Lei Jun: Your First Funding Starts with Trust from People Who Know You

10. Why the Worse Your Character, the Harder It Is to Raise Money Pool Your Startup’s First Funding Finding startup money is very difficult. When starting a company, the first thing you need is funding. There is a lead-in period: how many people have come to trust you through ordinary work and life—enough to write you a check for a million? That trust is hard to build. People will say there is nobody wealthy around them. But angel investing in America often simply means pooling money. Lei Jun once saw a US startup raise a few hundred thousand dollars from twenty angels, each contributing ten or twenty thousand, or a few tens of thousands. He believes people in China can certainly pool that much, and probably more. The real question is why someone should trust you enough to give you tens of thousands. If they do not know you well, how could they? Lei thinks the first fundraising question is how you built that credibility through work and life: do enough people trust you, want to give you money, and want to bet on you? That is the core issue. Never treat fundraising in isolation. First make close friends and earn people’s trust. If you want to start a company but cannot persuade your parents, siblings, or closest friends to give you money, what does that tell you? Many people write desperately to Lei Jun: why won’t he give them money? Why should he? His money is hard-earned too, the product of working day after day, through wind and rain, with his own effort and sweat. Lei was therefore the first to state openly that he invests only in people he knows. Genuine angel investors are acquaintances. Think calmly: this is not charity, so why should he give you his hard-earned money? An angel might invest because they like the undertaking, believe you can make money for them, or because you helped them up after a fall two days earlier and they feel heartfelt gratitude: “We don’t have much else, but we have a million in cash. Take it and start your business.” When seeking your first money, with nothing but an idea and two or three people, start with people you trust. Founders often say entrepreneurship is risky: if they fail, will they let those trusted people down? But if you approach Lei Jun and take his money, have you considered that you might let him down too? The first point, then, is to find your first funding among people around you. The process should begin long before you seek it. Build the credibility that makes funding possible. Nobody walks outside and finds money falling from the sky, with some fool called Lei Jun handing over a million to start a company. It does not happen. Do not believe such stories. Taking Your Conduct Seriously Is the First Step Toward Credibility What should you believe in? That by taking your conduct and work seriously, you earn people’s trust. When you start a business, they are willing to bet on your success. It is that simple. That is the whole fundraising process; there is nothing mysterious about it. Lei gives an example: he invested in a very successful company, YY, founded by Li Xueling. As a journalist, Li often criticized Lei in articles. Yet they maintained a good relationship, communicated often, and Lei frequently invited him to meals. Li said that would not work. He also refused press-event travel allowances, explicitly saying they could not buy him. When Li later had a startup idea, Lei saw someone with principles and, more importantly, a dream. Why refuse press-event travel allowances? Because he considered them too small: he intended to build something enormous and would not let such payments buy his principles. Li’s company was Lei’s second angel investment. Lei invested RMB 4.15 million directly and lent another RMB 4.15 million, providing RMB 8.3 million in 2005. Looking back, Lei thought that ten years of interaction had established at least three impressions: Li had principles, he had a dream, and, importantly, he was a technology enthusiast who knew his subject. Every conversation is part of building a relationship. YY is very successful today. They began discussing entrepreneurship from the moment Li first entertained the idea. At the very least, the journey showed Lei’s judgment in 2005 to have been correct. Lei particularly wants to explain why he invests only in acquaintances, with an extension to acquaintances of acquaintances. Everyone knows a limited number of people. A reliable friend of a reliable friend is basically considered reliable too. Lei will invest in something that seems 90% reliable, because nothing is 100% certain. Entrepreneurship is inherently a high-risk bet. When looking for money, first ask whom you think would invest. If someone has little savings, perhaps one of their close friends would support you. That is Lei’s first secret to finding money. His sincere advice: unless you have the extraordinary luck of money falling from the sky, begin with the people around you. #雷軍創業心法 (Lei Jun’s entrepreneurial principles)