Way to Grow

Some Say Forget about Funding

Two posts on Thursday from respected business bloggers saying, in essence, "Forget about funding".

In response to a question Seth Godin received, "How can we get our company funded?", Seth answers, "Don't." Points from Godin:

• If you fund your company, even a little, you've just sold it.
• Most companies are not appropriate sites for VC money...because they're freelance ventures, not entrepreneurial ones. A freelance venture is one where you work to get paid. An entrepreneurial one is where you can make money while you sleep.

Anita Campbell cites a U.S. News and World Report article by Jim Pethokoukis that says, "Bootstrapping, i.e., funding a business from customer revenues and getting it to be self-sustaining as quickly as possible, is the right answer for the vast majority of businesses. Besides, it’s the only answer for most businesses. Only a tiny percentage of businesses will appeal to venture capitalists or angel investors.

Angel Investor Networks

Considering angel funding for your startup? See the list of angel investor networks that Smart Startup gleaned, complete with links, from Business 2.0.

VC Suggestions About Presentations

Whether you're going to be talking to VCs or to anybody else as a potential investor in your business, there are certain things they want to hear.  Plenty of pages have been written on the basic "Presenting to Investors" outline, but a post from JD at Drake Associates reports on a panel discussion at the 10th Annual VentureNet Conference. The panelists offered instructive suggestions about presentations.  There are 15 recommendations in the post, starting with "Know the Total Available Market and Total Addressable Market" down to "Look at each round of financing as a risk reduction step for the investor."  Read them all.

When You Don't Have All the Answers

Allen Morgan has posted his Ten Commandments for Entrepreneurs -- the 10 things you should know when approaching venture capitalists. He's in a position to know. He's a general partner and managing director with Mayfield, one of the top Silicon Valley VC firms. In Commandment #8 - Know What You Don't Know -- and Admit It, he says it's sometimes OK not to have an answer to a VC's question. Some questions aren't "answerable" at certain stages of the business. But if it is "answerable" and you don't know, whatever you do, don't fake it!  He says:

"DO: admit (with confidence) that you don’t know the answer

DO: make a note of the question

DO: quickly find out the answer to the question

DO: promptly follow up offline with the VC who asked the question

DO NOT, REPEAT, DO NOT: fake your way through an evasive, oblique, or indirect attempt at an answer."

Raising Startup Money

Ask Dave Taylor offers good advice on where to begin finding angel investors. Along the way he also helps you be sure you're ready to talk with them when you find them:

"So the real question to ask your team is: do you have a business or do they have a neat piece of software? A business has a marketing and sales organization, existing customers, a measurable market visibility, a long-term development plan, and so on. Most startups - even some that are funded, frankly - aren't full businesses. But if a company does have a strong, competitive product, some measurable cash flow, a few good customers, and some visibility in the marketplace, then it's well positioned to look for some capital to help it grow faster. Investors don't pay for that first step, though: startups have to get their act together first." [Italics are mine.]

Via Dane Carlson.

Get Experience with Your Funding

For first time entrepreneurs, landing funding without accompanying expertise is a mistake. Drakeview says, "The money is important, since without it the venture likely won't go forward or will evolve in a manner that limits its potential.  But accepting 'dumb money' early in a venture's life can be almost as harmful."  If you can, find funding from a resource that will help you succeed.

Via BizzBangBuzz.

Venture Capital Financing Issues Explained

Thanks to Anthony Cerminaro for posting a great resource for technology-based start-ups. It's an article from White & Lee, LLP that outlines in some detail the process and issues associated with venture capital financing.

Thinking Globally

Former Secretary of State, Colin Powell, has joined the prestigious VC firm, Kleiner Perkins Caulfield & Byers. His title will be that of partner, but he will serve primarily as an advisor on leadership and international affairs to some of Kleiner Perkin's portfolio companies. This notable appointment highlights the strategic importance of global business to venture funders.

Read more in the New York Times.

Part-Time Entrepreneur: Risk Divided by Two?

Still want to operate your own business but can't hack the risk?  cdorob's blog offers you both worlds: Build your company while still working at your regular job. He lists a number of pros and cons. #1 pro: the regular paycheck. #1 con: zero social life.

What Is An Entrepreneur?

This weekend a friend who operates a small manufacturing business told me her attorney says she is not "technically" an entrepreneur. The attorney says an entrepreneur is someone who goes to venture investors for funding.

Let's be clear: Merriam-Webster online dictionary defines an entrepreneur as "one who organizes, manages, and assumes the risks of a business or enterprise" [italics are mine]. An entrepreneur is a risk-taker whether he/she finances the business alone or with the help of investors. When it's all your own money, aren't you a bigger risk-taker?