Posts tagged "funding"

Advice Strategy

Revenue and Business Models

2 Comments read

“The first layer of the perfect business model is to build a business with reliable revenue.” Mitch Thrower

When developing business plans, identification of potential revenue streams is a mandatory section. There are several different kinds of revenue models that can be used depending on the nature of business. Having developed several business plans which drew revenue models from product based sales, service fees, memberships and advertising I have been exposed to different types of revenue models. What I have learnt is that when developing these models great care has to be taken in understanding the assumptions these streams are based upon.

Many a time we find ourselves in the middle of an execution strategy and the assumptions we had used breaks down during the actual run. Over time as I have begun starting ventures with personal funding, I have started to use the ready, fire, aim approach. This has given me the ability to take multiple approaches to the market and build revenue streams based on feedback we get from the market place. This approach may however, not be totally feasible for cash strapped startups, in this case I would build stronger assumptions based on market data collated through research. 

A business must develop multiple streams of revenue and each stream much play a strategic part in the overall strategy. Points which must be taken care of during this development phase, will be the synergy between your long term goals and your revenue streams. Do they grow exponentially?, Do they help you achieve the targets you want ? Is the revenue model an optimal fit with the business model, etc. Many web entrepreneurs put a lot of faith in the advertising revenue stream. I have heard countless pitches where entire revenue strategies are based on this one factor. Sometimes they have not even thought a couple of steps ahead about new revenue streams, optimizing current streams, competition, margins. Some have not even accounted for market change. 

If you are writing a business plan or, are in a new startup venture, identify your revenue streams as clearly as possible, and understand what resources need to be put into place to realize their true potential. The future of your organizations rests upon these strategic initiatives. Make sure you think them through in thorough detail before moving forward. 

Finance

5 ways to fund your startup

1 Comment read

“If you experience great difficulty in raising money, it’s not because VCs are idiots and cannot comprehend your curve-jumping, paradigm shifting, revolutionary product. It’s because you either have a piece of crap or you are not effectively communicating what you have. Both of these are your fault. End of discussion.” Guy Kawasaki

Over the last week we talked about 5 ways on how to fund your startup. This list was limited to traditional funding options. For a list of a 101 creative ways to raise money for your startup please click here. Keeping in mind that funding is an important aspect of any startup, your belief and faith in your idea or concept is far more important. Before you go searching for funding make sure that you have your value proposition clearly in mind. Position yourself correctly and leverage on a good team to propel you to the highest of heights.

  1. Friends and family: This source represents a large portion of how startups get off the ground. It is however not as straight forward as it looks and you have to take into account the lenders financial status, bring professionalism into presenting your idea and have a properly structured legal agreement. To read more about this source please click here.

  2. DIY: A tough route where you develop a consulting model to facilitate the development of your end goal.This method provides entrepreneurs with a safety net before taking the deep dive. Care needs to be taken to ensure that you work towards specific and realistic goals in mind to progress to the next level. To read more about this source please click here.

  3. Angel Investors: Represent a group of high net individuals who are well  connected. They bring with them specific expertise and a valuable network to kick start your business. They provide a more flexible environment to the founders as compared to venture capitalists. Care must be taken when taking on an angel investor. Your interests must be aligned and a comprehensive legal agreement outlining each others responsibilities is critical. To read more about this source please click here.

  4. Incubators: Provide entrepreneurs with initial seed capital and resources in exchange for a minimal equity swap to get your idea off the ground. They help you in creating powerful networks which act as catalysts to get your product/service moving in the right direction. Incubators are quite scarce making them extremely difficult to get into. To read more about this source please click here.

  5. Venture Capitalists: Represent the end goal of most entrepreneurs. Venture backing provides you with the funds, mentorship and networks to take your startup global. Care has to be taken when presenting to VC’s, you have to ensure that you get referred to the firm, have a comprehensive business plan, a working prototype and a well made presentation to stand a chance. To read more about this source please click here.

The life blood of any startup company is its available cash line. Without it, startups witness stunted growth where their full potential is not realized. Establishing a reliable and stable cash line therefore becomes very important if you want to see your company become the next Google. If you happen to be among the fortunate few who get venture funded please use your allocated funds wisely. The art of bootstrapping by Guy Kawasaki is something that every entrepreneur should read very carefully. I have personally seen how venture funded companies squander their money without realizing. Spending money is the easy bit, especially so at a startup when we all strive for the best. Controlling your spending is much more of an uphill battle, so tread carefully. Best of luck in raising funding for your startup!

