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.
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 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.
My apologies if you’ve seen this elsewhere. It is available on the SBA community site, where it was posted about a year ago. I developed it originally as a donation to the SBA effort, because I believe what the SBA to help real-world entrepreneurs get started and run businesses is valuable. I cooperate with the Small Business Development Centers (check out asbdc-us.org) and the Womens Business Centers, and I’m a member of SCORE. I post this here — or repost — so you know about it.
Also, it’s a good example of an embedded Rebelmouse page in a WordPress blog. And another way to do a YouTube Playlist on a WordPress blog. If you don’t know about Rebelmouse, check it out.
Today I’m answering, with this post, a lot of similar questions I get often in email, where somebody is asking me how to get connected to or hooked up with or recommended properly for angel investment. Here are some unpleasant and unpopular facts about startups and investment.
Only friends and family believe in you and invest in you because you’re you. And that’s if your friends and family do believe in you; that’s not true for everybody. Outside investors, in sharp contrast to friends and family, either believe in your business prospects, your market, and your team, or they don’t invest. They’re doing it to make themselves money. (back story: I get a lot of emails from people asking how they can get investment for their business when they have pretty much nothing to offer investors. The answer is: You can’t.) Or not at all.
About that great idea you have that’s worth $5 billion for which you need $500 million to get started: unless you’re already a startup star, or an oil prince, or family wealth princess, just forget it. Mark Andreesen or Mark Cuban or Paul Allen could maybe get $500 million for a new idea. You can’t. (If it makes you feel better, neither can I). Give it up or scale it down to a $5 million idea that takes $5,000 to get started; or just forget it.
All of you newbies – new to entrepreneurship, no successful startups, no traction — asking how you start your business with no money: Please, get real. Once in a blue moon a foundation or government agency will grant some money, and usually that’s just a low-interest loan, to some proposal that has social and economic value that fits government priorities. We see this in special development zones, some scientific or defense-related research areas, and occasionally with private money committed to social good. But it’s rare. If you aren’t one of those special cases, forget it. And if you are, do your homework, find out what really happens with grants and such.
If you’re still interested in a startup, stop looking for some pie-in-the-sky solution. Get a job in the business area that interests you, and learn the business. Partner up with people who’ve been there already. And do your homework, look up all those web pages full of good advice about startups, including this one, bplans.com, which is full of information about what you can and can’t do. If you’re in the U.S., connect with your local Small Business Development Center, or Women’s Business Center, or Small Business Administration (SBA) office. If not, find the equivalent in your country. Get some real info, and then do the work: do some research, develop a realistic plan, take real steps.
Starting a business isn’t a right. The government doesn’t owe you your startup. You have to make it happen.
Think of how people infect (or so it seems) each other with ideas, fashion, eating habits, and customs. Doing something, even something hard, is easier to do when it feels like a lot of other people are doing it.
And isn’t entrepreneurship a combination of ideas, fashion, customs, and like that? So if I start a business and make it, aren’t my friends more likely to do the same? They have a changed risk perception.
Here’s an idea that makes so much sense that it’s surprising it isn’t done everywhere: combine Small Business Development Centers (SBDC), SCORE, chambers of commerce, and related organizations under one roof. That’s what the Disney Entrepreneur Center does in Orlando, FL.
I wonder if it’s just coincidence that Entrepreneur Magazine included Orlando in its most recent list of the best places to start a business.
I visited there last week, and spoke at a business planning event that included people at the center and people online. Center director Jerry Ross talks about synergy by explaining:
We have 13 organizations here, but only one printer, and one receptionist. We work together.
That makes a lot of sense to me, and it seems to be working. And he doesn’t mean just printers and reception; there’s synergy throughout the building. People from most of those organizations joined me there for my visit last week. I’m a member of SCORE, and my company is a longtime supporter of the SBDC network and of our local Chamber of Commerce, but I’ve rarely seen that much synergy in one place.
Thanks for asking. Our Oregon Small Business Boost day (business plan software free for Oregonians) yesterday went even better than expected. I like this summary from our local newspaper, which tagged it as “frenzy” on its front page this morning.
We distributed 16,200 cards through 85 locations. By the next morning, we’d had people logging in and registering their new software from more than 170 different cities and towns in Oregon.
When some locations ran out of cards, we got them more units, even though we’d run out of the formal preprinted cards. We made do. As far as we know, no adult Oregonian who went to one of those locations to get Business Plan Pro for free was turned down.
That was hard. One location had 80 people waiting when they opened the doors. Several locations ran out within the first hour or two.
Was it worth it? Well, just for the skeptics, this was not a light version, hoping for an upgrade. It was Business Plan Pro Premier, the more expensive of the two versions we have. And it was not an end-of-market version either; it’s our latest, and just in case anybody notices a later version within the next few months, if that were to happen, it would be upgradable for free.
So was it worth it? I’m big on planning, objectives, and metrics. Here are some values:
We won’t know for a while how many people actually used the software to create new businesses or manage existing businesses better. That will be hard to track. We will be asking people for stories.
We know for damned sure that we’ve already helped a bunch of people think about their businesses better. And we’re ready to bet that the massive distribution of business plan software is going to end up helping small business, in general, in Oregon. Which means job and economic improvement.
Our 85 distribution spots were organizations trying to help business, not commercial businesses: either chambers of commerce, Small Business Development Centers, economic development agencies, town halls, or similar organizations trying to help people do business. None of them had commercial motives. Calling attention to those locations is a good thing. It did our hearts proud to see crowds outside the SBDCs, for example.
We met a lot of cool people, doing good work, within those organizations. That makes us very happy.
So we’ll see. It will be fun to watch. If you’re one of those who got a copy yesterday, keep us posted, okay?