6 Fundraising Tips for Entrepreneurs
Sheeva Sairafi, the founder of Local and Lejos, tells us what she learned in her first round.
After traveling to Peru and Guatemala, Sheeva Sairafi met incredibly skilled women who created beautiful crafts. Having herself worked as a buyer for seven years, identifying trends, she noticed that, while these women were unbelievably talented, they had no connection to customers here in the US. She saw an opportunity to bridge the gap between South American female artisans and North American customers—she could provide the design tools they needed to make marketable products. From there, Local and Lejos was born. “Our mission is twofold,” Sheeva explains. “We want to deliver contemporary, modern home goods at accessible prices to consumers, while also providing sustainable employment to women abroad.” “Sustainable” is the key word there—Sheeva and her team consistently work with the same women (they started with 25 artisans and have grown the group to 500). “Access to a steady job is one of the hardest things for them to find, and it’s also one of the most impactful things,” she says. “In addition to providing a steady income, we do financial management training and get the women set up with bank accounts.” When it came time for Sheeva to leave her job (and her own steady income) to focus on Local and Lejos full-time, she was more excited than nervous. “I wasn't even scared,” she says. “Then, once that honeymoon phase ended, the reality hit me that I was no longer going to get a paycheck every Friday. I had given up that sense of comfort and security.” After bootstrapping the business with her personal savings for a year, Sheeva began fundraising. “I very much underestimated how difficult and painful this process would be,” Sheeva admits. “If you're going to give up your salary and spend the majority of your time doing something, it has to be something you enjoy and feel passionately about.” As Sheeva was wrapping up her first round of fundraising, she sat down with us to share the highs and lows—and what she learned from them.
1. Bootstrap your business for as long as possible
In order to self-fund with your own savings, the first thing you absolutely must do is make a budget. Figure out your fixed costs (bills, rent—the things you have to pay no matter what), how much it’ll cost to fund your business and then decide how much you can give yourself for spending money. Once you set your budget, you’ll feel empowered and realize that you can still do it—it's just a matter of sizing down your personal expenses. Be realistic with yourself; it’s not easy to adjust your lifestyle at first. At the same time, the little things that I used to do all the time, like going out for dinner or getting a manicure, now feel more special. I can’t do them nearly as often, but I appreciate them more. Determine what your revenues need to be before you can really sustain yourself, and create a calendar that shows how long you think it will take you to get to a steady point, knowing that there will be weeks or months when you can’t count on your bank account being full. Even now, as we’re expanding and raising money and things are becoming more secure, my lifestyle as a founder is much different than it was when I was making six figures. Self-funding my business made me realize that I didn’t need as much as I thought I did; it taught me to live with less and be content.
2. Allow yourself plenty of time
I assumed that fundraising would be a less time-consuming process than it is. Years ago, I got this sound advice: Start fundraising before you need money. Of course, I didn't listen, but I’d tell any other entrepreneur to, because if I had, I would have started to fund-raise six months earlier. The first step—before pitching and meetings—is networking. While you can send cold emails, a personal introduction gives you a much better chance of actually getting in front of an investor. If you network—through friends, family and former co-workers and work contacts—you’ll find yourself in a meeting with the right person; it just takes time.
3. Start with your friends and family
Starting with people you know well can be a little bit daunting at first, but it’s a great way to get the ball rolling. These people know you, either professionally or personally. They know who you are, what your experience has been and how driven you are. They're going to be your champions. Friends and family are not necessarily going to be able to get you the entire few hundred thousand dollars or million dollars you need (that’s the case for certain people, but it wasn’t for me), but they’ll get you started, and they can help you build your network.
4. Target your efforts
If you have a long list of target investors and you just start throwing things at a wall hoping it’ll stick, it's going to be frustrating and discouraging. You’ll have a much better success rate if you focus on a small group than if you try anything and everything. Come up with a concise group of people who are in line with your vision or your background. Look at what they tend to invest in to see if your idea is a likely fit. In the first month of my fundraising efforts, I sent emails to anyone I could, and it was just not working. Since then, I’ve reached out to people who have an e-commerce or retail focus, as well as a social justice focus, which has been much more fruitful.
5. Sell yourself as much as your idea
Once you get a meeting, go in there and show them how passionate you are. They have to see it seething off of you. Tell investors your story—how you came up with the idea and why you’re the person to do this. At this early stage, you may have some revenue, and they’ll want to see that, but your business is still too young for that to speak for itself. What they’re really investing in is you and your team. Not only do they need to be on board with your big-picture idea and your strategy, but they also need to know that you’re the person who can execute it. Show them that you have the skills, experience and passion necessary to do just that.
6. Show that you have traction
Have an example ready of a big partnership opportunity or something else that can get the investor excited, even if it’s not a done deal yet. For example, say, “Anthropologie is interested in selling X number of units.” Even if the details aren’t finalized, having something in the works helps an investor see how you're progressing now; it’s helpful when your business is young and you don’t have a lot of revenue to show for it yet. It shows that you have traction, that you’re already taking steps toward executing your vision and that you've got skin in the game—you’re not making a ton of money yet, but you’re all in.
Image courtesy of Ivanka Trump. Illustration by Jonny Ruzzo