Finance

Source #5: Venture Capital

0 Comment read

“I never invest in someone who says they’re going to do something; I invest in people who say they’re already doing something and just want funding.” John Doerr

Venture Capital. There are few words which ring bells in my ear and this happens to be one of them. It represents a stage in your entrepreneurial career which makes up for the roller coaster ride that you may have been through. To be substantially venture funded is a stamp of approval from seasoned veterans of this field that you have what it takes. All that is between you and immortality such as the likes of Google and Amazon is a little money. Getting here for most is a long and difficult process. This source of funding in todays day and age comes after you have used one of the previous sources outlined earlier. Diligence and persistence are two core personality traits which are vital.

Once your startup is at a stage where you believe venture funding is required to take your concept global, several steps must be taken. Some of the critical ones are outlined;

  1. Find someone who can refer you to a venture capitalist. Referrals comprise of the majority of ventures which are backed.

  2. Your business plan has to be professionally done with all the major topics covered. Sequoia Capital has outlined this very nicely on their website and every business plan should cover all the sections discussed.

  3. Have a prototype or proof of concept ready before the presentation. This is absolutely essential when pitching to VC’s today as the cost of developing them has been reduced considerably. It is an added advantage if your business concept is already running and you require the VC firm to take you to the next level.

  4. When preparing your pitch presentation please follow the 10/20/30 rule which Guy Kawasaki aggressively promotes. Having the presentation structured in this way will give you the ability to focus as well as to allow for discussion time. During the discussion you can use extensive research to answer questions.

Be as prepared as you can be for this meeting. I have been on both ends of the firing line both as a judge and a presenter and the first impressions in this encounter make all the difference. Know your presentation like the back of your hand. Be confident about your product or service, most importantly, belief in what you are pitching must be clearly apparent.

If you are stuck on step number one where you do not know anyone who can refer you to a VC firm there are a few things you can do.

  • Firstly you have to increase your level of exposure through networking (this is a topic which I will talk about in the coming weeks). Networking is an essential skill that every successful entrepreneur must have or develop.

  • Secondly join entrepreneurship clubs and committees. These provide you a platform to meet with and interact with  successful entrepreneurs which may become possible links for you to get introduced.

  • Use Linkedin or other professional networks to find individuals in your network who will be able to provide you with connections to the right VC firm.

  • Scout the web for prominent VC’s who regularly blog such as Kawasaki’s blog to find out more about them.

In essence you have to become a lot more proactive if you want to increase both your network and exposure level. You have to put yourself along with your product/service out there and get valuable feedback. Entrepreneurship is all about getting out there and giving it all you have because you believe in your company that much. Get inspired to be more today!

 

Finance

Source #3: Angels

1 Comment read

“I want to work for a company that contributes to and is part of the community. I want something not just to invest in. I want something to believe in.” Anita Roddick

Angel investors consist mostly of high net individuals. They have domain expertise in some specific area and are very well connected. Once a company decides that it wants to take itself to the next level, angel investors are usually a good first step. At this point, the advice I give startups is , find an angel investor who has domain expertise in their particular industry or field. They become an excellent reference point for you to get connected, gain exposure and set yourself up for a much larger round of funding. To begin the search for an appropriate angel investor you should;

  • Prepare a formal business plan with an attractive executive summary.
  • Get your elevator pitch and presentation fine tuned.
  • Preferable to have a working prototype or demo of your product/service.

Angel investors usually fill the void for investments ranging from $100k – $1m. Assessing your companies valuation (This process will be talked about in a couple of weeks) is an essential step before pitching to them. This will help you to gauge how much equity you will have to give up to raise the amount of capital you require. Armed with this information you are ready to begin your search. If possible get a referral from someone who may have contact with an angel group or the angel him/herself. This will increase the likely hood of getting an appointment. Without a referral, search for prominent angel groups in your city or country. Such as BANSEA in the SEA region.

Angel investors provide startups with flexibility which is not available in venture backed companies. Angel investors provide you with the ability to sell or buy your stock from them during the initial stages. This gives cash strapped founders the ability to benefit along the way. This flexibility also brings with it some unique challenges. Angels can be a lot more intrusive than venture capitalists. Some take advantage of cash strapped founders by increasing their shareholding at the expense of the founders and may even take an active role in the company which may lead to undermining the founders authority. Some ways you can guard against this scenario’s is to have a lawyer draft out a comprehensive agreement. In this way you can ensure that your rights remain guarded and you will not be caught off guard by the angels contract agreement terms. Making sure both parties understand the agreement fully before entering into this partnership is vital.

