Archives for 9 Oct,2015

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6 Tips for Overcoming a ‘No’ When Seeking Funding

6 Tips for Overcoming a 'No' When Seeking Funding
FEBRUARY 10, 2015

As a new entrepreneur, unless you’re dipping into your own private fortune, you’ll probably have to spend some time fundraising to collect enough capital to start your project.

For most founders, the process is difficult and time-consuming but necessary for the potential life of their business. If you haven’t been through the process before, the experience can be even more harrowing, since you won’t be familiar with the customs and conventions of fundraising.

Encountering a no from an angel investor, friend or even a possible crowdfunder can be disheartening. But don’t let it get the best of you.

Consider these steps to increase your chances of being reconsidered, improve your potential for obtaining financing in the future and in general relieve the stress of securing funding:

1. Be professional.

As you go through the fundraising process, keep your behavior and actions as professional as possible. It’s not disrespectful to follow up with a possible investor, even if he or she has said no to you before. But if you hound this person constantly with no new information, you might as well rule out any possibility that he or she might reconsider your pitch.

On the other hand, if you politely thank the potential investor for his or her time and follow up in a few weeks when you’ve gathered more information or adjusted the business model, you’ll have a much better chance of securing that funding.

2. Understand that raising capital is a long-term goal.

Anyone passionate about a business idea probably wants to start working on it as soon as possible and is excitedly anticipating the company’s launch. You won’t succeed in having your business funded overnight, though, unless you’re incredibly lucky. Fundraising is a long-term process and your project may remain at a standstill for longer than you would like.

Even after landing a commitment for funding, closing the deal can take months. Raising funds often ends up being a long process, so don’t let a short-term obstacle get in your way.

3. A no can be part of the road to yes.

Great business ideas may not be explosive hits immediately. The road to their acceptance can be littered with obstacles, failures and rejections.

Successful entrepreneurs might happily recount for you the numerous times they were rejected over the course of their careers. Take solace in the fact that many people who have accomplished things have done so only after an initial rejection.

4. Contemplate all the options.

There’s no right or wrong way to pursue funding. If one channel seems to be generating more obstacles than opportunities, change your strategy. When most people think of raising business capital, they think of angel investors or private lenders, but several other options exist.

You could apply for loans and grants through federal and local government programs for small businesses after checking the Small Business Administration’s website or pursue crowdfunding through sites like Kickstarter or GoFundMe.

Choosing the right channel (or group of channels) to pursue funding could increase your chances of arriving at a yes.

5. Review the business model.

Use an initial rejection as a learning opportunity. Examine your business model for any major flaws or weaknesses or flat out ask the rejecter why he or she passed on your project.

Perhaps your research doesn’t support your assumptions as closely as you thought. Or the project’s profitability might appear to be unpredictable over the course of time. Attending to such issues can make your overall business idea more attractive to other potential investors or might be enough to change the minds of initial rejecters.

6. Improve the pitch.

In a way your pitch is a consolidated version of your business model and should be strong enough to capture the attention of potential investors. This is especially true if you tackle crowdfunding.

When you speak for a minute or write a couple of sentences about the business, you should be able to explain the core concept and exactly why it’s a valuable investment opportunity to a prospect. If you can’t do that, your pitch needs refinement.

If you’re fundraising and already encountered a no, then congratulations. You’ve successfully completed the first step of the journey toward funding your business. There are dozens of routes to successful fundraising and none are straight. So when you encounter a major obstacle, take a minute to breathe, re-evaluate things and then keep working toward your ultimate goal.

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8 Myths Technologists Believe That Sink Businesses

8 Myths Technologists Believe That Sink Businesses
OCTOBER 10, 2015

Most technologists have little interest in the mechanics of starting and building a business. That’s why I recommend that they find a co-founder who loves business challenges, including marketing and finance. I usually envision a 50-50 ownership split for their efforts, but every engineer believes the technology side deserves the majority share.

In fact, an entrepreneur friend of mine, who made millions on her marketing expertise, asserted recently that most inventors fail in business because they refuse to believe that any business expertise or experience is worth more than 5 percent in partner equity. If you consider yourself a technologist, you probably believe and may be propagating one of the following myths:

1. The first priority for funding should be to develop the technology.

Outside investors are most interested in scaling a proven business model, not research and development. Thus it’s a waste of time for most entrepreneurs to be looking for investors until they have a product and some customer revenue. Most founders bootstrap product development.

2. Fabulous solutions require great technology.

Business success requires customers to see a solution as exciting, and they rarely care about the technology behind it. I exhort entrepreneurs to keep it simple, start with a minimum viable product (MVP), and test it out with early customers. The best technologies are barely invisible and low cost.

