We are very close to finally getting the laws changed that will allow many entrepreneurs to raise money in smaller amounts. It will be especially helpful for those that don’t have a network of wealthy people to talk with and become angel investors. This will help change the landscape a bit for both the very small companies and the larger ones as the law is expanding the number of shareholders that is allowed before having to become a public company. I will post the real law once it is finalized (hopefully next week).
We will surely see a rush to set up networks that help facilitate crowdfunding. I am going to guess you will see upwards of 200-300 of these networks sprout out of nowhere. Many will be focused on niche industries and ways we are currently not used to raising money.
I have been watching the JOBS act bill 2190 since October when it was HR 2930 and seeing it gain momentum each month and each step of the legislative process. This will be a big opportunity for many more entrepreneurs and small companies. I am very much looking forward to seeing it all shake out. Stay tuned.
I have been talking with several first time *treps (entrepreneurs, wantrapreneurs, etc) who are very early in the fund raising mode. What I really mean is they are not ready to start raising money and they are very excited to start raising money.
Rarely is there a need to raise money until you have a product, customers or some validation of what you are trying to do. There is no reason to talk to investors until you have these in place. Sure you can talk to some angel investors and see what they say but most will say come back when you have product, customers or validation.
Spend your time working on the acquisition of customers and refinement of your product before spending time on talking/meeting with investors. Raising money takes a lot of time and energy. Oh yes it seems like so much fun if you have not done it before and it feels good when you tell your friends you are raising money of your new startup.
Don’t let your ego or someone telling you to go raise money get in your way of creating a kick ass product. If you have a great product then you will be able to raise money much easier and it will not be a pain in the butt. Raising money can be fun when you don’t need it or you have a product that many people want to invest. Which by the way rarely happens.
Go out and create a product that can be used by real customers as soon as possible and then start iterating on it to make it better and better… the money will follow sooner enough. Product first, raise money second.
If you have a chance to do startup presentations for your idea/company in front of an audience that you don’t know it is a great thing. It is great for your business because;
it forces you to look at your business from the eyes of your audience
it allows you to talk about the benefits of your business and get validation or not on your idea
it also will give you new ways to attack the problem you are trying to solve.
The last point is many times overlooked. When you have an idea and you work on it for months, tweaking this and that and making it better is what you do. But most of the time it is you and a few internal people doing the changes. When you get some new people who will bring a different prospective you get different solutions. Therefore when you have a chance to do a presentation to investors, other startup peers then get out and do it. You will not only get experience giving your pitch to people you might find a different solution to the problem you are solving. Never be bashful and take every opportunity you can get.
A press release by Zillow about their numbers was just released.. one thing that everyone knows but I think it is worth pointing out…
“The company says its traffic continues to be driven by mobile usage, with more people now searching for homes via Zillow on a mobile phone or tablet than on a traditional desktop computer. Zillow now has 13 separate apps for consumers and professionals in the real estate business. About 168 million homes were viewed on Zillow’s mobile site and apps in July.”
To everyone, especially consumer driven services, that is not taking into account the mobile experience please take note when you are updating your website.
I have been helping a person out with a short slide deck they can use to meet with angel investors…. here is what I have come up over the years of talking to angels…Please keep your presentations short… you should be able to get through your deck in about 15-20 mins max if you are not interrupted… if you can’t explain your business in 15 mins you are making it too complex and most people will just pass on the investment.
Here are the slides. If you can provide some pictures that is fine but make them relavant to each slides “punch line”.. . yes each slide should have a one major point that is being explained.
1. We do what??? That solves what?? For who?
2. More details about the problem… this slide may not be necessary.
3. Your solution with a real life use case using names of people… and how big is the market? How many customers that pay for your product are there? do not use “if we only get 1% of this market it will be a success”… if you get 1% of your market you would not be a success.. you would be a niche player.
4. Talk about your team… including advisors if noteworthy… if not noteworthy don’t waste your time.
5. How do you make money.. Keep it simple. Who pays for your service or product?
6. Briefly describe parts of your business, technology, mobile, social, etc. Is there any IP? how does it incorporate into social if it is a consumer product?
7. Who are your competitors? Do not say NONE!! you have competitors.
8. Outline some key metrics you will track or are tracking. Customer acquisition costs? Value of each customer?
9. Show some financial s with a graph.. At least 3 years.. Be realistic… don’t go into a lot of detail here.. if they want more detail you can give them a full set from excel.
