I have always stressed the fact that you don’t need millions of dollars or even thousands to build a successful startup
and I will keep saying that to anyone that cares to listen. I built my first website for no money, my first Tee shirt business cost me $1000 to start off with and I know many other people who have started successful business ventures with little or no money. In fact I just finished building my latest social network TheCampusChat and believe it or not it cost me about umm $100. I am a firm believer in “never spend a lot of money starting a business”.
I do understand however that there will always be ventures that do require substantial investment and so this guide explains the various options available to you as a freshie, generation y entrepreneur. Usually most freshies just write out a plan and send to VC’s but that’s really like scheduling your first swimming class in the heart of the Atlantic. Only if you have a previous track record, stacked resume and fully functional product or company should you consider a VC. They should be the last point of call for any entrepreneur.
Family, Friends and contacts are vital. This should be the first place of refuge for any freshie seeking funds. 
These people know you and (hopefully) trust you enough to invest their coin in you. Remember that most times money is not invested into ideas, money is invested in people. No one will invest in you if they don’t know you, your track record and what you are capable of. I won’t desist from talking about the importance of building your contact list on your blackberry, fill them up with numbers of useful people…people who can vouch for you and have resources to invest in you. I am not encouraging being a gold digger, I am just saying as a college lad, recent graduate or wherever you fall into, I will rather have a successful hardworking contact than one who’s contacts include the weed dude and the coke chick.
I once read a story about the guys from Excite starting out by borrowing $15000 from family and friends and bootstrapping whatever else they needed at the start of their business. Most entrepreneurs I know started off with money from friends, family or contacts they built. I think I only know one entrepreneur who started his first business with money from somewhere else and that was an Angel anyway…an Angel who he found with the help of a friend’s dad. So in reality, your best bet is working up your startup capital or speaking to people you’ve surrounded yourself with.
Angels could be handy. Angels are very wealthy individuals or group of individuals who invest their own money in 
what they see fit. Angels are quite different from VCs but the fact of the matter is that all in all this is a completely different league than what you are used to with borrowing from friends and family. In this case, deals are signed, equity is exchanged, new board members are welcomed on board e.t.c.
In this stage of funding you will experience a lot of technical stuff and complexities that you are not used to, you might have to get a lawyer, and you will also be asked several times how you intend to sell the company and when. As with Angels and VCs, these people are in business with you because of the profit they will make eventually and especially if your company is not a sales company or some sort of money milling pond, they will expect you to come up with an “exit strategy” so they can make their money back and some.
There are so many angels and angel networks spread around the country and around the world generally, with Silicon Valley, Boston and New York serving as home to about 70% of them. Angels might not be a terrible idea for people seeking funds but looking to avoid all the hassle that comes with signing with a VC because usually, Angels are more relax and less stringent with conditions on the contract. They are not on your tail or blowing up your blackberry like VC partners will. I remember when I first came up with a business plan for a venture I wanted to start in November of last year and I sent it out to a couple of Angel networks, the response wasn’t actually as bad as what I experienced with VCs. I sent my plan to 19 Venture capitalist firms, 16 responded, 16 said thanks but no thanks. Of that 16, 4 went into details and explained that I was too early along in my venture to secure funds from them.
In comparison, I sent the same plan to 11 Angel networks as I didn’t know any individual angel unfortunately. Of these 11 angels, 11 replied, 9 said I was too early along, 1 invited me to come to LA for a presentation and the other wanted me to build a team (I was the only one at the time) and then secure $15k from family, build a functioning beta site and said he would be ‘very interested’ as he thought the idea was brilliant and worth a shot. These two opening fizzled out because for one I lived across the country in Baltimore and at the time (just 2 weeks out of college) was too broke to put gas in my car let alone buy a plane ticket to go present when I wasn’t even sure I would get a deal and secondly, who the heck would give me $15,000?? At this time I knew not the importance of valuable relationships and contact building so I knew no one I could call upon, my folks live a very humble life, $2000 is a lot of money for them let alone $15,000. But what I am saying here is that Angel networks are not so bad, they might hold the keys to your destiny afterall.
For more information on Angels and angel network directory, follow this link ANGEL NETWORKS
Early stage/seed firms. I do not know a whole tone about these firms but as the name implies they obviously invest 
solely in early stage businesses and invest seed funds into companies that are still very early along. I have even been told that they mostly invest in companies that are still at the “idea” stage which is good for us right?
Unlike Angels and angel networks, seed firms are actual companies that follow a standardized procedure. The only thing is that they strictly invest in early stage companies. With seed firms you can be sure that you will get good support especially when it comes to tips and advice about starting up a business. Angels aren’t in business to invest so they maybe have only done 2 – 3 deals so they might not be well vast in challenges start ups face and how to attack them. However seed firms are in business to invest, they have strong experience in this industry so you can be sure they’ve been there, done that and know exactly what situation you are in.
So if you are a freshie and do need quite a bit of money, perhaps seed firms are your best bet.
One company that I know of that does early stage investments with young entrepreneurs is venturehacks. It was started by Naval Ravikant, the guy who owns epinions and funded several startups. You should take a look at their blog to gain some pointers as well.
Here’s a video of Naval at startup2startup talking about what he looks for in a startup.
What \’Early Stage\’ investors look for in Entrepreneurs
Venture Capital firms: I won’t be discussing VCs here, I will be dedicating an entire post or more on VCs. But just an idea for those who don’t know what they are. A venture Capitalist firms is a company in business for the sole purpose of analyzing businesses, corporations and companies that need some sort of funding and investing a pool of money into these ventures. This pool of money they invest are from wealthy people or companies who obviously expect their money back and some in a time period, could be as small as 5 years. VCs invest big, and I have seen up to $500million invested at one time. So this is for the big boys, the established companies…hence why you as a budding entrepreneur won’t find much luck. It’s like a high school junior going to a bachelorette party and hoping to score the bride’s best mate. Your chances are slim to none, regardless of how slick your “game” is.
