Have it together, now what? How to get bridge funding?

Alison Lewis CEO/Creative Director

November 5th, 2013

We have a MVP product that was built in collaboration with a client. They have first rights to refusal to it and in a few months it is all ours to promote and sell. It is a freaking amazing and awesome wearable tech platform. Yet, I can't say a word about the product name till it's launch. We need bridge financing to get us to the campaign and get the orders.

Here are the facts:

We made the product, we own the IP/design ourselves.
This idea/product has 1.3M views on YouTube and around 17,000 people signed up actively.
The access to the customers is controlled by the larger company at this time as they are a marketing company.
They have said that they will pass off these customers when the time is right, after the campaign (it is not in their business to work on orders with the public)
We can use the technology and design we have to build anything of our own we want.
We need to secure the IP through funding
We need to get it certified through funding
We need to launch a campaign with the tech inside 2-3 other products (we have 2 right now)
A risk is competition (though I see it as a benefit) coming to market at the same time.
A risk from an investors perspective is that it is hardware and material goods and costs more
(it's also connected and controlled by an app)
We've asked the large company to invest in the idea and get it out the door, they get first pass.
They are moving as slow as molasses.
A risk is our company will fold after the marketing campaign is over due to lack of funds to keep the team on board for the next 2-3 months even if the 10,000 people want to buy one.

We're about four weeks from finishing the 20 samples that will go out to the world and the marketing company will promote the idea. The whole team is focused on execution, that leaves just me to keep us going.

To continue on past a marketing campaign and get this to the public hands, we will need bridge funding. How do I get to tell investors and potential angels what is going on and get them excited?

We have a great team, ability to execute, 10 - 20 years experience in fashion tech and product design, got to MVP on less than 300K , got corporate sponsor to get us this far. It looks pretty good, but I'm stuck on the way to get bridge funding to get to the next stage of market and sell.

I am sure that people say this all the time, but this looks so obvious to me why someone would invest. What questions should I be asking to lead them to invest? How can I find the right people to talk too when I can't share the product name or my client at this time?

Paul Bostwick

November 5th, 2013

I have to hit and run on this but I see two major issues to address: 1) If the IP is not already in hand then the public disclosure in the YouTube video is going to become prior art and thus public property. If provisional patents are underway in advance of public visibility then you've cleared that issue, otherwise you need to hustle to just win the race to market and thus make IP a less important issue. The way you lay it out in your email, it is unclear how well you have that issue grocked - might be a brevity thing might be a knowledge thing. Clear that up and make the appropriate move. 2) If it is so obviously a super deal, you'll be asked how much you have put down to possess this super deal. If you say "my time" you'll be laughed at. Real actual $ down is the acid test. Same for those 17,000 sign up folks. Until they turn over $ for the "freaking awesome wearable tech platform" it is a risky theory and we bringers of new things to the world are competing for real money. Money that can instead be spent on/invested in tried and true items and instruments. Maybe this is a come to jesus meeting with all the team. What we "do to get paid" vs what we "pay to do" is a big difference and a strong test. The sooner you face this one down the sooner you'll know if there is an economically viable product. What to do Well you'll have 20 samples to demo, you have a YouTube video (and can crank more no? - don't be precious here we are bootstrapping right?), 17000 email addresses and a team and four weeks. I'd say that is sufficient material to crank out a reasonable KickStarter project. (Hunt around for some guides and structure the campaign so you have all the items lined up and loaded ready to go. including many of the contributors.) If it is "freaking awesome" and you can get that across in a video then kickstarter (or one of the others) should be a good context. Those are preorders and that can act as a bridge. Good luck! -Paul

Derek Dukes Business Development, Startups at Amazon Web Services

November 5th, 2013

Alison,

If the product is the one I'm thinking of, and you have the assets nearly on hand, it's pretty compelling and very beautiful. In terms of what the Kickstarter market will bear. I just ran a campaign for a super niche product (high speed video camera) where the price point was $4500 per unit. We exceeded the campaign target by 160% so the market will bear higher priced products.

It seems the first thing you'd need to do is pre-negotiate with the other party to clear out any ROFR / IP issues (including securing the prospective customer list) so you have clear claim and they become assets that you can access directly, not through them.

