Slashdot Mirror
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?"
.. from someone having been there..
* If you expect to have any control over the venture, you need to have your management team in place and solid. If you're an individual, forget about VC. VCs typically don't get involved until you've already got your venture running and are grossing more than $1M
* If you're just getting started, you probably want tier one, aka "Seed capital" aka "Angel investment", which basically translates to finding someone with some money to burn that believes in your project; this could be family & friends or some rich person who has an interest in what you're doing. The best way to solicit T1 money from strangers is to put together a business plan that has a clear exit strategy for the angel investor when the time comes for the next tier of funding.
* Ultimately, this whole deal is a catch-22. Most people who have money either want majority control, or won't be interested until you've proven that your idea is marketable and profitable, in which case, it may be less critical for you to need capital.
* If you have an idea that you think is profitable, but have not deployed it in any manner to demonstrate that the concept is practical and marketable, then the value of your venture is ZERO. Unproven ideas are worth virtually nothing. Everyone on the planet thinks they have the world's greatest idea.
* Don't discount the potential of soliciting government grants or regional business development deals, especially if your idea is unproven -- often these types of deals require more salesmanship than practicality.
* Sad but true. Often the entities that would most benefit from exploiting your idea/tech/service are the ones who can't be bothered with you UNTIL you embarass them by demonstrating that your idea kicks ass. You usually don't get the attention of major players until you're pissing other companies in your industry off. Your best bet is if you have companies being serviced by a potential investor/partner that represent your target audience, you should target them and try to get their attention that way.