Estimated reading time: 15 minutes
Finding investor money can be one of the more intimidating aspects of starting a business. Everything else with the business can often be done entirely by you without you really having to expose your idea to someone else’s scrutiny and criticism—someone else who has not spent hundreds of hours working on the project and may criticize the very idea of it on the first slide of the pitch deck.
Add in that you as a veteran might not have much experience in this world and the idea of trying to get investor money can be an intimidating prospect for veterans.
Wells Fargo did a study and found that the average small business will need $10,000 of startup capital. Another study by the Kauffman Firm suggests that the figure is more like $80,000. Point is, you are likely going to have to get over that fear if you want to start a business.
What might you need investor money for?
- Doing a house flip
- Entrepreneurship through acquisition, or a search fund
- Equipment
- Marketing
- Legal fees (e.g., patents, company formation, copyright issues, etc.)
Bottom line: to get a business off the ground you may need some outside capital. That could mean personal savings, money from friends and family, or even a bank loan. Or it could mean reaching out to investors and raising some money.
Are you thinking of buying a business? I recommend taking a look at Acquira and its accelerator as a way to get started. They place you in a cohort with other business buyers, help you vet deals, and then help you put together the financing to close on a business. Take a look HERE and use the link to get 10% off.
Don’t Let Fear Stop You From Seeking Investor Money
In one of my classes at Darden, we spoke about the dynamics of taking money from people knowing that you cannot guarantee they will get that money back. When those people are friends and family, for example, it gets even more complicated.
First, know that if you are going to professional investors, then they (should) know the risks involved. Especially for startups, where the risk is very high upfront, most investors go with the strategy of expecting 1/10 investments to payout. So they expect that 90% will fail.
Startup vs. small business: In general terms, a startup business is trying to disrupt the market in some way. They are looking for big growth and developing innovative products and/or services. A small business is not. They are usually looking to create a business in an already established field.
Even with creating a small business, serious investors know that it will be hard and the certainty of success is not guaranteed.
How can you navigate these waters while taking someone’s money?
Communicate: The rule of thumb is for a startup to send out quarterly updates to their investors. That’s crazy. Imagine giving someone $50,000 and only hearing from them four times a year. My recommendation is to send out a monthly update with the progress of the business, and include a specific ask for something specific from your investors. They want to help, so let them!
You don’t have to take their money: Investors are more than just a check. Good investors will help you grow the business. They can connect you with people to hire, customers, or help you strategize. That being said, not everyone with a checkbook is a good investor for you. There are lots of high-paid professionals (doctors, lawyers, etc.) who have the money but may have absolutely no clue about business, particularly your business.
This rule can be especially true when it comes to taking investments from friends and family. It’s absolutely OK to be worried about ruining relationships that way. So if you see the bright-eyed look in your cousin’s eye that they think your startup is going to be the next Google….then it’s OK to not take their money when your idea isn’t totally proven.
The other side is that friends and family may WANT to invest. Doug Lebda is the founder of Lending Tree and came to talk to my class at Darden (where he is an alum). Lending Tree is currently valued at $2.21 billion, meaning he’s seen a helluva lot of growth since starting it while at Darden. He told us about how, to this day, his dad is upset that Doug didn’t take his money. Why?
- Despite the fact that Doug can lavish him with all the money and gifts he wants, his dad wanted to earn it.
- His dad wanted to invest in him—to stand next to his son and believe in him and take the risk.
Just something to think about while you look for investors.
Where to Find Investor Money
I’m a big believer in veteran entrepreneurship.
Here’s the thing: I’m not the only one. Lots of people want to invest in veterans. Below are some ways you can connect with these people.
Angels
What is an angel investor?
Typically, an angel investor is an accredited investor. For an individual, this means that they have to make $200k/year (or $300k/year for joint filers) or have a net worth of $1 million.
