The following answers are provided by members of the Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

What’s one thing you learned from raising funding that you wish you’d known BEFORE you started?

BenJ Miller1. Line Up Potential Investors
I run a service-based company and see lots of great products come through our door. When I finally had “my idea” for a product, I took it to two or three investors. The product was solid. We quickly built the tech and started spending marketing dollars.

I learned I should have lined up my buyers. We needed big advertising partners, and I didn’t have them lined up. If I did it again, I would have commitments from “buyers” who, if we hit X, would get on board. Validate the concept with real customers and real contracts.

Benj Miller, eyespeak

Eric Corl2. Consider Funding Options

Most startups fail. Raising funds from others is a serious commitment, and it will keep you up at night when things aren’t going well. See what you can do on a limited budget and raise in milestone increments. If you can bootstrap, do it. Luckily, entrepreneurs can now use crowdfunding sites like Fundable (http://www.fundable.com) to raise capital by preselling their products or services and providing something of value in exchange to their backers quickly. This allows you to reduce the risk for yourself and the investors by first validating market demand.
Eric Corl, Fundable LLC

Derek Shanahan3. Shorten Pitches

I’ve now seen about 500 pitches live. I’ve given that many just in two years as a founder, some to investors and some to the market/community. What’s become abundantly clear is that 95 percent of us are actually talking about building businesses that take 10 seconds to explain. However, we keep thinking 15 minutes or a great story will make those 10 seconds more interesting. Just say what you are. Then, say where you are now and where you’re going. Then, if you don’t have any questions from an investor, ask him for feedback on something that’s bothering you. Rinse and repeat.
Derek Shanahan, Playerize

Aaron Schwartz4. Keep Your Day Job

Many entrepreneurs discuss fundraising as a “full-time” job and recommend that you give up your day-to-day responsibilities for the 6 weeks (or 3 months!) it will take to close the round. That sounds amazing, but I do not believe it’s possible, at least not for a seed or “A” round.
The drivers of a startup are its people. As a founder, you cannot afford to disappear for a few months. You should prep your team before you begin fundraising. Be prepared to work twice as hard during the fundraising process. Your investors need you, but so do your customers and team.
Aaron Schwartz, Modify Watches

Andrew Schrage5. Raise Only the Funds Needed

One thing many entrepreneurs fail to understand is that if you raise too much money, it could easily lead to overspending. The adept entrepreneur will set a specific number for how much money he or she needs to start a business. Fundraising initiatives should be scaled back significantly (if not halted) once that goal is reached.
Andrew Schrage, Money Crashers Personal Finance

 

David Ehrenberg6. Master Capital Efficiency

More isn’t better when it comes to raising money. What you do with your money is what determines your future success — not how much you get. Capital efficiency is a better indicator of your startup’s success than capital access. Large amounts of capital result in unnecessary dilution at a lower valuation. With smaller funds, you can preserve ownership, scale at a steady pace and set more manageable milestones.
David Ehrenberg, Early Growth Financial Services

 

Rahul7. Examine Term Sheets Closely

Term sheets are where you really find out the investor’s intentions. Look out for exit clauses. If they are not clearly defined, ask for them to be.

Term sheets can be very carefully crafted to fool even the most thorough people into believing that they’ve struck a great deal. In reality, it can be far from it. If you’re at this stage, it wouldn’t hurt to have your term sheets validated by experienced entrepreneurs who’ve gone down this road, as well as your lawyer, who has relevant experience.

Rahul Varshneya, Arkenea

doreen-bloch8. Know Your Investors

Fundraising is a very relationship-centric process; it’s less science than art. Before starting the fundraising process, I wish I had begun to develop relationships with investors. Cultivating relationships with investors before looking to raise funds is a practice I recommend to every early-stage entrepreneur now. Developing trusting, robust relationships with investors before starting the fundraising process formally will speed your meeting setup and team-vetting process.
Doreen Bloch, Poshly Inc.

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