The Frustration Of Not Being Able To Raise Capital

I had dinner with my parents on Sunday and the inevitable questions came up again because my parents follow our venture so closely (they helped start it off, have provided capital, moral support and even absorbed some of the debt).

Mom asked her favourite: "If so many people keep saying you guys are so smart, or experts at xyz, or that Realvibez is good for Jamaica and should be supported, why don't they give you any money?"

Dad asked a different one: "Why haven't you been able to raise capital yet?"

I had answers for both because we have thought long and hard about these questions, as well as discussed them with other people, including potential investors we have approached.

My answer to Mom was fairly simple: "Maybe those people don't have money to give us. We don't know their financial situation, we just assume that they have money and are willing to invest in startups. Not everyone is like that. I am sure that they could introduce us to some people though but I don't know why that hasn't happened yet. Very few people have been that nice."

Dad's question lead to lots of debate because I answered by saying that "We haven't been introduced to the right people." Dad, as expected, replied by pointing out that I was blaming everyone except ourselves. That is when I had to explain my answer.

Robert and I have previously looked at every single potential investor we have ever spoken to and have even outright asked some of them what it would take to get money from them. One person said that they didn't know how big the Reggae market is - definitely not the right person, a VC said we were "too early-stage" and then introduced us to a possible angel investor, a welcome gesture, while other people have either said they are interested and then don't come through when it is time for a check or we can't get back in touch with them via email or phone (often the more "popular" they are, the harder it is to communicate with them).

I also explained to Dad that my answer did put some blame on ourselves because the reason we weren't meeting the right people was entirely our fault. There were two things we were not doing:

- Pushing as hard as possible to meet as many potential investors as possible
- Getting our present contacts to connect us with the "right" people

The more investors you meet, the more likely you are to finally meet the right one. Any entrepreneur knows that another "No" just means you are that much closer to a "Yes". Pressing our contacts harder to connect us with specific kinds of people would also increase the quality of the potential investors and not just the quantity.

Why aren't we doing these two things?

Simple - The first time around, we spent way too much time trying to woo investors and too little time on generating revenue and securing deals that would grow the venture, things that actually make it more attractive to outside investors.

We vowed not to make that mistake again.

This time around we first focused on consistently generating revenue in an easily scalable way and working on deals that will contribute to the bottom-line. After getting some of these in place, we could then make the big push after investors.

We have reached that stage and we are now coordinating our biggest push yet to raise outside capital. An advisory firm from New York has agreed to assist us with fine-tuning the business plan and shop us around while we are putting together our own proposals for strategic partnerships.

We have had one investor say "Yes" but that deal seems to be in limbo and we have no control over it. We haven't joined all the startup websites that help entrepreneurs raise capital, have not aggressively pursued VCs that are focused on our kind of business, or pressured our contacts to make some introductions.

I am actually glad that we didn't start out last year by pursuing investors because it was later in the year and early this year that we secured the major deals that make the venture more attractive. Taking some time has allowed us fine-tune our strategy and get feedback from advisors and potential investors.

Asking someone point blank "What would it take for you to give us $50,000?" must provide useful information. Hopefully they provide answers that other investors we give as well.

I would be lying if I did not say that it is extremely frustrating to have a venture that powerful people say is something that is good for Jamaica and should be supported, have people say it is a sound plan and then not be able to raise money. It is even more frustrating to get investors to say yes and then not close the deal.

You work hard to prove the concept and show how it can scale with additional capital, you do the family, friends and credit cards, plunging yourself into thousands of dollars of debt, just like all the books and articles say, and then you feel like you are not crossing that important bridge.

I will end by saying that this is the life of an entrepreneur and you had better be prepared for it if you decide to become one too. Nothing worth having in life is easy to achieve.