5 Things to Consider When Raising Capital
"It is such a good time to be a founder," says Maha Ibrahim. "There's so much capital on the sidelines, wanting to be invested into companies."
As a general partner at the early-stage venture capitalist firm Canaan, Maha knows this truth through and through. For over 20 years, she's worked closely with companies to drive their growth to billion-dollar evaluations. She champions women entrepreneurs and founders—brilliant people who have, for too long, been shut off from the conversations around raising capital. "The door has not been open to people of color or minorities or women—and it is open right now,” she says. “Get in, and then make a mark for yourself."
Maha's insight is incendiary and spot on, and it begs us to ask: If you are a female founder seeking capital, where do you start?
Considering, of course, that the answer is wildly different for every founder and business, Maha’s five pieces of wisdom offer universal direction.
#1: Consider: Does Your Model Work?
People try a multitude of varying business models to keep their customers coming back, says Maha. "We've seen flash sales and subscription models. We've seen perishables, in the case of Instacart, where customers must reload because they eat the product that's coming in." There are plenty of models—but it's critical to consider: What works for you? "Some of the business models are appropriate for the product. And some of them aren't—and that's when you get consumer fatigue," she continues, adding that we likely don't need 10 beauty samples delivered monthly. "After four months, my sink is crowded." Think about products and models that are unique and that fit with your specific set of products.
#2: For a Retail Business, Think about Your Hook
Retail businesses, like any, are unique when it comes to raising capital. Taking a venture capitalist point of view, Maha and her team consider the following when it comes to retail:
Can your business be "Amazoned away?" If the global e-commerce giant focuses on your company, will they, as Maha says, "eat your lunch?"
Consider if your margins are big enough. Are the average order values high enough to sustain growing a business online?
Is there a hook that keeps people coming back repeatedly?
#3: Know Your Story Vision Is Critical
As a venture capitalist, Maha focuses on businesses that have the potential to grow into multi billion-dollar companies. Of all the critical factors she and her team consider, including market and timing, story and vision are of the utmost importance—and this is the case for any investor and business. A CEO-Founder must "paint a vision that can be huge," she says.
#3: Be Discerning When Raising Friends-and-Family Capital
"If you're going to take money from friends, family, whomever," says Maha, "make it clear to them that this is money that's already gone. They should assume that it's a lottery ticket. They should not be coming and calling you every week to see how the business is. These are very long-term, high-risk businesses. So [friends and family should] only give you money if they're willing to lose it."
#4: Get Support
Being a CEO-founder is incredibly lonely. You are fraught with insecurities and questions constantly. But these doubts and insecurities can't be "plastered on your forehead," says Maha. For these reasons, she advises her founders to get support through a coach. "I want them to be able to work through those issues with someone."
#5: Trust Your Decisions
"Your story, as a founder, is your own," says Maha. "I am there to guide. I'm there to provide thoughts as an advisor or board member. But ultimately, the decision on how to run the business is yours." She offers this story from the CEO of a company where she invested. "The CEO randomly called me one day and said, 'We need to sell the business.’ She explained why the business was going to face immense headwinds in the next six months. None of us could have seen this except for her, and that's because she's in it—every day. We're flying at 1000 feet. She's on the ground and sees everything. We sold the company, and things turned out well."
The ultimate takeaway here is: trust yourself. "Don't discount what you're seeing. Get feedback from everyone around you, but ultimately, the decision is yours to live with based on your own experiences in the business."
We pulled these tips from Nada’s original conversation with Maha. You can catch their full conversation on The Liberty Road Podcast.