I am continuously amazed at the proliferation of startup funding sites an entrepreneur has accessible to them. The numbers are staggering. Wow. Are there really that many startups looking for funds and that many angel investors looking to fund? While I not representative of or for other entrepreneurs, I can share my thoughts about the arduous task of investment seeking.
With so many investors out there, one would think that it is a simple matter of being funded. Not so. My own experience with funding as a minority with limited corporate background credentials points to a sad state of things when it comes to qualifying for almost any type funds. Don’t get me wrong, I do have an MBA from the University of Maryland. I have served in the US Army as a successful company commander twice. I have worked directly for one and two star generals in high levels. I have startup experience from two companies with my present one being the third. I write within my industry and have published articles in leading industry magazines, not to mention the many white papers I’ve written. So what’s the catch?
I have observed that fund seeking is an addictive exercise from which the industry as a whole benefits more so then those seeking money. I am aghast at the many fees and costs associated with publishing one’s “executive summary” or company profile at various web funding sites. I am amazed at the “free” memberships that go nowhere but to the deep dungeons of databases somewhere in the bowls of the internet –never to see the light of day. And along with it, the aspirations and dreams of entrepreneurs.
Let’s face it. An entrepreneur has to walk on water for smithereens of attention nowadays. Don’t have the right credentials? Don’t have that dynamic team? Idea too simple? Wrong timing or wrong market? The multiplicity of reasons for failure are many.
When I first started my company I sought out every avenue possible for funding. I failed at every one of them. I admit that my naiveté helped ensure my failure. But where were those that claim to “help” entrepreneurs? I have discovered an undeniable truth –help is directly proportional to the amount of money one is willing to pay. No money, no help; that’s the dilemma all entrepreneurs find themselves in. For us little folks, what is the solution?
Here are some simple tips that may improve your chances of success:
(1) First, determine what type of company you are starting. Is it a “local” small business or is it a “national” type enterprise. Is it a “me too” type or is it unique in execution and product offering? Nothing wrong with the “me too” –Mark Cuban’s was one. Can it scale from a small business to a larger format? What is the level of capacity of the company and the management team? Let’s be honest, everyone can’t be Mark Cuban or Steve Jobs, both which started small and grew exponentially in a short timeframe. A lessons learned: Start where one is at the present and not where one would like to be. Nevertheless, START. It does take time to mature and learn one’s own business, so start now and learn as you go.
(2) What will it take financially to get the company to the next goal? The best solution is a zero overhead cost requirement solution, which is not always possible because of the type of business started. A consultancy would fit this category, as would a software/web company where the owner is also the programmer. In my case, I started a global company in manufacturing energy management home and building devices (very cash and people intensive from the get go). If cash is an issue, look for solutions that fit one’s personality and aspirations. A lesson learned: passion (enthusiasm) for something does sell.
(3) Look for other people that share your passion. There is comfort and support in numbers. In my case, I found a local electronics R&D company that also like the idea and decided to support my efforts. Introduction to this company occurred at a city sponsored small business tradeshow and through an Indian art exhibitor, whose husband was an embedded software programmer at the company. Amazingly, my company was the only “global” company there and all I had was literature to display my ideas. A lesson learned: look in your own back yard first for help and support.
(4) Partnering is full of problems and pitfalls, yet it is a way to move forward for a
company that wants to become larger or that needs those relationships to even be seen as credible and legit. I collaborated with quite a few companies (mostly complimentary startups in my industry) and eventually some paid off. In the MBA world, we call that “strategic alliances.” One can do the same at the local level through the Better Business Bureau, Chamber of Commerce, and so on. Even other companies that compliment one’s business – doctors do that all the time as “referrals.” Working closely with partners helps crystallize one’s business focus and identifies problems in marketing strategies. A lesson learned: Offset personal and company weakness in core competencies with strategic alliances.
(5) Revenue is king. Not the business plan, the planning and execution, or any other wishful thinking ideas. If revenue isn’t king then the company is a hobby or a past time endeavor. Every facet of execution must focus on revenue generation. I get venture capital requests all the time –their spill? When you reach $2 million call us and we’ll fund you. What they are really saying is –eliminate as much as possible our risk and we’ll consider you. Understandable. Get revenue and everyone is your friend. Reminds me of my first tour of duty as a young Lieutenant in the Army. Previously I was a private with a young wife and a newborn baby. No one would give me the time of day. We spent our first winter in Lawton, Oklahoma in a shack with the wind blowing through every crack and crevice in that wooden house. It was miserably cold. When I returned to that same military post as an officer, the reception was different. Banks called to help me settle. No credit checks or hassle, no references required, even received a welcome basket from the Chamber of Commerce, and so on. A lesson learned: how one is seen or perceived makes a difference in opportunities offered. The same applies to a startup.
By now you are probably wondering about the “how to get money” part. If you are still wondering, it’s probably best for you to join a startup and learn more of the ropes from the founder. Learning at someone else’s risk is a good way to learn a business before entering a life-long endeavor that might not be exactly what one had in mind. Goes back to the first criteria I mentioned in this article.
Quite frankly, getting money is hard work, takes forever to get, and is full of
disappointments. Of course, if your company is the darling of the industry, then the
opposite applies. But for most of us, it boils down to persistence and acceptance of the
limitations imposed by those who do have money to waste (think half a billion the US
government gave to the defunct solar company in California). If you want funds, then
you really need to play by the rules of those who want to fund. I looked at the many
options available and concluded that for most of startups, funding from external venture sources is premature at best. Funding from “institutional” angel investors is no better –most are starting to act like banks and venture capital firms. This leaves the often not seen or heard of investors, individual(s) and companies who have resources but don’t necessarily use them for investment. Take for example the R&D company I partnered with. I know another company that collaborated with an electronics manufacturer to launch their product globally. Most of the time one can work with a supplier with the idea of guaranteeing them continued purchases or business. This can work at all levels whether small, medium or large company format. Being creative in this area of funding is not wrong or stupid.
The ability to receive funding depends more on the person asking for funds then
anything else. Selling an idea is an art many of us are not good at. I can say this
though, practice does help. Start with those investors one can afford to loose with the
idea of learning from these failures before pitching to investors that would most likely
invest in your company. That means doing some homework on the investors or their
firm and pitching to their criteria. Even a single investor has motives and psychological needs (besides the known criteria) that must be met by you. Some of that can be countered through an introduction by a known friend of the investor. In fact, most of my investor contacts that have been semi-successful (actually got to talk to them) have been through networking.
Bottom line, admit one’s limitations, which means the startup, and implement (means execute) a plan to offset that. There is plenty of help out there –one needs to judiciously and carefully seek it while avoiding the thousands of rabbit trails that distract and lead to disappointment and disillusion. Just make it happen.