Tags |
|
|
Links |
|
|
Answer Upon - Strategic Fundraising for Startup Technology Companies
Business forms are an integral part of any official communication. Be it a business setup, private company, government organization, or small home office, business forms are of great help to record various processes, dealings, and communications. Invoices, statements, purchase orders, packing lists, labels, letterheads, envelopes and business cards are all examples of business forms. Business forms contain repetitive information and are usually required in bulk. They are required while doing business with another company or within the company. Whatever the reason, these forms are important.Forms are needed to gather or provide different kinds of information, like opening an account in a bank, getting surgery, filing legal documents, filing taxes, or filing medical policies, insurance papers, loan documents, employment offers, school registration and so on. The purpose of these forms is to gather or dispense information which is valuable in running any business, like keeping record of work done or expenses incurred.Creating business forms with correct language and proper clarity can be a big task and quite time-consuming. When computers were not the order of the day, handwritten or typed documents were in use. One can well imagine the time, money and effort required to make multiple copies, redo in case of mistakes, or customize. Photocopying still made things better, but computerized business forms have made things quite uncomplicated and fast.All kinds of business forms, ranging from invoices to expense sheets, are now easily available as free downloads or paid packages. One can make specific modifications, with the bas
This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless it’s for personal/hobby reasons. And since there is little competition, and as a result, little time pressure—fund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.
This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. That’s fine—the problem lies when the entrepreneur doesn’t know what he has, or won’t accept it. He thinks his baby needs to grow up to be a fast-growing player. But it’s generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investors—and it’s fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesn’t meet the lofty expectations that were needed to sell the f
Deciding on a resume format is the first major decision to be made when creating your resume. The overall look of your resume depends on the resume format, font and outline you choose.The two main types of format in use are the chronological and functional formats.When to Use the Chronological Resume FormatA Chronological resume is the easiest to create and it is also the most widely used format.Chronological resume format allows you to list your job experiences starting with the most recent and moving back in time.This allows employers to see your progression in the career field If you are staying in your career field, this format will allow employers to see if you are qualified for the job you are applying for. It may not be beneficial for people changing career fields.When to Use the Functional Resume FormatFunctional resume formats are more difficult to create and are not widely used. However, they are suitable in situations where people are changing career fields.The functional resume format is based more on skill development. The format is non-linear and the emphasis is on development and achievements.You can list experiences other than paid jobs.Employers will be able to see your progressive skill developments that qualify you for the jobSome people choose to combine the two resume formats to gain the benefits of each and avoid their shortcomings.Scannable Resume FormatAnother type of resume format you may have to use is the scannable resume. Many employers store resumes in electronic databases nowad
The questions that run through an entrepreneur’s mind are nearly endless. Do I even need the money? Is my company fundable, regardless? How much do I need? How much should I try to raise? What’s the best time to start raising money? What type of investor should I approach, and what are their expectations? How should I go about approaching them?
I could fill up the rest of a page with salient questions an entrepreneur might have. This might be the most daunting process in the minefield of difficult steps to forming and building a winning high tech company.
So you’re a new entrepreneur, with a great idea, a prototype, and a vague notion that you might need to raise some capital. Where do you go from here?
NO COOKBOOK FORMULA Well, like most things that really matter, there’s no easy answer. It depends on what type of company you’re trying to build, your own control and risk/reward mentality, as well as the dynamics of your market.
For discussion purposes, I’ll focus on an embryonic software company. Most of the discussion will be just as relevant to a later stage business, or an early stage manufacturing business. In a manufacturing business, you’ll need to raise more money to fund manufacturing in the ramp-up phase. But the initial fund-raising is very similar.
FUNDRAISING BASICS
First of all, let’s quickly cover the various categories of capital sources. There are many variations and shades of gray with respect to funding sources, but the following are representative of the basic categories available to new software companies:
1) Self-funding
2) Friends & Family
3) Angel Investors
4) Venture Capital
5) Strategic Partners
Hopefully, these categories are pretty self-explanatory. Next, let’s look at what TYPE of company the entrepreneur is trying to build:
A) Lifestyle Company
B) Solid Single
C) Home Run
A Lifestyle company is one in which you are often intermixing your personal life with your company life. There may be family members involved in the business, your write-offs and accounting are more aggressively aimed at reducing taxes than showing profits, and you aren’t interested in or planning to sell the company anytime soon. Solid Singles and Home Runs are similar to each other; the major difference is market size/opportunity.
