Posts tagged "incubators"

Finance

5 ways to fund your startup

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“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 #4: Incubators

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“The genius of investing is recognizing the direction of a trend – not catching highs and lows” Anonymous

If you find yourself in a precarious situation where you haven’t been able to raise any money through the three methods outlined in the previous posts; incubators may be the route to take. Incubators are essentially centers or organizations where startup companies are provided seed funding and a office location to launch their business. An example which comes to mind immediately is Y Combinator. The website provides you with a basic idea of how incubators are run.

I was introduced to the concept of incubators very early on as the university I attended runs several of them. The way it worked was;

  1. Write a comprehensive business plan and send it in for review.
  2. If you get short listed you were called in to give a presentation about your concept or idea to a panel of seasoned entrepreneurs.
  3. Once you get through, you negotiate with the university on an equity swap for seed financing. Usually the sum would be below $15k and they would take anywhere between 5-10% of the company.
  4. You are allocated a small cubicle where you have access to shared services such as a receptionist and a business center.
  5. You are allocated a mentor to guide you along your startup route until you are ready to meet an angel investor or VC.

In theory this is a relatively easier route than the ones outlined earlier. However due to the severe shortage of incubators in most countries I left this source out earlier. I would appreciate if comments could be made regarding incubators in your country of residence to facilitate anyone who may be looking to use this source.