Discuss
Topics
I've done a fair bit of fund raising. Feel free to ask any questions.
In funding do you mean gathering partners? investors and the like?
backers? I still having trouble of getting over the sting of having to sell/share my ideas & profits with someone else
I've been sitting on a fantastic idea for the last 6 years now, thumb still firmly.... ahem... well... up my butt. so to speak.
I have all the planning, business model, revenue streams etc, etc all mapped out... getting to the next step is proving difficult..
The next step is to get the idea presented to a few smart people. Tech business guys, angels, CEO's, company directors. Then listen to the aggregate common feedback (the common issues raised).
After that you can move quickly on to angels (rich people willing to take a risk on startups) to raise seed funding to test the idea out.
Don't be too worried about sharing the idea with people directly. Just don't shout it to the world.
And don't worry too much about sharing profit. You're also sharing some risk and you never share the profits without making the profits a lot bigger. Your idea might have potential for 100 milllion dollars, but it won't get there with $1,000, hard work and a healthy attitude. Maximise the value of what you have, but be prepared to give up some of it to get it to the next level.
It's really you investing just as much as the other person investing in you. Get me?
btw: mitch I'm happy to hear your idea and give you some feedback.
I voice for Marty and Mick - they give great feedback - can not find two nicer guys
and gentle with your baby too
Vouch*
I dont know if gentle is the right word. Sometimes being harsh is a good thing.
Reviewing other ideas is a great way to learn though, or so I've found.
I'm curious - does idea theft ever happen when presenting to investors? What can you do to prevent your idea from being taken? Does a 'home-made' NDA really hold up if you find yourself going to court?
When it comes to online applications, what do you think about the new trend of applications taking significantly less VC money or funding themselves entirely on their own? I'm a university student who has worked on a few ideas I'd consider to be worth quite a bit, but as soon as the challenging part is solved I tend to just let the project die out - partly out of fear that no one will use the project, and partly becasue something new and exciting has just opened up; I can't help but shake the feeling that with the weight of someone else's money lying on my shoulders and a watchful eye looking for the screwups that tend to doom venture businesses many of my ideas would be out there earning me a house in the Bahamas. What confuses me is that the 'watchful eye' seems to be what turns away most entrepreneurs from going after VC money.
hey jms, a few different questions in there.
firstly, from an idea front is does always pay to be cautious about whom you share the idea with. But having said that, NOT sharing your idea with the right people (early) is just causing you to waste precious time. I think it's the process of talking frankly with really smart, experienced people about what you're planning that brings the most value.
Honest commentary will open your eyes to the practicalities of your idea, competitors that you didn't know about, or sometimes even past failures who tried what you're planning already.
Best source of advice is other CEO's in your space. They'll tend to want to help (you'd be surprised how much we like talking to other startups) and will typically give you clear, honest and good advice on what you're doing.
With respect to the current breed of applications costing less, that's true, though it depends on the idea and how much it costs to get it off the ground. The cheaper the better.
VCs aren't all evil; but taking VC money always introduces a potentially competing goal separate to your own. You need to be very careful about who you get into bed with.
If you're just starting out though then VCs are not something you should be concerned with. It's extremely unlikely a VC will fund an unproven startup. Funding usually goes something like this:
Stage 1 - Family, friends, credit cards = getting setup, usually staffed by just founders, build out a demo and work up the business model.
[usually < $50K]
Stage 2 - Angels - typically local business men, other CEO's in your space, sometimes small investment funds - typically $200K to $1m - used to hire a team, complete and launch the product, test business model.
Stage 3 - VC - institutional money from pro's - typically $2m to $4m (for 30% to 50% of equity) - used to "drop the pedal" on your existing business.
So you basically don't go to VCs typically without a proven model, good team and a "just add cash" pitch that is backed by facts.
Wow, that was extremely insightful. Thanks for the reply!
no worries!
Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats.
-Howard Aiken
Wow! Nice thread. I'm currently definately at stage 1 and to see it written down in black and white by someone else makes me feel slightly less amateurish
Up to $50K. I wish.
Onwards and upwards...
OK. So I'm rapidly coming to the realisation that 1. savings and credit cards will only take you so far, and 2. when you are getting started outgoings are a lot greater than incomings. So, in order to grow at the rate I need to, and in order to even get the project to the level I would like within the next century, I am going to be looking at Angel Funding.
My personal network is not great. Having been a solutions architect for about the last 5 years, and an internet designer / developer since the heady days of Spike, my development / design contacts are exactly what I need them to be, but having only recently made the decision to switch to "ideas man" / entrepeneur , my VC / angel / advice network is pretty slim to say the least. (non-existent might be a better explanation)
With this in mind I have been considering angel funding introduction networks.
Anyone have any recommendations or views on this? I've been looking at businessangels.com.au , but have no experience with them personally as yet.
Where are you located?
And as an aside, it's really difficult to go from zero network to funded -- most developers (I was one of them) approach networking on a specific needs basis. I need money, so I'll now go spend a month building a network of people with money. Unfortunately it doesn't really work. Building a network is a long, slow experience that pays off slowly over time. People don't form relationships based on immediate need. You want to get to know "good" people, over a fairly long period. Having 2-3 sets of dealings with someone builds that up slowly.
It's also across the board: legal, finance, development, marketing, pr, biz dev, media. I help reporters find stories, I throw good business ideas over to local VCs, I pass on recommendations to lawyers/PR, I help setup deals for biz dev guys and I give lots of advice to other CEOs. I also get all of those things back.
There's a good question to ask: do you really know what it takes to be the CEO of a startup. If you've never worked for a succesful startup (note that unsuccessful startups don't count) then frankly, you don't. You might want to consider taking another step upwards by working for/closely with another startup to fill in the experience gaps. Going from programmer to (succesfull) CEO is incredibly hard.
Take it seriously. Expect it to take 3-5 years.
(I hope I'm not depressing you, but it's good to understand the challenge. I call it "realistic enthusiasm")
Hi Marty,
I'm currently based in Sydney.
Don't worry, I wouldn't call your comments depressing. It's good to be realistic about such things, especially when providing advice. The last thing you want to do is build someone's hopes up only to have them dashed
10 second background:
I've worked for (and with) several startups now, both successes and failures - albeit never in the position of CEO I've sold multi-million dollar solutions into Japan and the US as part of a larger team, having prototyped several of these myself and having been involved as lead solutions architect on several others. I've been involved in everything from the early sales process to proof of concept, prototyping, development, documentation, handover, and support. I've worked with external teams from BroadVision, ATG and Verity on concepting and prototyping, and have managed both internal and outsourced development teams.
At the same time I do not doubt my lack of depth in terms of business acumen. This is primarily why I am looking at angel funding rather than venture capital. We have a model that will work for VC, but a management team that would have difficulty with credibility, particularly because we have placed a fairly simple proof of concept to start with. My understanding of angel funding is that if the right angel investor can be partnered, then a fair amount of that credibility, and in some cases a fair amount of the business depth required by a management team can be directly injected by the angel investor. At least I am hoping this is the case anyway.
OK, great! That's much better.
And no, angels will help with advice, but they can't stand in place for a good ceo. Most of the time though a good angel will tell you about your gaps.
And if you're in Sydney let's have a coffee! (email me at marty / tangler.com)
I also run Dinner 2.0 in Sydney
And Mick and I run STIRR Sydney
Both great events for you to attend.