Lastly, let’s talk about what outside investors look for in a fundable venture:
I) Management
II) Market size/opportunity
III) Defensible differential advantage
The three items listed above are all crucial, but they aren’t equal in importance. Professional investors look for strong management teams, but if there are holes in the current team, it isn’t necessarily fatal for many investors. They’re happy to help you fill out the team. Many, in fact, prefer it this way. But having a large market opportunity and strong differential advantage are non-negotiable in the eyes of investors. They are looking for big returns. It’s a long-held view among institutional investors that their own management time is the limiting factor in their own business. As a result, they don’t feel they can afford to invest in “solid little businesses”. If you don’t stack up as having big potential in both of these key areas, almost every professional investor will take a pass.
YOU HAVE TO LIVE WITH THEM, TOO
Another important consideration that many entrepreneurs fail to consider is how well potential investors fit with the company’s management. Management teams are often so focused on “getting the money” that they fail to consider that you “have to live with them”, as well. It’s a bit like getting married. You may be thrilled to attract the most prestigious investor (like the best looking potential spouse), but end up with business philosophy and personal conflicts that severely retard the company’s development. This isn’t a used car transaction, where the sale is made and the parties walk away. You and your investors are now intertwined, but may or may not have the same interests.
So ask yourself: Is this a good match?
Are you seeking a “hands off” investor, or someone that will get involved with the details—providing business guidance and contacts—for better or for worse? Many VCs, for example, have successful business backgrounds and networks that can make them invaluable as advisors. There’s another group, however, that don’t have the background or skills to run a company. Yet their arrogance leads them to believe they are eminently qualified to drive even the most strategic of decisions. Are they going to be so involved that it will take up much of your scarce management time that is needed to build the business? On the other hand, are the investors so busy that you won’t be able to get their attention when you need them? Which type do you want on YOUR board?
It’s true that the money that you raise is a commodity—but the people relationships that come along with it can make or break your company. Early stage fundraising, taken as a whole, is NOT a commodity function.
THE LIFE STYLE COMPANY
Now let’s look at the simplest case study. An entrepreneur has conceived a software business using his knowledge of a particular, very specific, vertical market. It’s a market he knows well, and there’s almost no direct competition. Unfortunately, the market, while attractive to him, is not large by software category standards. Yet the market is plenty big enough to support a very profitable company, particularly since there is almost no competition. He’s proven to himself that he has a solution that the market will embrace, allowing the building of a business. Yet he thinks he needs a little additional capital, to ramp it to the point of the business being self-supporting using it’s own cash flow. What should he do?
This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless it’s for personal/hobby reasons. And since there is little competition, and as a result, little time pressure—fund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.
