Raising Money: Four Rules for Finding Dough in DFW

There are rules to raising money. There are laws and regulations, yes. And admonitions on websites about how particular investors prefer to be pitched. But there are plenty of unwritten rules. To boost the odds of landing early-stage funding, you’ll need to know those, too.

Four rules for how startups can find money in Dallas Fort Worth

Rule No. 1:
Assemble Your Team

Every business needs three things: a banker, an accountant, and a lawyer. This is especially true at its genesis. Professional guidance can help entrepreneurs avoid less-than-obvious mistakes that can become major issues down the road. It’s easy to view these professionals as too expensive in a company’s early days, but hindsight often shows that spending money on the right advice at the get-go could have saved money—and heartache.

Rule No. 2:
Cast a Wide Net

Finding an investor is much like finding any kind of partner—consider all the many types. “The conversation will be different depending on whether you’re talking to an angel investor, family office, or venture capitalist,” says Alexander Muse, a North Texas entrepreneur and author of Startup Muse, a book meant to demystify the venture capital funding process for first-time founders. The trick, he notes, is determining what each type of investor needs and wants. “Remember, institutional investors are looking for 10X returns based on typical fund dynamics. Non-institutional investors are often satisfied with 2-3X returns.”

READ NEXT Quest for Capital: The Dallas-Fort Worth Difference

Rule No. 3:
Make Friends Along the Way

“Treat every investor you pitch as if you will see them again in the future,” says Joe Beard, partner at Perot Jain, a Dallas-based venture capital firm. “The investor community is connected. A firm that tells you no may be the same firm that introduces you to a firm that says yes.” Likewise, both institutional investors and wealthy individuals rely on networks of confidantes to refer deals they might cotton to. Family offices—the business arms of well-to-do clans—can be especially hard to find for the uninitiated, says Aaron Pierce, managing director of JF2 Capital, which handles the financial affairs of Jon Frankel, who did well selling a pair of startups in credit-card processing. “My advice is to find an insider who is well connected in the family office community and allow them to guide your efforts,” Pierce says.

Rule No. 4:
Look Beyond Investors

In the last decade or so, Dallas-Fort Worth has seen the emergence of a number of organizations that don’t invest in startups but may help point entrepreneurs toward people inclined to support development of various things. “More than two dozen corporate innovation centers have opened here, many of which have a presence in Silicon Valley,” says Vanessa Camones, venture principal at TechWildcatters, a Dallas accelerator that serves as a capital source. In addition to the incubators and accelerators sprinkled across North Texas, the region is also home to coworking spaces, executive offices, and makerspaces. So even if, for example, Plano’s AT&T Foundry can’t refer an inventor to funding sources, working with the telecom giant’s development center could lead to a meeting with a venture capitalist, Camones says.

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Dallas Innovates 2019—The Magazine explores the region as a rising tech hub that will shape the future of innovation. The theme of our second annual print publication, “A Breakout Moment,” explores why now is the time for the region to grab its place in the tech universe.

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