Tag: fund
Sort by
Most startups need some form of financing, whether that’s from bootstrapping, borrowing, or selling equity. Making sense of all the options can be overwhelming; we’ll make it simple. Learn the basics of each approach, and find out which one is best for you, in this interactive, online webinar.
Most startups need some form of financing, whether that’s from bootstrapping, borrowing, or selling equity. Making sense of all the options can be overwhelming; we’ll make it simple. Learn the basics of each approach, and find out which one is best for you, in this interactive, online webinar.
An elevator pitch is one your most powerful tools. It’s critical for explaining your business to people you want involved, like investors, co-founders, employees, or business partners. It’s also a great way to educate people who can spread the word about your company, like friends, family, and vendors. In all of these cases, people need to grasp the essence of what you’re doing quickly and easily – and feel that it’s viable and compelling. That’s a tall order given that you’ll only have about 15 seconds (It should probably be called a “revolving door pitch”). Here are some tips:
1) Create two versions. The short version usually includes the type of product or service you’ll offer, and your target customers. For UpStart, that might be “an online bootcamp for startups.” If you’ve got more time, you can add more details about the unique benefits you’ll provide for customers, and how you’ll make money. For UpStart, we’d add “we sell on-demand courses, coaching, and content that helps first time founders anywhere, across all industries, start up smarter.”
2) Anchor with something familiar. The key to describing your product or service is to start with something people already understand. Try using either a category (e.g. we’re an online store for x), or a well-known product comparison (e.g. we’re diapers.com for x).
I run into a lot of people with entrepreneurial dreams. When they tell me about their ideas, many use this punch line: “And nobody’s doing it!” Is that really true? Is it even a good thing? When you march into a meeting with an investor, think twice about declaring that you’ve got no competitors. Here’s why:
Perception is reality. You’re building a zebra with a unique pattern of stripes. But to potential customers and investors, your zebra looks a heck of a lot like other zebras. If you want their attention and their money, pay close attention to their perspective.
Better safe than sorry. Investors expect you to do your homework. Don’t let them down. Research and analyze the competitive landscape, so you can educate them during your pitch. Nothing undermines your credibility like having a potential investor school you on a competitor you didn’t know about.
One way to tell a rookie entrepreneur from a seasoned veteran is by the way they use NDAs or “non-disclosure agreements”. Note to rookies: Act like veterans.
Rookie:
Pulls out an NDA two minutes after you meet them – before they’ll even tell you their elevator pitch.
Insists that everyone sign NDAs, including potential investors and advisors. They quickly learn that most VCs won’t sign NDAs, and that sophisticated angels can get turned off by having an NDA pushed on them too early.
Thinks their idea is some sort of valuable, secret sauce.
I met with a client recently who spent the past few months unwinding a partnership–complete with legal costs, wasted time, and frustration.
Long story short, he took investment capital from a wealthy person I’ll call Richie Rich. Richie had lots of cash and time on his hands, and a desire to be involved in running a business. Unfortunately, Richie proved to be a terrible operator who botched several deals and nearly ran the company into legal trouble. If Richie had been an employee, my client would have fired him. But firing an investor is not that simple.
I know, I know, you need capital now to start–or preferably to grow–your business. But be very careful about mixing the roles of investors and employees. Before you bring someone onto your team, loaded or not, always ask yourself the following: Continue reading this post
As a first-time founder these days, you’ll probably get started via bootstrapping, or raising / borrowing money from friends and family. Once you have a product developed, and proof that customers will buy / use it, you may seek “seed” funding from angels, or early-stage venture capital firms.
Many founders start pitching to seed investors toward the end of this process, after they’ve got some customer traction. However, I recommend speaking to seed investors earlier – six months or more before you plan to approach them for investments. Here’s why:
Intel. Seed-stage investors often focus on certain types of businesses. The best funds and angels know the secret sauce behind those kinds of companies, so they can provide advice about what works, what doesn’t, and key success factors. They may also know about analogs you can learn from, contacts you should meet, and competitors you should be aware of.
Over the past two weeks, two UpStart clients got term sheets from investors. Congrats!!!! These clients and others routinely wrestle with what type of investors to approach, and what exit strategies are most compelling. The right answer depends on factors including founder goals, the types of companies they are building, the degree to which they are capital efficient, etc. But there are some interesting big picture trends worth noting.
Hunting whales. Traditional venture capital firms tend to make big investments ($3 million+) in the hopes of making big exits ($100 million+). If you want to get these types of VCs on board, you need to convince them you’ve got the chance to generate that kind of significant scale. You need them to think you’ll become a whale.
There was a time when a smart, young, first-time founder with an idea scribbled on a napkin could raise a million bucks from a venture capitalist. That time is past. Today, the vast majority of new ventures get started via bootstrapping (for example, only 26% of 2010 Inc. 500 founders raised money from outside investors).
What is bootstrapping? It’s about getting through the early stages of startup growth with limited funding.
Why bootstrap? Many founders bootstrap because they have no choice. Their teams or business may not have the stuff investors look for (e.g. experience, scale, exit opportunities). Or they may just be too early in the game to prove they can succeed. Other founders bootstrap by choice. Bootstrapping gives them the flexibility to experiment without having to answer to investors, and lets them sprint to get a product in front of customers instead of spending months trying to raise capital for a team and idea.
In this environment, it’s especially important to get “traction” (i.e. progress toward your ultimate goals for the business) before raising capital from outside sources. Here’s an example:
I worked with a client recently I’ll call Kelly. She developed an innovative concept for a line of fashion accessories. She and her friends loved the product ideas, and she had a simple prototype. She came to me thinking she needed a business plan in order to raise startup capital. But as we got to talking, it became clear that she hadn’t proven that demand existed. Would customers in her target market buy the products, and at a price that would let her turn a profit? She just didn’t know.
Before convincing investors, she needed to convince herself. Unfortunately, she couldn’t afford to hire a company to conduct market research and testing. Instead, we came up with a bootstrap alternative:
