Investors · Fundraising

How to secure funding for startup?

Navneet (Ricky) Advisor at Totally Square Records

January 23rd, 2016

If you're an investor advising me here, please do ping me separately if you are interested in hearing my pitch.

All my career, I have been coming up with ideas with no funding to test it. I am not taking a credit for it, but I had Groupon idea few years before they came out. Groupon's founders did good and I am happy for them. I had more ideas similar to this which i kept passing because I wasn't passionate about them.

Since late 2014 I have been sitting on the idea that would simplify and standardizing the flow of financial information for the investor community. This product would improve planning and analysis for both startups and VC community. Imagine answers to your financial questions on tip of your finger. Simply priceless!!

I am passionate about this idea and the market is there. This product will be utilize by pre- and post-funded startups and investors.

How do I raise money for my startup before creating the product and securing 1st customer? Specially, when this is my 1st startup.
Too many founders wing it when it comes to financials; they have no idea how to explain them to investors. In this course, we’ll teach you how to build a basic financial model; read financial statements; and understand cash flow, balance sheets, and income statements.

Lane Campbell Lifelong Entrepreneur

January 23rd, 2016

If your idea is that strong but you don't have the network of investors to solicit then forget raising money.  It's a waste of time to do that without a prototype or MVP of some kind.  Instead of soliciting investment I'd recommend you go out and network to recruit a co-founder who can build the product. If the idea can stand on it's own then it should attract other great people around it.  Once it's built you can try and raise money, or even better, you can just sell it and keep ownership in your pocket.  

Nick Damiano Co-Founder & CEO at Zenflow

January 24th, 2016

Matthew, I think you live in a different world than the guy asking this question. That's great that you did 30 years of research to get to your idea, but if you don't have any barriers to entry around it, a team of 19-year-old hackers could very well jump in and out-hustle you. So I hope you have some IP behind it (with some ten left on the patents because the life of a patent it's only 20 years), or some kind of complicated technology that it's going to be hard for others to replicate. Startupland can be cruel, and you don't get extra credit for having spent 30 years rather than 30 days on something.

Not to mention that the kind of idea you're talking about is entirely different from the OP's. The Groupon founders didn't do a MD/PhD and postdoc in daily deals and file 20 patent on it. They executed well, but didn't have any barriers to entry beyond first mover advantage, and before long everyone and their mother had a Groupon copycat startup. Where's Groupon now? Same with his next idea, a tool to help investors get intel. It's not like he's trying to build a freaking hyperloop to Mars.

It's been said many times that ideas are merely a multiple of execution, with the exception of the 1% of startups that have ideas that are game-changing and have significant barriers around them. However, these exceptions still need to execute well. OK idea + great execution trumps great idea + OK execution every time.

As for your contempt for accelerators and concise pitch decks, the unfortunate facts are that 1) you need to play the game, and 2) no reasonable investor today has time to sift through convoluted 50-slide decks and listen to 100 startups give hour-long pitches. Expressing ideas concisely is the name of the game, and the ability to do this also correlates with founders who can cut the BS and be efficient with their time, who in turn are the founders who tend to execute better. Accelerators - good ones at least - can help you become that type of founder. Bad accelerators are worthless, and you should know how to tell the difference.

Steve Owens

January 24th, 2016

Navneet, many people have great ideas.  There is no scarcity of ideas.  What is in short supply is the ability to execute on these ideas.  There are very few people in the world that can take an idea and turn it into a business.

Martin Omansky Independent Venture Capital & Private Equity Professional

January 24th, 2016

I represent 4 groups of angel investors. We do many start-ups. Here are some observations: (1) many investors and many more ideas - therefore odds are not in your favor; (2) our groups are biased in favor of projects that cannot be easily reverse engineered; (3) best start-up advice: find one credit-worthy individual who trusts you and has a good grasp of your technology and/or industry. Assemble a small kitty - say $25K - and purchase legal and accounting services; (3) find an adviser who can help you devise a cogent business plan; (4) use the document to solicit equity contributions from people you know or can easily network with. General comment: there is a great deal of content and detail necessary - in terms of law, taxes, competition, strategy, fiduciary duty, etc. related to start-ups. This activity is not for the poor or the faint-hearted. Be aware that starting up a tech company is a profound intellectual challenge. I suggest you find an experienced mentor, pay him/her, and pay attention. Sent from my iPhone

David Jaeger ✪ SEM/PPC Guru ✪ eCommerce Growth Hacker ✪ Online Business Consultant ✪ $25 Million/Yr Managed Ad Spend

January 23rd, 2016

The investment world is brutal. Investors don't just give away money. They are all over their money and the founders. No track record = bad or no deal.

Get a cofounder, go to hackathons, get an MVP as Lane said, before expecting to get funded.

Nofyah Shem Tov

January 24th, 2016

I really suggest looking up Lean startup models and working on that

Gabor Nagy Founder / Chief architect at Skyline Robotics

January 23rd, 2016

Today's investors essentially won't fund you until you don't need funding. They'll consider investing in your company once you have a product, clients and revenue.
At which point, you don't need and should not want funding...

I wrote an article about this:
https://www.linkedin.com/pulse/investors-window-why-would-i-want-your-capital-once-gabor-nagy

Faisal Memon iOS Department Technical Lead at Citrix ShareFile Quick Edit

January 24th, 2016

I'd like to make a remark on your presentation on the problem, but I hope you're not offended because I do so with a constructive intention.

Your presentation of the problem references "I" not "we".  Its collaboration that is key to getting something off the ground because everyone in regular employment will have an extra amount of labour and some small money available to progress a speculative venture before income is available from it.

Also, by bringing in others, you are testing your basic entrepreneurial skills -- creating and sharing a vision and getting people bought into it.  You should be able to raise 20k USD by yourself from friends and family easily.

Sharing is also a sanity check.  Defending your idea enhances your understanding of the problem space, and is good grounding for when you face professional investors.

It's emotionally easy to go for investors first, not family because if it fails, there is no blowback to your inner circle.  However, that would happen anyway as your focus on the business will mean less time and attention to friends/family.

My last point is it appears there is a contradiction in your presentation of the problem because if you knew the VC problem space dynamic, you'd also know about how to raise initial money.  Since you're asking after that, it can't be that you understand the problem space.  I don't mean that to be a harsh statement, but doesn't it follow logically?

Once you had you 20k USD from friends/family, you'd seek a co-working relationship with a cofounder to build a MVP, then talk to other entrepreneurs to ask for a recommendation from their angel investor for an introduction to their angel or others.  That initial seed series money would also come with the angel's contacts in the VC industry where you could position for some Series A money.

I get the sense you do have good ideas, and I hope that your  directing them properly will result in good success for you.  Please report back on how you get on!

Nick Damiano Co-Founder & CEO at Zenflow

January 24th, 2016

So investors are going to be your customers with this product, yet you seem not to understand how they operate. That's not a good start.

What you need to be doing first is building things and talking to users. If I were going to consider investing in your company, the fact that you're not doing that already would be a major red flag. Why would I ever take a risk on someone who hadn't even shown that he can execute on the very first step? Would that give you confidence that this is a team who can build a billion dollar company?

Ideas are almost worthless, and most of us have had ideas that turned into big products. If I had the idea for Facebook in 1999 but didn't execute on it, then it's not because of luck that I lost out to Mark Zuckerberg. It's because he started building stuff and making it happen, and I didn't. You have no credibility as an entrepreneur until you prove you can execute.

I suggest you look to join a good accelerator, as these can be immensely helpful for first time founders who don't really know where to start. Make sure it has a solid track record and isn't just taking advantage of gullible wantrepreneurs. Build something real, show it off at demo day, and maybe then you'll be ready to raise funding. Until you have a solid MVP and something customers want, you're wasting investors' time and your own by trying to fundraise.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

January 24th, 2016

Let me rephrase what you are saying. You need to be able to demonstrate that you have a good idea and that you can monetize it.  I have personally represented investment banks, VC funds and more than 2000 investors in the private securities market over the years. FD seems overloaded with Founders and advisers. Let me speak from the investors' perspective. Of course investors want a good idea, but they also want to know that you can source what you need and sell your product profitably and that you can sustain both.  Entrepreneurs who can demonstrate that they can operate the business and  make money will have a much better chance of finding investors than those who cannot. So it is not either a good idea or good execution, it is both.