This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. That’s fine—the problem lies when the entrepreneur doesn’t know what he has, or won’t accept it. He thinks his baby needs to grow up to be a fast-growing player. But it’s generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investors—and it’s fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesn’t meet the lofty expectations that were needed to sell the fu
Whether you're just starting your business or your business is well underway, this question has more than likely popped into your head:Should I have a logo?The answer to this is really internal. You know your market, your customers and your plans for your business better than anyone. So before deciding whether or not to get a logo created, ask yourself these questions:Would the addition of a logo benefit my brand? In other words, would a logo amplify, enhance or highlight my overall purpose?Does it make sense for me to have a logo? For example, if you have a clothing line, a logo could make brand recognition that much easier and thereby customers could recognize you just on your image alone. The reverse would be, for instance, if you ran a small accounting company out of your home & and are not interested in recruiting new clients…well, investing in a logo might not make a whole lot of sense.What do my competitors do? Now, of course, you want to set yourself apart from your competitors but you also want to be consistent within your industry.If after answering these questions, you're still not sure, consider these three benefits a logo offers to your business:Helps make a generic name unique: If your name is merely descriptive and/or geographic, the addition of a logo could add to the uniqueness factor of your entire brand. That uniqueness factor is what most every business should strive for – setting yourself apart from others in your industry.Gives your product or s
FUNDRAISING BASICS
First of all, let’s quickly cover the various categories of capital sources. There are many variations and shades of gray with respect to funding sources, but the following are representative of the basic categories available to new software companies:
1) Self-funding
2) Friends & Family
3) Angel Investors
4) Venture Capital
5) Strategic Partners
Hopefully, these categories are pretty self-explanatory. Next, let’s look at what TYPE of company the entrepreneur is trying to build:
A) Lifestyle Company
B) Solid Single
C) Home Run
A Lifestyle company is one in which you are often intermixing your personal life with your company life. There may be family members involved in the business, your write-offs and accounting are more aggressively aimed at reducing taxes than showing profits, and you aren’t interested in or planning to sell the company anytime soon. Solid Singles and Home Runs are similar to each other; the major difference is market size/opportunity.
Lastly, let’s talk about what outside investors look for in a fundable venture:
I) Management
II) Market size/opportunity
III) Defensible differential advantage
The three items listed above are all crucial, but they aren’t equal in importance. Professional investors look for strong management teams, but if there are holes in the current team, it isn’t necessarily fatal for many investors. They’re happy to help you fill out the team. Many, in fact, prefer it this way. But having a large market opportunity and strong differential advantage are non-negotiable in the eyes of investors. They are looking for big returns. It’s a long-held view among institutional investors that their own management time is the limiting factor in their own business. As a result, they don’t feel they can afford to invest in “solid little businesses”. If you don’t stack up as having big potential in both of these key areas, almost every professional investor will take a pass.
YOU HAVE TO LIVE WITH THEM, TOO
Another important consideration that many entrepreneurs fail to consider is how well potential investors fit with the company’s management. Management teams are often so focused on “getting the money” that they fail to consider that you “have to live with them”, as well. It’s a bit like getting married. You may be thrilled to attract the most prestigious investor (like the best looking potential spouse), but end up with business philosophy and personal conflicts that severely retard the company’s development. This isn’t a used car transaction, where the sale is made and the parties walk away. You and your investors are now intertwined, but may or may not have the same interests.
So ask yourself: Is this a good match?
Are you seeking a “hands off” investor, or someone that will get involved with the details—providing business guidance and contacts—for better or for worse? Many VCs, for example, have successful business backgrounds and networks that can make them invaluable as advisors. There’s another group, however, that don’t have the background or skills to run a company. Yet their arrogance leads them to believe they are eminently qualified to drive even the most strategic of decisions. Are they going to be so involved that it will take up much of your scarce management time that is needed to build the business? On the other hand, are the investors so busy that you won’t be able to get their attention when you need them? Which type do you want on YOUR board?
It’s true that the money that you raise is a commodity—but the people relationships that come along with it can make or break your company. Early stage fundraising, taken as a whole, is NOT a commodity function.
THE LIFE STYLE COMPANY
Now let’s look at the simplest case study. An entrepreneur has conceived a software business using his knowledge of a particular, very specific, vertical market. It’s a market he knows well, and there’s almost no direct competition. Unfortunately, the market, while attractive to him, is not large by software category standards. Yet the market is plenty big enough to support a very profitable company, particularly since there is almost no competition. He’s proven to himself that he has a solution that the market will embrace, allowing the building of a business. Yet he thinks he needs a little additional capital, to ramp it to the point of the business being self-supporting using it’s own cash flow. What should he do?
This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless it’s for personal/hobby reasons. And since there is little competition, and as a result, little time pressure—fund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.