This is the stage in a startup venture when your dreams begin to take shape. When an angel shows interest don’t reach the conclusion that it is a done deal. Continue to market yourself, this will raise your companies exposure level. With a greater level of exposure you will have considerable leverage to ensure that you get the better end of the deal. Rushing this stage is never a good idea, you are selecting a partner who is essential in your journey to an IPO or acquisition stage. Keep your eyes and ears peeled and once you get that “right” feeling just go with it.

Finance

Source #1: Friends and Family

3 Comments read
“The holy passion of friendship is so sweet and steady and loyal and enduring in nature that it will last through a whole lifetime, if not asked to lend money.” Mark Twain

It is natural that when we first start out on any business venture, friends and family are the first ones who are asked to support them. I used this method of sourcing for money in my first media startup. However, it wasn’t like knocking on a door and saying, could I please have $5k. I wish life was that simple. Before you embark on taking money from anyone you have to be completely sure about what was talked about yesterday. We need to be completely sure where we are going with our idea, with whom and how. So when I approached an uncle of mine for a loan I prepared a detailed document outlining how the business is going to run. It was a basic executive summary which showed him:

  1. The market need
  2. Our value proposition
  3. The market size
  4. Our services
  5. My team
  6. Payback period

A lot of individuals overlook the fact that taking money from friends and family is risky business. We have a lot invested in our relationship with them and any sort of complication leads to friendships being lost and family ties strained. You have to make it absolutely clear to them from the very beginning what it is that you need the money for. I feel this gives them much needed relief, because from their perspective they will realize that you have put serious thought into the venture and that in itself is a good starting point.

Another factor that you have to take into account is whether they will be buying in to the business in return for equity or the funding will serve as a loan which will be paid back. I have a relatively strong preference for the latter. Involving family and friends is complicated as it is, if they buy into the company this further complicates matters and they may have completely radical ways of viewing your business model. If you take a loan from a friend or family member make sure that they are financially capable of withstanding the loan. If not you could get a call out of the blue one day requesting the loan money be returned straight away due to an emergency. That is another situation which can be the end of an early stage startup.

Whichever route you take be sure to do it professionally, with openness and honesty and get everything in writing. These will help safeguard both your relationships as well as your startup’s future.

p.s Source #0: Using savings that you may have. I have made the assumption that like most younger entrepreneurs you don’t have significant savings to initially fund the startup process. However if you have a some money saved up I would strongly suggest that you use that instead of venturing out to the next source.

Finance Inspiration

Is it all about the money?

2 Comments read
“You must not for one instant give up the effort to build new lives for yourselves. Creativity means to push open the heavy, groaning doorway to life. This is not an easy struggle. Indeed, it may be the most difficult task in the world, for opening” Daisaku Ikeda

I hear it all the time….”I will start up my own company when I have enough money” or “I can’t start a new business because I don’t have the funds”. I used to think along these lines once upon a time as well. The reasons why some think this way are purely psychological. We set up sub conscious barriers which inhibit us to go into unchartered territory. We fear that we may fail or that we wont have the confidence that is needed. Since nothing can really prepare anyone for this deep dive I just ask the question “Do you believe that your product/service has the potential to become something huge?”. The answer to this question helps you break down any internal barriers you may have. It will strengthen your resolve and make you think deeper about what you are actually wanting  to achieve. I sincerely believe that money should not be an hurdle when you believe that you have something unique to offer the world coupled with the confidence you can deliver it .

I have been part of and have created quite a few companies in the last couple of years. I don’t recall a time when money was the primary hindrance in wanting to execute what we had in mind. Don’t get me wrong, money is a great thing to have while running a business, its just over reliance on it which causes a blur. Over the next week I am going to be talking about some of ways that you can look into raising funds for your startup. Pre-requisites would be, the belief that you have a potentially value adding service/product, have part of your team in place and a burning passion to succeed  to bring about positive change. Without these factors I am certain that even if you raise capital, chances of success are reduced.

The fact of the matter is that when you want change in your life or you do not want to go down the the beaten path you have to want it bad enough. Stuff like finding the right team and the right investment partner become much simpler feats. I had mentioned this before, when you are looking for success it has mysterious way of creating pathways for you to find it. Letting the world tell you that it is too difficult is just its way of testing your resolve. If you truly believe that you have what it takes to make it,  I am very sure that you will have no problem crossing this hurdle.