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Raising Money for a Tech Venture?
phosphor-boy asks: "Age old story: a friend and I have a fun, part-time technology venture that's actually generating a little cash. To take this to the next level, we need to raise few hundred thousand dollars. There's good reason to believe that it has enormous potential to make money - but since it's a new concept, it's (obviously) extremely speculative, so going to the bank won't work. We've been tentatively offered venture capital funding, but would have to take A LOT more than we need ($millions!), and give up way more control than we'd like - giving up some control is OK, but we've seen firsthand how VC money can run amok, and it's not pretty. However, a few hundred thousand is more than is do-able with friends, family, and second mortgages. So to sum up: too little for VCs, (maybe?) too much for friends and family. Have any others on Slashdot faced this situation? What works here, and what doesn't?"
Are usually the investors at this level. And the only way to make the connections is to start networking. Talk to your MD, family lawyer, Opto, and dentist. Work out a song-and-dance and see where it goes.
"Eve of Destruction", it's not just for old hippies anymore...
For an overview of what to watch out for, this has been making the rounds of the internet lately:
l .h tml
http://www.antiventurecapital.com/venturecapita
In general, VC money is available, and a lot of good, successful companies are VC funded. However, it's a bit like Churchill's comment on democracy: VC money is the second best way of startup financing. The best way of startup financing is every other way.
Good luck to you.
Try some other avenues first (we used these as well)...
- Local Chamber of Commerce.
- Tech incubators
- Small Business Administration (we used this quite sucessfully)
- State tech assistance programs (normally funds set up by the state to encourage tech sector growth)
If you do not need to grow your company now, then wait. You first need to go through a few revisions of a business plan. That alone can take a whole year. You need to get with a financial specialist to do profit forecsats (potential). You need to make sure all of your liabilites that can be reasonably insured are insured first. You need to look at all business models that might apply (corp, S corp, LLC, etc) to see what best fits. You need to get help with a professional on understanding your local market demographics. You need to take a look at what it would take to give you all required expenses and the ability to pay a loan back at twice the required monthly payment per month (your loan for the capital you need). You need to see if you can grow the current income into this amount before you seek outside financial help.The less risky you look (time and profits), the more likely you are to get a bank loan (much preferred to a VC), or better yet an SBA loan. Check to see if you have a group called SCORE (Senior Core of Retired Executives) in your local area. They are an incredible resource.
InnerWeb
Freud might say that Intelligent Design is religion's ID.
VC may be a good idea, but it probably isn't. Read these links:
- Joel on Software on VCs
- 10 reasons to shy away from venture capital
I wouldn't bet on it, personally. Consider very very hard what you're in it for, and what risks you're willing to take.Read this first: Strategy Letter I: Ben and Jerry's vs. Amazon
SlashSig Karma: Excellent (mostly affected by moderatio
I suggest you talk to your most enthusiastic customers and cut them a deal where they pay MORE but get some company interest in addition to whatever the hell it is that's generating cash.
/. Just sit down and think through all the scenarios, OBJECTIVELY. If you can't do this, hire a manager who can with the little $ you have and let him figure out how to get more $.
Watch the enthusiastic customer who is also a startup. I had a business KILLED by one of these who placed huge orders, never paid, filed for bankruptcy, and then got bought out of bankruptcy by the founder!! I haven't been the same since. I made me much to cynical!
I invested in anothe startup. They dragged on with angel money from here and there for some 12 years and just recently folded. I believe it was too easy for them and had there been a strong management team and a bunch of vultures dragging their asses out of bed at 5AM, 7 days a week, the comany would have prospered in the first few years.
Don't ask