This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. That’s fine—the problem lies when the entrepreneur doesn’t know what he has, or won’t accept it. He thinks his baby needs to grow up to be a fast-growing player. But it’s generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investors—and it’s fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesn’t meet the lofty expectations that were needed to sell the f
If you want to compete in the world of high growth startups, you better know how to play the marketing game. Marketing has become a big stakes game where companies are betting fortunes on the success of their products. Nowadays if you can’t play the big marketing game you may not even get the attention of the customers you need to grow your business.So how do you compete if you don’t have the cash to run with the big dogs? The answer lies in growing your marketing budget by doubling up on your marketing investments quickly. Chances are the capital you need to compete in this game is right under your nose, you just need to know where to look for it.Make marketing an investmentThe first step to growing your marketing budget is thinking about it differently. People used to think of their marketing budget as a line item expense that they wrote checks for throughout the year. It was almost like rent – a normal cost of doing business. The mistake these startups made was that they treated marketing like an expense. It’s time to start thinking of your marketing as an investment that you expect to yield a return.Like any investment you would make in the stock market, your marketing investment should generate a specific monetary return in an expected period of time. For our purposes, we’re looking for short term investments that will produce enough working capital to re-invest quickly to grow our marketing.Grow marketing, grow customersWe all know that marketing attracts the customers we need to generate more sales. For this reason, if we want to grow our position in the market we’re going to need to grow our
YOU HAVE TO LIVE WITH THEM, TOO
Another important consideration that many entrepreneurs fail to consider is how well potential investors fit with the company’s management. Management teams are often so focused on “getting the money” that they fail to consider that you “have to live with them”, as well. It’s a bit like getting married. You may be thrilled to attract the most prestigious investor (like the best looking potential spouse), but end up with business philosophy and personal conflicts that severely retard the company’s development. This isn’t a used car transaction, where the sale is made and the parties walk away. You and your investors are now intertwined, but may or may not have the same interests.
So ask yourself: Is this a good match?
Are you seeking a “hands off” investor, or someone that will get involved with the details—providing business guidance and contacts—for better or for worse? Many VCs, for example, have successful business backgrounds and networks that can make them invaluable as advisors. There’s another group, however, that don’t have the background or skills to run a company. Yet their arrogance leads them to believe they are eminently qualified to drive even the most strategic of decisions. Are they going to be so involved that it will take up much of your scarce management time that is needed to build the business? On the other hand, are the investors so busy that you won’t be able to get their attention when you need them? Which type do you want on YOUR board?
It’s true that the money that you raise is a commodity—but the people relationships that come along with it can make or break your company. Early stage fundraising, taken as a whole, is NOT a commodity function.
THE LIFE STYLE COMPANY
Now let’s look at the simplest case study. An entrepreneur has conceived a software business using his knowledge of a particular, very specific, vertical market. It’s a market he knows well, and there’s almost no direct competition. Unfortunately, the market, while attractive to him, is not large by software category standards. Yet the market is plenty big enough to support a very profitable company, particularly since there is almost no competition. He’s proven to himself that he has a solution that the market will embrace, allowing the building of a business. Yet he thinks he needs a little additional capital, to ramp it to the point of the business being self-supporting using it’s own cash flow. What should he do?
This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless it’s for personal/hobby reasons. And since there is little competition, and as a result, little time pressure—fund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.
This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. That’s fine—the problem lies when the entrepreneur doesn’t know what he has, or won’t accept it. He thinks his baby needs to grow up to be a fast-growing player. But it’s generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investors—and it’s fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesn’t meet the lofty expectations that were needed to sell the f
Have you ever lost your way in a mess of papers, photos, and stickers? Then instead of fuming and fretting get some Zipper Binders. With Zipper Binders you don’t need to browse through heaps of material as these Zipper Binders are fitted with various pockets to make storage easier. Moreover they are translucent enough so that the moment you open them you know the items that you have stored.There is a whole range of Zipper Binders to choose from, so you can choose the one that suits your purpose. There are some that are well endowed with storage space. The pages for the Zipper Binders are either made of heavy plastic or translucent vinyl, with an accordion pullout file for the protection of pages. At times they are fitted with cut-off pockets also that can be used for holding stickers. Moreover, you don’t have to worry about forgetting what you put inside, since the Zipper Binders are translucent. In fact, some Zipper Binders have a large durable plastic envelope that has enough storage space to hold supplies such as scissors, rulers and pens. Another variant of these binders has a separate folder for things that didn’t fit into the first one. You can also choose a binder that is fitted with pockets of different sizes, making it ideal for filing and storing all your stickers.They are a great way to organize things, a far cry from the traditional methods of storage. The Zipper Binders help you access the items easily, so now you don’t have to spend your valuable energies digging around the whole place. These Zipper Binders make activities such as crafting, scrapbooking, and needle working all the more fun to indulge in. You are
It’s true that the money that you raise is a commodity—but the people relationships that come along with it can make or break your company. Early stage fundraising, taken as a whole, is NOT a commodity function.
