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Consider all resources before seeking investment.

Here comes the argument for ignoring people in my profession. Oops.

Take a few moments to review the four reasons that I list below for finding other ways to finance an early stage business, before looking to professional investors. You'll be better informed for your own efforts, or to advise a friend who is the early stage of raising money.

And for you attorneys, accountants, VC's and angels reading this, here is an acknowledgement that our ecosystem has changed during these past several years. We should all know where we fit, and make an effort to inform entrepreneurs as to the most likely path to a good outcome. It saves time for everyone in the system, especially entrepreneurs early in the process of building an enterprise.

All the best,



Consider all resources before seeking investment.

I cannot tell you how many times I have seen executive summaries of business plans in which the entrepreneur seeks $5,000,000 to build the business.

First, few startups can use that much money today with all of the virtual services available and increasingly inexpensive methods of development, prototyping and marketing. Second, almost no professional investor will consider putting that much into a startup until there is proof of market demand, product viability or some other mitigation of failure.

Third (if you’re keeping score), it is not wise to dilute the founder’s ownership greatly in the first round of financing. The investors want a motivated entrepreneur, and it is certainly more difficult to motivate a twenty percent owner than a sixty percent owner.

Fourth, there is the matter of control. Entrepreneurs have a vision for what and how to create and build a great business. Giving control over that vision to others early on often dilutes the vision and is a disincentive to the entrepreneur.

Professional investors love to see ... To read the rest of this post about ideas for raising early stage funding before professional investment, click HERE to go to the story at http://berkonomics.com.

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