10. How much money are you raising, convertible debt preferred? Equity? What milestone does that money get you to?
11. Contact info.. don’t forget your phone number.
I have been following the mobile payments space since last fall and I am still intrigued by the possibilities it brings to anyone that carries a smartphone. There are many interesting startups in the space and I have gotten to talk to a couple smart people last week about what is happening in the space. There is a huge land grab going on right now with companies trying to establish a foothold as one of the leaders. From large retailers establishing a separate company to go after it. (Merchant Customer Exchange). to many smaller ones like Dwolla, Cimbal, Card.io and of course Square (not so small).
They all have a different spin on how they are approaching it but it all boils down to when will consumers start being comfortable paying for things with a text message, email, NFC or scanning a QR code. I know it is happening right now but it is far from any kind of mass adoption. The consumers have to start using one of these methods enough that they are requiring or strongly suggesting that they use a mobile payment solution. Square has done a good job of getting their white toggle in the hands of thousands of small business owners. I love Dwolla but I know very few people who actually have a Dwolla account. The companies in the space are taking babies steps to get adoption of the technology by consumers and my guess it will take another 2 years before it is readily accepted to transfer money from your smartphone to a business or another consumer.
But what really excits me about this is the fees. There is a hundreds of billions of dollars at stake that lobbyist are trying to protect that are no longer required. This disruption of the 2.5 -4% transaction fees is very much underway. The big boys, Visa M/C are under attack and we will see those fees go to 1% or less in the next 3-4 years. This is way there are many companies trying to enter this space as there will be more than one winner and there is tons of money at stake. Looks like the making so of a great battle. Most will watch from outside the ring and few brave ones will enter the ring and fight it out. Go get’em Dwolla and others.
This month at Startup Grind we welcome Todd Dean from Avatara Capital. For those wanting to see what angel investors require or those who are not sure if it is the right thing to do for your startup…you will want to listen to Todd on September 25th. Angel investors are not always the right fit for every startup. Our fireside chat with Todd will be very interesting since he has been involved directly with Angel investors since 2005 when he started the Keiretsu Forum Northwest. Todd has reviewed hundreds of Startups, team members and today has Avatara Capital which helps match great companies with great investors. He has seen both the good and bad when it comes to getting Angel Investors involved in your startup.
If you are on the fence about whether it is time to look for angel investment or not you should attend and ask some questions from someone who has helped match millions of dollars with hundreds of companies in the Northwest.
Startup Grind Seattle will be meeting at The Easy on 511 Boren Ave N., Tuesday the 25th at 6pm. If you have not yet attended a Seattle Grind event you will be pleasantly surprised by the quality of people who attend these unique events and the open format that allows the audience to be part of the fireside chat.
Come enjoy beer, wine and food and meet your next CTO, employee or co founder. Welcome Seagrinders register here.
I have to share this post by Paul Graham.. it really is something every startup investor and person who is raising money should read.
I’ve done several types of work over the years but I don’t know another as counterintuitive as startup investing.
The two most important things to understand about startup investing, as a business, are (1) that effectively all the returns are concentrated in a few big winners, and (2) that the best ideas look initially like bad ideas.
The first rule I knew intellectually, but didn’t really grasp till it happened to us. The total value of the companies we’ve funded is around 10 billion, give or take a few. But just two companies, Dropbox and Airbnb, account for about three quarters of it.
I am excited to talk with Johnathon Sposato at our next Startup Grind Seattle event. We will be chatting on Oct 30 at our new sponsor (Graham and Dunn) wonderful location on Pier 70 on the waterfront. We are going to make this our home as long as they will keep us there. Johnathon Sposato, chairman of Geekwire, . Listen to him share some insights of starting Picnik and later selling it to Google as well as the adventures with Geekwire, which has quickly become a staple in the tech Community. He has done some true innovating with Picnik and is looking for ways to help others out. If you are planning on attending bring your “A” game and some great questions because he will answer anything that comes up.
I have enjoyed the conversations with Jonathon because he brings a unique perspective to everything he does and I think you can hear this in a recent quote from him. “When you love the startup scene as much as I do, you want to breathe, eat, and sleep in that exciting universe. There are really only two things to do. First, you can launch a startup yourself. This I have done, and every time the experience has taught me about my own limits, stamina, and at times my ability to drink.” Get your tickets here
He is a true leader in the tech community and is willing to help others get what is needed for them to taste success similar to his own. He has had some great adventures over the past 10 years and he continues to push the envelope on ideas and companies he is helping. When you attend the next Seattle Startup Grind event you will be entertained as well as inspired by his true interest in creating great companies. To join the meetup group go here.