Funding

The only thing you can be sure of with funding is that it is elusive at best, so should you get some, be a miser with it, because you can't be sure when revenue or additional funding will come through.

Our experience with funding has been that it is extremely hard to get and will run out more quickly than you would imagine. We spent 3 months from application to approval to get our initial round of funding, $15000, from the Canadian Youth Business Foundation...and in retrospect that was the easiest money we could get. This is not to say that there isn't easier money to be found, it was just that we had no access to it.

If you have family that will support your efforts you should try to tap them first because their confidence in you will inspire confidence from friends and others. Beware though, taking money means risking their respect if you squander it in any way.

We went the opposite route in taking a bank loan and therefore were able to show a prototype. With that said, it didn't make our fund raising much, if any easier because the people you are pitching have to have some sense of what you are doing before they will put a dime in. For example, I have a cousin who married into money and was part of a successful business. I pitched her and her husband and walked away without a dime. The reason, they could not evaluate the opportunity because they had no sense of what it took to build a successful web company and the potential returns of doing so. On the other hand, I pitched a small number of my friends and was able to snag a small investment from a couple of them. The lesson I suppose it to pitch whomever you can because you never know who the idea will catch with.

The next level of investor is an even more elusive one. The "Angel" investor is usually a former entrepreneur who has cashed out of his own business and is now looking for the opportunity of cashing in on new business without the massive headache that running one's own startup entails. Angels can basically be found in only two ways 1. Angel Investing Clubs: These clubs group Angels together to evaluate potential deals that have already been vetted by professional evaluators. They usually aren't interested in seed deals like the one you would be bringing them. 2. Social Networking with other entrepreneurs. Most successful entrepreneurs had to raise money to do so, therefore they usually have contacts with Angels. If you want to tap this resource contact entrepreneurs who you think you might have something in common with and introduce yourself. You will usually find these people very accommodating and willing to help an entrepreneur just starting out.

The next level of investor is the Venture Capitalists. These people are professional investors and are just about impossible to impress without what they call "Traction". If you want to make these guys take notice you need to show results. They are however worth shopping your idea around with because they can bring high level issues to your attention that you may not have thought about. The downside is that they also may use your information to help out entrepreneurs they have in their portfolio already. My advice, tell them enough to basically describe your concept, without giving them the "Secret Herbs and Spices" that you believe will make customers keep coming back for your product.

When presenting to anyone take their criticisms in stride and try to learn from them. We have written our business plan so many times I can barely remember what the original concept was anymore. With that said, i know that what we are creating is exponentially better than what we started with, and much of that can be directly attributed to feedback from potential investors.

Next week I will write about recruiting the team, and building the product.