3. New technology is so exciting it sells itself.

The reality is that consumers and businesses alike are afraid of new technologies, due to the learning curve, potential quality problems and side effects. This fear can easily override their fear of the problem the technology aims to solve. Business people know how to downplay the technology and market the value of the solution.

4. Marketing is a necessary evil to mask poor technology.

In today’s world of information overload, everyone relies on marketing and social media to find solutions to match their needs. Even the best technical solutions often fail due to lack of good marketing. The right marketing efforts can cost as much as the technology.

5. You can’t build a business case until the technology is finalized.

In fact, building a business case, starting with market opportunity and customer segmentation, is the only way to know what you can afford to spend on the technology. Technology that can’t be sold for a profit or appeals only to early adopters is not a viable business.

6. Patents are not worth the effort, since big companies will win.

Intellectual property is a business issue, not a technical issue. Patents can raise startup valuation by investors by as much as a million dollars, and will attract acquisitions rather than copycats. Patents can apply to innovative user interfaces, processes or a new technology algorithm.

7. Business efforts should start only after the product is right.

Business experts often now recommend that entrepreneurs start their marketing first to confirm that they have real customer interest and an appealing product concept. Elegant implementations may be too expensive or too complex for non-technical customers.

8. Perfecting the technology early removes most business risk.

It’s true that inventions can’t be scheduled, but it’s equally true that customers can’t be invented. The ultimate risk is trying to sell a solution that customers don’t need or want.

All this doesn’t mean that a great technologist can never be a great entrepreneur, but it does suggest that business skills are as key to startup success as technical skills. Very few people have both, but there are some notable exceptions, including Mark Zuckerberg of Facebook and Elon Musk, founder of Tesla Motors, SpaceX and others. The odds are still against you being the next one.

The alternative is to find a co-founder who can provide the business acumen, as Bill Gates did with Steve Ballmer for Microsoft, and Google did by bringing in Eric Schmidt. I’m personally a technologist, and I’m always disappointed when good technology languishes on the sidelines for 20 years in denial of business realities. Don’t let a few myths stop you from changing the world.

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What’s the Secret to Startup success? Timing.

What's the Secret to Startup Success? Timing.

Most entrepreneurs have heard the commonly cited statistic that 90 percent of all technology startups (and let’s face it, the majority of modern startups are technology based) fail. Some fail because their products didn’t end up being what they thought it would. Some fail because they ran out of money. Others fail simply because their revenues couldn’t grow fast enough.

But these causes of death don’t exactly illustrate what went wrong for the startup during the course of its life, much in the same way that listing a heart attack as a cause of death doesn’t directly indicate an unhealthy lifestyle that may have led to it. Like with human life, some startup deaths come out of nowhere and can’t be helped, and some are both predictable and preventable.

We all know that there’s no shortcut to success, and there’s no magic formula that can create the “perfect” startup, immune from the 90 percent death rate constantly looming over the heads of entrepreneurs. However, there’s one factor that rises above all others in importance: the timing of the business.

In a recent TED Talk, serial entrepreneur Bill Gross introduces a quandary that has been plaguing him for years. Both within and outside his organization, he’s witnessed dozens, if not hundreds, of different businesses grow from just a hint of an idea to full-fledged enterprises standing and developing on their own. He’s seen a number of different successes during his tenure, and he’s seen a lot of failures, and as you would imagine, some ideas he thought were perfect turned out to be flops and some he thought would be flops turned out to be quite successful.

Dirven by curiosity, Gross examined dozens of different companies, evaluating them on a point scale in each of five different categories he felt were at least partially responsible for determining a startup’s success. They included the strength of the idea behind the company, the plan on how the idea would be executed, the amount of capital the business was injected with, the people who were running the show, and whether the idea launched at a time when audiences were both ready for it and interested in it.

If you saw the headline of this piece, you won’t be surprised to learn that timing turned out to be the factor responsible for the greatest number of successes among Gross’s selection sample. And while the idea and the funding might make more sense — after all, how can you find success with a bad idea or without any money to help you grow? — the timing aspect represents the greatest make-or-break point in a startup’s development.

Imagine a business where everything else is perfect: You have a great idea, a theoretically brilliant business model, a talented team and enough funding to get the ball rolling. But if your idea comes too early and consumers aren’t ready for it, they won’t readily adopt your system. If your idea comes too late and there are already a number of different competitors in front of your target audience, you won’t be able to squeeze in.