Why does the law require this level of wealth before you can angel invest? Mostly because this type of investing can be quite risky and the government wants people who can stand to lose the money and also have a sense that they know what they are doing.
What do they do?
Angel investors typically invest very early in businesses. You may only have an idea on the back of a napkin, that’s how early. But angels can also fund starting a small business like a restaurant, or a real estate deal. Really, they can provide capital for any type of business opportunity.
So how do you find people like this?
#1. LinkedIn
People dramatically underestimate the power of a LinkedIn search. People ask me, “How can I connect with someone at my dream company?”
To which I reply, “Go search “Navy XYZ Company” on LinkedIn and message someone.”
It’s really that easy. And you can use the same thing to search for angel investors.
I recommend starting with groups or networks you are already in. Maybe it’s your university or a military association. Start there first and search for “investor” or “angel investor” and see who pops up.
#2 Localvest
Localvest is designed to connect veteran entrepreneurs with investors. It’s a pretty impressive platform that automates fundraising—something which can be a major headache for entrepreneurs who need capital for their business.
#3 Academy Investor Network
The Academy Investor Network invests in veteran-led startups where a veteran owns greater than 10% equity and civilian-led startups in the GovTech/Defense Tech space.
#4 Meritorious
Meritorious is a networking platform for high-performing veterans. You can learn more about it here and how it can be a great place to connect with military-affiliated investors.
#5 Vet-Biz
The Vet-Biz Network brings Angel investors and Military Veteran Entrepreneurs (MVE’s) together in an environment that celebrates innovation and creativity, rewards strategic risk-taking, and promotes performance.
Our passion is innovation, job creation, and help those that have given so much for our freedom, so we bring Angel investors and Veteran entrepreneurs together within a structure that mitigates risk, amplifies upside potential and provides startup and early- stage funding.
#6 Hivers and Strivers
Hivers and Strivers is a network of military-affiliated angel investors. It’s worth noting that an angel network operates a little bit differently than does a solo angel investor. There may be a slower process to get funded, but you may also get access to a larger network.
Military vets are an exceptional, underappreciated and underfunded talent pool of entrepreneurial leaders. In early-stage investing, we bet on the jockey, not the horse and with the skills acquired during active duty, we believe companies led by former leaders of our armed forces are more likely to succeed.
Veteran-Focused Venture Capital
First—venture capital (VC) money is meant for startups, meaning companies that have the potential to scale to something big. If you are looking to start a small business or start a search fund, you may want to move on to the next section.
During my second year at Darden I got to take a class with Silicon Valley VC legend John Glynn. You probably haven’t heard of his firm, Glynn Capital, but I’m sure you’ve heard of his investments:
- Facebook (market cap: $926 billion)
- Intel (market cap: $218 billion)
- Stripe (market cap: $95 billion)
- Palantir (market cap: $47.53 billion)
- Slack (market cap: $26 billion
And that’s just a few of them. So yeah, the guy knows a thing or two about VC investing. Luckily I got to pick up some of that knowledge and experience.
How does VC investing work?
Someone (called a General Partner, or GP) goes around to very wealthy people and asks them to invest in their VC fund. Each fund has a different strategy based on the knowledge, experience, and risk tolerance of the GP. But generally, VC funds are looking to invest in early-stage companies, providing them capital to help them grow so that they can get a return. These investors are then called Limited Partners (LPs). They typically only provide the money and the GP makes the investment decisions.
Investing in early-stage companies is very risky, so VCs tend to spread the funds out a lot. The typical strategy is in making ten investments, you may see one company that provides a huge return, two or three that provide a small return or just break even, and the rest are lost money.
This is where veteran-focused funds come in.
There are a handful of funds out there that look to invest in companies founded by veterans. Why? The common thread amongst them is that they think veterans make better entrepreneurs than average and that companies founded by veterans have a larger chance to succeed and thus they can generate greater returns for their investors.
