I received this question over the weekend via my ask-me form on timberry.com. I modified it slightly to not include private information. It’s about a web software business. It reads …
… we are gaining traction. Financing is difficult. I am looking to find out what resource you would recommend to get financing for the project. Investment would probably be 100-250k. Would like to go to privates like doctor’s groups but please direct me.
I’ve written a lot about angel investment on this blog and on financing a business in the main articles section on the parent site, bplans.com. Check out particularly this article, the right funding for your business type, which talks about the main options and gives you some basic definitions to work with. And consider these 5 points:
- Narrow your number. Project sales, cost of sales, fixed costs, spend before launch and development costs and come out with what you think you need. Everybody knows it’s just a guess. But there’s a huge difference in options between $100K and $250K. Name your number and have projections to defend it. Yes, that’s part of a business plan.
- Generally it takes as much legal hassle and legal fixed costs to invest $100,000 as to invest millions.
- If you have to ask about venture capital, you’re not a good candidate. Don’t feel bad about it. Venture capital is very rare, usually goes to high-profile startups led by people who’ve already done it. And the amount you need isn’t enough to interest standard venture capitalists.
- If really have what investors want, you understand the hard truths about startups and investment, and you still think you’re a good candidate for angel investment, go to gust.com, sign up as a startup (it’s free), watch the videos, read the blog posts, and get going.
- If angel investment isn’t likely, then start looking at what they call friends and family, which is what you call doctor’s groups. Talk to your nearest Small Business Development Center (SBDC) (you can find info on these at asbdc-us.org.) The best advice I’ve heard on this is to start asking everybody who they know who might be interested. Don’t ask anybody directly; ask who they know. That’s less awkward and more effective.