Imagine the other end of the spectrum. Everything else is lacking: You have an OK, but not great idea, a business model with a few holes, a few dedicated people who don’t know exactly what they’re doing and barely enough funding to keep the lights on. But your release is timed perfectly. People have a strong need for your idea and they’re ready for it, but you’ve come along before anybody else has.

You could expect to see strong initial sales, which can help you flesh out your business model and provide you enough cash to negate your funding issue. At that point, you’d be able to hire a better team, and eventually, your idea will evolve and get better with the support of your users.

Timing can’t be ignored, and it can’t be substituted just by paying more attention to the other elements of your business. Certainly, having a good idea, business model, team and available capital can all increase your chances of success, but without that critical timing factor, you’ll inevitably end up failing — or at least struggling.

The biggest downside to this is that there’s no scientific process for determining the timing of your idea. You can use market research to figure out the personas of your target demographics, and competitive research to see what your competition is like, but for the most part, timing comes down to a gut feeling and a little bit of luck.

Still, hit the timing right, and everything else in your business will fall into place in due time.

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Are You Ready to Pitch Investors for Funding?

Founder and CEO of MCG

As many entrepreneurs know, securing funding for new business ventures can be a very difficult endeavor. And if a founder isn’t prepared, it is not only detrimental in the short term but also the long run, as the lender community is small and people talk. So, when seeking funding for your company, make sure you are prepared.

Here are a few tips to get you started.

Highlight your experience.

Many times, one of the first things that lenders or VCs look for is experience in an entrepreneur. Highlight the length of time you have been in business and your proven industry experience to showcase why you should receive funding. The best way to do this is by utilizing your referral network. Reach out to those you have worked with in the past as references to showcase your abilities and reliability. If you are looking to highlight your experience in other ways, consider polishing up your resume or create a presentation that goes over your past experiences, capabilities and accomplishments,

Focus on your target audience.

One of the biggest questions any private lender will ask an aspiring entrepreneur is about her clientele. Be prepared to discuss this topic before meeting with any ending body.

Determining your target audience can be done in a number of ways. One of the simplest ways to determine your target audience is to look at your competition: who are they marketing to? Old fashioned market research in another option and beta testing is another great way to see who responds most to your product and service and what feedback they have.

Have confidence in what you’re selling.

As an entrepreneur looking for funding, it is important to know what you’re selling and are confident in the product or service. You have to show you believe in your business, before you can encourage others to follow suit.

If you are feeling a little timid, prepare, prepare, prepare. Study the market and your product or service inside and out.  That said, there will be things that you don’t know. If you realize this going into the meeting, it may help you relax. (No one expects you to know everything.) Lastly, ignore your disadvantages. Don’t pay attention to the potential challenges you may face during your presentation, it will only add stress to your presentation.

Have a plan for the funding.

No entrepreneur will find the success they are looking for if they simply go to meet with a lender or VC without a plan for how the funds will be spent. So, make sure you have a solid plan for how the money will be spent to improve or build your business.

A well-developed plan will focus on several things. First, you should breakdown and explain all of the costs associated with your proposed plan, including expected expenses and the cost of labor. Make sure you include expense forecasting or predictions on what expenses will come up in the future. Include a section on your projected revenue, or a realistic expectation on how much you will earn in revenue the first year and in the first five years.

Research the competition.

When you meet with a lender, you need to show the individual that you are not only well versed in your business but in your general market as well. Make sure you research your competition. Show that you know about similar companies in the industry and make sure you are prepared to explain why a consumer should/would buy a product or service from you instead of the competition.

Many experts have found the best way to do this is through a process called S.W.O.T. analysis: strengths, weaknesses, opportunities and threats involved in any business venture.

  • Strengths: Stands for characteristics of your business that gives it an advantage over others. Make sure to highlight all of the strengths of your business during your pitch.
  • Weaknesses: Highlight the weaknesses of your business, so potential investors know you are aware of the areas you need to work on.
  • Opportunities: Highlight potential elements related to your new business venture that you could possibly exploit to the advantage of your new venture.
  • Threats: There are always elements in the world that can cause trouble for any new business, knowing and being prepared for these threats can help any business succeed, and show any potential investor that you are prepared for the challenges in the market.

S.W.O.T. is a simple, yet effective analysis tool that many have used throughout the entire process of owning and operating a company. Taking the S.W.O.T. approach early on, particularly when it comes to approaching investor meetings, is a powerful way for any new business to get off the ground.

Organize your financial information

To find success in your meeting, you need to have to all of your financial documents in order. This means having revenue projections, bank statements, budgets and proof of business ownership information in place for the meeting. Make sure to include information on your projected growth plan and your goal of continuously improving your business. This should be more than what you want to happen, but what projections about the market indicate can happen with your business in the future.

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