- Do you want to own 100 percent
of a company that makes $100,000 a year?
Or would you rather own 50 percent
of a company that makes $10 million dollars a year?
Of course you want to own 50 percent of the company
that makes $10 million a year.
You know what the difference is?
Venture capital.
Hey everyone, I'm Neil Patel and today,
I'm gonna share with you how to raise venture capital.
(upbeat music)
See, over my lifespan, I've raised in excess of $20 million.
That may not seem like a lot.
It's because I've learned that you shouldn't
raise more than you need.
Sure, some people raise hundreds of millions of dollars
and then their company fails.
And the VCs take the whole thing.
The key is with venture capital,
this is the first thing you need to know.
Don't raise too much, just raise
a little bit more than you need.
And the reason I say a little bit more,
things always go wrong.
You may think, oh I just need this much
money and then things will go right,
I can do this and that, but shit always goes wrong.
So always add some padding.
Now here's the thing that most people
don't tell you about venture capital.
When I first started off, I would go to VCs
and pitch them like here's my idea,
it's cool, it's the next best thing since sliced bread.
You have to invest.
And you know what they all said?
Oh, cool yeah, I'm interested,
let us think about it and we'll get back to you.
You know what they did?
They never got back.
Why?
Because I didn't build up a relationship with them.
See, venture capital is all about who you know.
It's not about going out there
and just raising money from random people.
It's really about raising money from the right people.
And what I learned about venture capital is
when you build up a relationship and you get to know people,
they're much more comfortable giving you the money.
Why?
Because the idea they invested, and they know this,
is probably not gonna be the idea
that your company ends up with.
In which ideas change over time.
What you first start with is usually not your end company.
Things pivot and adapt.
So people invest in others that they know.
For example, did you know Twitter started out as Odeo?
Odeo was a podcast company and then they're like,
oh this isn't working.
And within there, they spun up Twitter.
Podcasting.
Twitter.
Do you see the resemblance?
No, I don't.
The investors didn't either.
They understand ideas change.
Do you think they're happy?
Doesn't matter if Twitter stock's down
compared to when it first came out.
They still made billions of dollars.
And that's the point I'm trying to make.
Shit changes.
So when you're raising money, you have
to go after connections and building those networks.
So the way you do that is you go to events,
like TechCrunch, they have conferences.
Who are at the TechCrunch events?
Investors.
Mashable has meetups.
Who are at those kind of events?
Investors.
Start up events, all those type of places
like San Francisco, Boston, New York,
these big cities, what's there?
All the start up related stuff.
If you don't meet the investors, get to know them,
provide value, and build that relationship,
you're not gonna raise money.
Now before you pitch them, you have
to get to know them first.
That's the biggest mistake I see.
People go and they raise or they try to raise money,
which never really happens,
from random people that they don't know.
And it usually, in most cases,
ends up with a disaster.
Don't do that.
Network with them, get their feedback,
before you pitch 'em for money.
Now that you got that out of the way,
you need to create a deck.
There's a lot of amazing decks.
If you go to slideshare, Dave Mcclure
once released a deck that shows
you how to raise venture capital.
I understand technology's changed,
but the same pitch that worked back then works now.
And if you follow that, you will be better off
and you should have an easier shot in raising money.
Now here's the thing you need to know
before you go out there and you try to raise money.
One, if you're not passionate,
you're probably not gonna get money.
Two, if you don't have a co-founder,
again, it's gonna be really hard to raise money.
They know you're not gonna be able to do everything.
If you're a business guy, go find an engineer.
If you're an engineer, go find a marketer
or a design or a product person.
You want to have up to one or two more co-founders.
So in total that would either be
two or three co-founders, right?
Because you're also including yourself.
Now that you've got your co-founders,
you want to go and pitch a big idea.
If you're gonna pitch something that
could make a million dollars a month,
you think an investor's gonna give a shit?
Of course not.
They're not looking at a create company
that does $10 million a year.
They're looking for the next Uber, AirBNB,
Ebay, Google, Microsoft, you get the point.
So create something that's really huge.
They'd rather have you go for a big,
gigantic idea or lose money.
They don't want you to create a company
that does $20 million a year and sells for $50 million.
It doesn't do much for them.
They're owning 20 to 30 percent
of your company, and that's what they take in each round.
And expect that once you raise money once,
you're gonna raise more and more money.
So go after a big idea or else
no one's gonna give it to you.
And your first round, you can raise a few million bucks.
You don't have to have revenue,
but after you raise that first initial investment,
expect to create revenue.
And whether you have a lot of revenue or a little,
you should always be fundraising.
Before one year, before one year,
your money runs out, raise money.
That's right, that may sound like a big time frame.
Most people do it six months before they run out of money,
but you want to have a healthy cash reserve
or else you're gonna find a much harder time to raise money.
So if you ever tried raising money or struggled out there,
just leave a comment below and
I'll tell you what you did wrong.
I hope this video helps you.
If you liked it, please subscribe to this channel,
like the video, share it, let other people know about it.
Thank you for watching.