Start ups must have capital from the founder(s).
The amount varies but it needs to be a significant portion of the founder(s) personal networth.
That's called hurt money and if the founder doesn't believe in it enough to bet the farm, no one else will back it.
Angel Camps - probably worth while. Anywhere you can go to learn from other people who have done it before will help you.
Bootstrapping is a great way to make a start. I know an entrepreneur here in Australia who did consulting for many years to fund the development of his software product. He also utilized government grants very well.
Returns - VC's and angels that I know want 5 to 10 times there money back when the exit event takes place, usually 3 to 7 years after the initial investment.
That may sound like a lot but returns are all tied to risk levels and start ups have very high risk.
How much - take as much as you can get. It usually takes several times more money and several times longer than you think to build a business.
How big - VC's and angels want to back businesses that can generate $50m to $100m in turnover (or more). That means you need a very large addressable market.
Its rare to get more than 20% market share and its rare to grow share by more than a few percent per year.
Generally you need a market of $500m but many will tell you its got to be a potential market of $1Bn+.
See my blog - tomthemoneyman.wordpress.com - for more ideas on business and investment.
Read the book Enterprise and Venture Capital by Christopher Golis. I am currently co-authoring the 5th Edition of this book. Cheers Tom
Friday, May 2, 2008
What it takes for a start up to survive
Its got to be customer/market need first, then product/technology. Make sure your product is highly differentiated and solves the customer/market need/pain.
Many start ups fail because they think there is a customer/market need, so they build the product only to find out they were wrong or the benefit is only incremental and not enough to make people switch.
Being adaptable and persevering are also key.
I know of a very successful entrepreneur who built a tool for scientists but found out scientists 1) didn't have a lot of money and 2) strangely didn't like to use software as much as she thought. So, they adapted and sold the product to the education sector, which is now 99% of sales. It got backed by a life sciences VC (it was related to brain function) so it was not easy to change the target customer market to education but they did and it worked!
So be adaptable (but it also proves you must really know your target market before building the product - they just didn't know scientists as well as they thought they did)
Watch the cash too.
But remember, its customer/market need first (and this must be confirmed through real knowledge of your customers).
Many start ups fail because they think there is a customer/market need, so they build the product only to find out they were wrong or the benefit is only incremental and not enough to make people switch.
Being adaptable and persevering are also key.
I know of a very successful entrepreneur who built a tool for scientists but found out scientists 1) didn't have a lot of money and 2) strangely didn't like to use software as much as she thought. So, they adapted and sold the product to the education sector, which is now 99% of sales. It got backed by a life sciences VC (it was related to brain function) so it was not easy to change the target customer market to education but they did and it worked!
So be adaptable (but it also proves you must really know your target market before building the product - they just didn't know scientists as well as they thought they did)
Watch the cash too.
But remember, its customer/market need first (and this must be confirmed through real knowledge of your customers).
Is business 99% luck or planning?
I believe preparation and planning are the key to success.
A lot of what looks like luck is actually the result of planning and persistence and rational risk taking.
You should not rule out your gut instincts nor should one be caught up in 'analysis paralysis'.
Following gut instinct is not luck - its actually finely tuned having absorbed all your life experiences.
So go out there and make your own luck!!
Cheers Tom
A lot of what looks like luck is actually the result of planning and persistence and rational risk taking.
You should not rule out your gut instincts nor should one be caught up in 'analysis paralysis'.
Following gut instinct is not luck - its actually finely tuned having absorbed all your life experiences.
So go out there and make your own luck!!
Cheers Tom
Bootstrapping vs. VC & Angel Funding
What should one do with their start up business?
You may be able to boot strap unless you need a large team of product developers. Boot strapping is a more likely prospect if your products are complete or near so or you can build the product yourself.
The attractiveness of the business to outside investors will depend on:
1) Size and growth rate of your target market
2) Your differentiation & competitive advantage
3) How big can the company become? Many angels & VC's will want a business that is worth $50m to $100m at exit
4) Can it deliver the returns required for the risk involved? Many VC's and Angels will seek 5x to 10x their money in 5 to 6 years. To deliver that you need a pretty large market and to grow pretty rapidly and to have a clear exit strategy.
If you have a strong track record, it will help you to attract investors.
If not, you'd benefit from having some advisors/directors or a CEO who has strong track record.
The best teams usually win! Good luck to all you entrepreneurs out there!
You may be able to boot strap unless you need a large team of product developers. Boot strapping is a more likely prospect if your products are complete or near so or you can build the product yourself.
The attractiveness of the business to outside investors will depend on:
1) Size and growth rate of your target market
2) Your differentiation & competitive advantage
3) How big can the company become? Many angels & VC's will want a business that is worth $50m to $100m at exit
4) Can it deliver the returns required for the risk involved? Many VC's and Angels will seek 5x to 10x their money in 5 to 6 years. To deliver that you need a pretty large market and to grow pretty rapidly and to have a clear exit strategy.
If you have a strong track record, it will help you to attract investors.
If not, you'd benefit from having some advisors/directors or a CEO who has strong track record.
The best teams usually win! Good luck to all you entrepreneurs out there!
Best Books on Investing
I have read many and highly recommend:
The Intelligent Investor, Benjamin Graham
A Random Walk Down Wall Street
Beating the Street
One Up on Wall Street
These will give you a good start!
The Intelligent Investor, Benjamin Graham
A Random Walk Down Wall Street
Beating the Street
One Up on Wall Street
These will give you a good start!
What to expect from your financial advisor!
Independence
Understanding of your profile, risk appetite and circumstances
A problem solver, not a product pusher.
Understanding of your profile, risk appetite and circumstances
A problem solver, not a product pusher.
When Will Renewable/Clean Energy be Viable?
Energy is simple.
When the technology enables production and delivery of renewable and clean fuels reliably at prices below fossil fuels, then consumption will tip, as rapidly as the technology & infrastructure allows.
I think its closer than most people realize.
Even if you don't believe in global warming, I think most people will rapidly gravite to the lowest cost reliable fuels and one day they will be clean and renewable.
Most people would gladly reduce their impact on the environment if they could do so with reasonable convenience and cost.
The ability to undo what's been done does exist to a large extent.
Extinctions obviously will be pretty hard to undo but nature does heal itself when given the chance.
When the technology enables production and delivery of renewable and clean fuels reliably at prices below fossil fuels, then consumption will tip, as rapidly as the technology & infrastructure allows.
I think its closer than most people realize.
Even if you don't believe in global warming, I think most people will rapidly gravite to the lowest cost reliable fuels and one day they will be clean and renewable.
Most people would gladly reduce their impact on the environment if they could do so with reasonable convenience and cost.
The ability to undo what's been done does exist to a large extent.
Extinctions obviously will be pretty hard to undo but nature does heal itself when given the chance.
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