Last note: you don’t need to only get money from other veterans. But these firms can be a place to start with people who know about your background and capabilities
#7 Veteran Ventures Capital
Veteran Venture Capital invests in vetted investment opportunities to qualified veteran-affiliated businesses. We interact with businesses that have military veteran leadership exclusively because we recognize the value of their experience, training and character
#8 TFX Capital
We invest in high-performing former military leaders who are accomplished professionally and academically. We look for servant leaders who can communicate, inspire others, and rally a team against a common mission. These leaders have the tested ability to learn, adapt, and apply themselves in unpredictable, ever-changing environments.
These leaders along with their co-founders and executives are accomplished, committed to the mission, and have relevant domain expertise.
#9 Context Ventures
There’s not much on their website, but you can find a way to reach out to them here.
#10 Stony Lonesome Group
Following the ethos of “invest in what you know”, Stony Lonesome Group has long been an early visionary and leader in the Veteranpreneur sector. We are committed to partnering with post 9–11 Military Veteran entrepreneurs to help them realize their dream to build the next wave of iconic Veteran founded companies like Nike, Fed-Ex, WalMart, and USAA.
At SLG, we like to call our brand of investing “mentor capital” as much as it is “venture capital”. For our investors, this translates into the SLG Triple Bottom Line value proposition that extends well beyond ROI, but instead offers the chance to make a difference with our mission-focused investing.
#11 Scout Ventures
Scout Ventures is founded by veterans and has a special taste for technologies that also may have some type of defense application. They describe their investment approach as such:
We invest in standout, frontier technologies built by hard-to-access founders that are making the world a better, safer place.
We focus on companies which develop scalable technologies to build profitable businesses that influence millions of people.
We focus on the sectors where our experience allows us to help companies grow: Frontier Technologies (AI & Data Science, Robotics, Drones, Autonomous Mobility, AR/VR, Advanced Materials, Physical and Cybersecurity, Quantum Computing, Space) and Enterprise SaaS.
#12 Moonshots Capital
Founded by two veterans, Moonshots Capital is focused on empowering veteran entrepreneurs.
Great leaders are hard to come by. We believe the best ones are military-trained or trial-by-fire entrepreneurs who have the ability to motivate others to action, inspire trust, and plan heuristically. We invest with conviction when those attributes are present.
Moonshots Capital, with offices in Los Angeles and Austin, was founded by a team of veterans in 2017. We have collectively founded and operated 14 companies, and have personally invested in over 80 ventures. Beyond capital, we deploy our military and entrepreneurial experience and network to help world-changing companies grow
#13 LunaCap Ventures
LunaCap Ventures is a firm founded by an Air Force veteran that provides debt financing to military, women, and minority founders.
Why these groups?
Because the firm saw that because these groups have weaker networks, they have poorer access to capital. This means they are usually much more focused on cash flow early in their business, which fits well into LunaCap’s debt financing model.
LunaCap Ventures provides venture debt financing to early-stage companies with Military, Women and Minority (MWM) founders and leadership. We are a New York-based impact investment fund established in 2014 with a team of serial entrepreneurs, experienced investors and hands-on operators. LunaCap Ventures is built on the principle that providing capital to exceptional leaders with diverse backgrounds can build a better world and yield above-market returns for investors.
#14 550 Capital Partners
550 Capital Partners has launched to accelerate businesses owned by military veteran entrepreneurs, connecting their talent and grit to 550’s established resources and shared culture. This is a calling to rebuild our national economy and to restore our well-being and our communities.
550 serves this special class of inspirational Americans with financial capital, inside tracks, experience, and networks. They in turn scale companies in target sectors of medical technology, health & wellness, and human productivity.
#15 1836
1836 is a non-profit organization. Our mission is to support military veterans by matching them with the execution resources that they need in order to build and operate businesses.
#16 The Veteran Fund
The Veteran Fund is an early stage venture capital firm based in Silicon Valley that invests in military veteran-led technology startups.
