offering. And if you can take the time to do this correctly, and there are ways and smart ways to do it that are cost-effective, you have an excellent opportunity to make a huge splash, and it'll teach you to eventually become a public company if that's what you ultimately desire. So there's a variety of ways to raise money in crowdfunding, but you need to do it right. There's a variety of lawyers, auditors, marketing firms, crowdfunding platforms, and they all are going to try and sell you different services. We've actually done it, and we have a compilation of all the best ones of how to raise your first million dollars, not just with crowdfunding, but other ways as well. You can get that in the description below. So here's what I've learned after raising over $100 million in my lifetime. Money doesn't solve all your problems, it amplifies them. If you don't have a plan to use that money effectively, it's going to blow up in your face. When you go to a restaurant and you pay for a meal, you expect to get that meal. The investor expects that you are going to do everything that's possible for you to get them a return, and you need to be ready for that commitment. If you do not— investments do carry risk, but you need to have a plan to use that capital, and I would advise you not to raise any capital until you have that plan. Again, plans will change. You will be able to pivot as we learn more, but it's important to have a thoughtful, well-timed execution plan before taking on significant capital. You also need to know who you're taking your money from. Not every investor is the right investor. There are tons of red flags that we can go through on the types of investors you should take and then how to deal with investor relation management. This is something that we're going to put in our description guide as well. Momentum is everything. You're always raising even when you're not. You have to tell your story in a very specific way and have momentum and deadlines within that fundraise. And crowdfunding ultimately was able to give us extreme leverage, but we were only able to capitalize on that because we knew what we could actually use that capital for, which in our case was to acquire other assets that we can implement our technology in that scaled our business and significantly created a lot of value through profit within the company. So one of the things that are most often overlooked in fundraising, in addition to timing, is the storytelling. As a founder, you're going to have certain skills. Some of you are going to be great operators, some of you are going to be more technical, but someone has to be a great storyteller. You have to be great at telling a narrative. People invest based off of emotion just as much as they invest on the numbers. If you cannot connect with them and they can't connect with you and they don't see your story, you're never gonna raise any capital. You can look at the best companies in the world. They have a great narrative. They have someone that can spill their vision. Look at Elon Musk with SpaceX. That is now one of the most valued private companies in the world at $1.25 trillion. You look at the greatest ever, Steve Jobs, was able to tell the vision of thinking differently. He didn't lead with just the product. He led with a vision, something that you can resonate with. And so you're really starting with this concept of starting with why., and there's a way to tell that narrative, great books to do, great presentations to look at, which we're also gonna include in the description guide. Fundraising isn't just about decks, meetings, and chasing VCs anymore. It's about building something people want to believe in, and then knowing how to present that opportunity in the right format to the right audience. Whether it's crowdfunding, venture, or customer-funded growth, the goal is the same. Do not chase capital. Build your leverage and let that money come to you by applying the steps below.