THE LIFE STYLE COMPANY
Now let’s look at the simplest case study. An entrepreneur has conceived a software business using his knowledge of a particular, very specific, vertical market. It’s a market he knows well, and there’s almost no direct competition. Unfortunately, the market, while attractive to him, is not large by software category standards. Yet the market is plenty big enough to support a very profitable company, particularly since there is almost no competition. He’s proven to himself that he has a solution that the market will embrace, allowing the building of a business. Yet he thinks he needs a little additional capital, to ramp it to the point of the business being self-supporting using it’s own cash flow. What should he do?
This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless it’s for personal/hobby reasons. And since there is little competition, and as a result, little time pressure—fund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.
This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. That’s fine—the problem lies when the entrepreneur doesn’t know what he has, or won’t accept it. He thinks his baby needs to grow up to be a fast-growing player. But it’s generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investors—and it’s fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesn’t meet the lofty expectations that were needed to sell the f
Building Customer Loyalty is always difficult if you find that your clients come one and you never seen them again – you are sadly losing money. It costs far more to obtain a new customer than it does to sell more to your existing customers. The way you do this is to keep in touch and make them feel valued. Some ways of doing this are: Newsletter: Start up a small newsletter and send this to your current and past clients. This can be done my mail or preferably email. Please give your clients the option to opt out of this service. Your newsletter should include information, chat and articles that people will find interesting and are relevant to your own business. 2 – 3 pages are all that you need. If you find the cost a little prohibitive – then pair up with a complimentary local business and share the costs and efforts as well as the mailing list of course. You can also include regular discount cards as well as information on new products and services you are bringing out. Keep it light, informative and “non salesy” and you will keep your clients close and in regular contact with you. If your newsletter is really interesting then they will send it onto their friends as well. Your frequency can be from every ten days to every two months depending upon your services and fortitude. Any more or less frequently and you lose your effectiveness. Loyalty Bonuses: Introduce loyalty cards where you provide an extra product, service or discount after a certain level of purchases has been made. This encourages extra sales and gives your clients a feeling of achievement. the building of a business. Yet he thinks he needs a little additional capital, to ramp it to the point of the business being self-supporting using it’s own cash flow. What should he do?
This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless it’s for personal/hobby reasons. And since there is little competition, and as a result, little time pressure—fund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.
This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. That’s fine—the problem lies when the entrepreneur doesn’t know what he has, or won’t accept it. He thinks his baby needs to grow up to be a fast-growing player. But it’s generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investors—and it’s fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesn’t meet the lofty expectations that were needed to sell the funding deal. I’ve seen many great little companies screwed up in the attempt to become something they’re not.
THE SOLID SINGLE
Now we’ll examine the next step up—the solid single. This opportunity often presents as a bigger vertical than the life style company is attacking, or possibly a horizontal, yet still niche, product. These are often the situations where the most difficult strategic decisions reside. And in fact, the great majority of software companies who seek outside funding probably fall into this category. The market size is just on the edge of what the professional investors will consider. And while there is a differential advantage, it’s not at the level that you’ll be able to “knock their socks off” in your slide-show pitch. There’s worrisome competition, but it’s not over-crowded, with 75 venture-funded companies. What’s a management team to do?