Other Sources of Investor Money
#17 SearchFunder
If you listen to the podcast, you’ve likely heard me talk about entrepreneurship through acquisition. There are lots of ways to go about it, but you may select to seek out investors to help you acquire a small business.
Searchfunder is a networking platform for people looking to acquire a business and investors looking for people to invest in.
Pro tip: Don’t be scared by their $70/month fee. All you have to do is post something or comment to get 30 days free on the site. It’s super easy to do.
#18 Folla Capital
Founded by a veteran who also runs Vet to CEO (a program I HIGHLY recommend), Folla Capital seeks to use crowdfunding to help veterans raise the capital they need to start a business.
#19 Service Academy Business Mastermind
SABM Group offers a platform to connect with investors. They also have a business mastermind group for veteran entrepreneurs.
The site is VERY marketed toward service academy grads, but the FAQ does say that you do NOT have to be an academy grad to take part in the masternind or fundraising.
Raising Money vs. Bootstrapping
A huge theme of this site is to check your ego.
Don’t expect to do a lateral transfer when you exit the military.
You have to earn it.
Don’t expect to get into a great school just because you are a veteran.
You have to earn it.
Don’t expect your idea to be successful just because you are involved.
You have to earn it.
When it comes to creating a new enterprise, the narrative today encourages everyone to seek the “CEO/Founder” in their job title or “Venture-backed” somewhere in the business description. Especially when it comes to raising money, everyone wants to flaunt their massive valuations and the who’s who on their investor list.
But you know what I’ve found? Lots of entrepreneurs end up regretting taking on outside money. Not all, but a lot.
Why? Because they lost control of what they built. Their hobby, their baby, their community got taken over by other interests and they didn’t like how it looked at the end.
I’m not saying that taking outside investment is bad. Often it is required to turn that dream into reality or can be the catalyst for explosive growth where everyone reaps the rewards.
All I’m saying is this:
Be deliberate.
Do what’s right for you and the business.
Not All Investor Money Is The Same
It can be very attractive to look at the dollar signs that people throw at startups and think, “I can’t wait to get that kind of money!”
But don’t just take a check to take a check. Do it because the partnership adds value to your business.
What is more valuable than money to your startup? Money combined with time and expertise.
Let’s take angel investors as an example.
There are no qualifications necessary to be an angel investor other than personal wealth. They could just be a heart surgeon who makes a ton of money and wants to feel cool and sophisticated by investing in startups. I say this because I’ve seen it. But what does that heart surgeon know about your e-commerce outdoor gear business, for example?
Probably not a whole lot.
They know medicine, not online sales. So their ability to help your business stops at the check. They likely don’t have much more to offer you than that.
What can a good investor offer?
- Time
- Expertise
- Connections to customers or potential key team members
- Connections to other investors
The time one is especially true to consider. Early-stage investors are likely to make multiple investments. You should wonder how much time they can spend with you and if they will have the bandwidth to add value beyond the check.
Last note here: You may not care if they can add value beyond money. Your team may already feel comfortable and confident doing what you are doing and you may need money just to hit the accelerator.
Story Time: Mailchimp
But let’s take an example: Mailchimp
What is Mailchimp?
If you are subscribed to The Veteran Professional newsletter (which if you aren’t I don’t know what is wrong with you—sign up HERE) then you’ve interacted with Mailchimp. If you get any type of email newsletter, there’s a very good chance it’s run by Mailchimp.
Mailchimp helps entrepreneurs and small businesses get their brand online and market their products and services.
Oh, and they recently sold to Intuit for $12 billion.
But here’s the catch: they never raised outside money.
Not a single cent.
What did they do? They just built a great product and let it do the work. And they got to run their business like they wanted to run their business.
It’s possible. Not always, not every time, not for everyone. But it can be done.
Go crush it.
Related Articles:
33 Ways Veterans Can Buy a Small Business