Not knowing all the ins and outs of the relationship, it seems like you should be able to offer them a % share in the company and make them a partner, not an obstacle to success. One could From there, given 17,000 interested parties + team + prototype you should be able to do any of the following;

Secure funding on Angel List
Secure funding through traditional VC rounds
Launch / operate a successful fundraising campaign.

Alternatively, if you don't think you can get what you need from the partner. Form a new entity, secure seed funding based on the previous work, develop new IP and start building a new customer list or use the team's track record (and YouTube video) to launch a crowdfunding campaign to fund the new product + team.

Message me directly if you'd like to discuss these challenges more. I've raised capital for my own companies, friends companies and through Kickstarter. Let me know if I can be of help.

Alison Lewis CEO/Creative Director

February 25th, 2014

It took awhile, but I wanted to let those who followed the post know how it's going.

1) We shipped the prototypes to the client, they are happy

2) Our MVP app that runs the lighted shirts is looking good and working

3) Basic websites are up: www.switchembassy.com and tshirtos.com

4) A press push is coming soon (in a week or so)

NOW: 5) We're trying to decide what platform to use for a pre-sale campaign for the limited number we can produce (about 250 @ ~$1500)

Don't know if https://open.crowdtiltopen.com/ helps with delivery and shipping or if there are any hidden legal feels we should be aware of?
Everyone is talking kickstarter; but they take a lot off the top and there are some real hidden fees that can kill ya (they take the full commission off the sales even if 15% of your people back out); that's not cool!
They are the biggest and best, but I keep hearing horrible things about their customer service and analytics.
There is a lot of info on crowdfunding out there. I'm beginning it's better to call each person interested and sell them one by one with a link to the page.

That is where we're at :)

Richard Rosen Founder of FastCall --> #1 Phone Sales Productivity app in the Salesforce AppExchange

November 5th, 2013

If there is a public youtube video why are you prevented from sharing this?

Michael Brill Technology startup exec focused on AI-driven products

November 5th, 2013

Why can't you have an honest conversation with the partner? If they're seriously considering it, then provide some bridge financing because you're not going to be around to support it if you don't get cash in. Otherwise, pass on or modify the ROFR so that you can talk to investors. No reasonable investor is going to want to invest time in a mystery opportunity that might not be available after all.

Michael Brill Technology startup exec focused on AI-driven products

November 5th, 2013

Oh, and congrats!!

Travis Brodeen Technical Marketing Expert, Business Coach, Founder and CTO at ENVOKEN

November 5th, 2013

It seems if you mention it you could inspire them to take the first right of refusal? That is what I'm gathering by being forced to keep it quiet.

It would not be hard to find out this product using the criteria you've provided. So either you're not very concerned and this is a marketing strategy or you may be at risk of exposing your secret unintentionally.

Alison Lewis CEO/Creative Director

November 5th, 2013

Ok Travis. That is a good point. I am very happy with my client and marketing team that we are working with, I wish they were all like them. I don't want to ruin that. Hopefully, I've not said too much. I did some searches with my info above on Google and the old project did not come up. I do feel a bit trapped here and not able to talk about something when there is real opportunity. How am I supposed to get help and move forward when I can't say what I am doing? Catch 22. Stream of responses: - I've built a team of 5 and spent 150K less than most hardware startups to get to 1 MVP and 20 samples. Done in less than 9 months. - That's fast and cheap. If an investor wants to invest in a team and help by putting in a biz dev, I think that would be the best. - How do I get them to see us? - Kickstarter: They like the idea, it is not straight-forward for my client. There is discussion. - There is really only one person part-time who can work on bridge financing (that person is me) unless I find a good biz dev. partner. - Looks like I just have to just sit here and prepare something quietly. - Maybe all I can do is prepare to have our website up so people know who we are? - And if there is time, make a couple other designs for us to sell ourselves? - I like the idea of crowdfunding. - We do high-end fashion products, do you think the Kickstarter audience will pay for high quality fashion goods ($1200 and up)?

Paul Bostwick

November 5th, 2013

Hey Alison,

Logan Lenz Online Innovator, Marketer, Entrepreneur, Investor

November 6th, 2013

Send me more info. I'm an investor that might be able to help.