This is a tough call. Every situation is a little different, but my general advice is to work your way up the 5-part funding tree discussed earlier. Fund it yourself as long as it’s not crippling your progress. Then do a round starting with Friends and Family, as well as Angel Investors that are easily approachable via your immediate network. Once you go through this funding, hopefully you’ve built a rapidly improving business with good growth prospects.
It is at this point you may be able to attract money from a VC or private equity firm that has a later stage, more conservative risk/reward profile than the typical early stage VC. Professional investors might see in your company one that may not be a 10X return, but one that may be a 2-5X return in a shorter timeframe, with less risk. And this later funding may work to your benefit, because the opportunity in front of the company may be such that you need to manage dilution of your stake carefully, to ensure that at the end of the day, it’s been worth your while. A strategic partner may be even a better fit here. Often a company in this situation may be able to attract funding because their product is important to the prospects of a larger partner company, filling out a total solution or providing a key technology the larger company can’t quickly or easily replicate. In this situation, the company may even get a richer valuation that the “Home Run” scenario which we’ll look at next.
THE HOME RUN
Lastly, there’s the classic Venture-funded company, the one with “Home Run” potential. These are the companies that VCs are out seeking to fund. These are the hot young companies that you often read about in the newspaper or trade journals. A high profile engineer, or someone else well known has started the company, with some cache in their field. The technology of the company appears to have breakthrough potential. The market is new, expected to grow to be very large, and is very newsworthy. But the competition is expected to be very intense, both from established players and a spate of new startups. This is obviously a very different situation than the two discussed above.
In this situation, you’ve got to go get the money. Time is of the essence. Getting established in the market early is crucial, and economies of scale usually become important as well. So a company in this situation typically needs to raise as much money as possible, as early as possible. All the steps are compressed here; and the time between funding rounds may be only a few months in extreme circumstances. It’s best, if possible, to skip the more casual funding sources and go very quickly to where you can raise large amounts of money very early—the VCs, and possibly strategic partners. Care needs to be taken on how you approach VCs, however. Unless you know them personally, never approach them directly. It’s one of the peculiarities of the VC community, and considered perverse by most people outside the VC community. The VC community has their reasons, although their rationale is certainly arguable. But no matter--it's one of the rules of the game. Always approach them through a service provider (Accounting firm, Law firm, etc.), or another entrepreneur who has been successfully funded by the VC firm in the past.
Until you can get a commitment from institutional investors, however, take money from wherever you can get it, within reason. Self-fund, friends and family money and Angels may all come into play if there is a delay in getting the institutional money to buy in. Don’t worry very much about dilution in this case. The choice is often one of potentially ending up with a small, valuable percentage of a company with a large market cap, versus a large percentage of a failure. As you can see, the advice in this scenario is almost the complete opposite of what I’ve recommended in the two previous examples.
A STRATEGIC DECISION
But it’s all fund-raising, right? Why such different advice?
The advice varies because fund-raising is one of the most strategic activities facing an early stage high tech company. Many entrepreneurs view raising capital as a generic operational activity, like choosing a bank or leasing office space. It's viewed as just a necessary evil, because every business needs money to survive and prosper. This discussion was intended to demonstrate that raising money should be viewed as one of your most important strategic functions--a decision that is taken with an eye for its effect on your competitive position, no differently than choosing the best technology platform to adopt, or what marketing mix to use to outflank your key competitor.
I know that there are many of readers out there who have run the fundraising gauntlet—give us the benefit of your wisdom! Contact me with the info. below.
HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.hubyou.info/article/19744/hubyou-Strategic-Fundraising-for-Startup-Technology-Companies.html">Strategic Fundraising for Startup Technology Companies</a>
BB link (for phorums):
[url=http://www.hubyou.info/article/19744/hubyou-Strategic-Fundraising-for-Startup-Technology-Companies.html]Strategic Fundraising for Startup Technology Companies[/url]
Related Articles:
Third Party High Risk Merchant Accounts
What Brand Consistency Can Do For Your Business, and Why You Should Care
Franchise Regulation Attorneys and State of Illinois Lawyers in Franchising Regulations
Bookmark it:
|