7.15.2014

Where to See Money To Get Seed Money

Before the Angel Funding stage, get $ from the 7 places below first

Erika Remmington points out 7 good places to get seed money before you have to hit up investors.  You probably already know about #3. "Family and Friends" and #7. "Small Business Loans" (if you seek debt-financing) but there are a few more options. Here are my favorites from her list...

#2. AngelPad 
Not to be mistaken with Angel investors, this accelerator program created by former Google employees assists web technology entrepreneurs with improving the quality of their products, as well as education on seed funding. The 10-week mentorship program takes place in San Francisco, ending with a demo day introduction to several hundred potential investors. AngelPad also manages the business side of the partnership (i.e. immigration visas, incorporation, and accounting partnerships) for flagships ready to take off. 
#4. Jumpstart Foundry 
This tech microfund pools from startups within data systems, healthcare IT, and social engagement industries in the Southeastern United States, placing itself in a unique position to prepare small businesses for future growth. The Foundry launches approximately six new startups each year. Jumpstart Fundamentals offers participants insights into fundraising. Partnership with angel investment firms provides the Foundry’s funding capacity for new projects. Pilot startups are offered business, technical, and other assistance with funding. 
#6. Federal Grants
Depending on the industry that your venture is targeting, the federal government has specific grants available to ventures. For instance, in the business telecom industry a Telecommunications Development Fund is provided to the tune of one million dollars for small companies who gross less than 50 million dollars per year. There are many more types of development funds and grants available to specific industry ventures.
It behooves you to exhaust all 7 possibilities and get the majority of your seed capital before making your pitch so as to impress investors more and rely on their influence less. 

Now if the question is how much to raise... 

Mark Suster:
...I think that if you’re offered fair terms that aren’t destructively dilutive, preserve options for an exit, don’t put undue pressure on your company to do things too quickly you TAKE THE MONEY.  I know you think you’re going to do a bigger round later at a higher price but the problem is that if someone offers you $2 million now it’s guaranteed.  That same extra $1 million might prove very difficult to get one year from now if something fundamentally changes in the market, your company isn’t getting traction as quickly as expected or your competition makes a lot of noise in the market.  Or even your investors start having their own liquidity problems! 
So I came up with the corollary, “When someone’s passing you the hors d’oeuvres tray always take two.  But don’t take the whole tray.” 
The whole tray is obviously unhealthy. Look, these things are judgment calls and there are no mathematical answers.  Just remember that for many companies success or failure often ends up being a binary outcome.  Businesses usually fail for the exact same reason – they run out of money. Don’t let that be you.  If the appetizers are in front of you, take two.
Will Herman:
In the end, the most important part is to get the money you need and to get moving. Time is your biggest competition and it works tirelessly 24/7 to kick your ass. 
Try not to get caught in abstract notions about valuation. Do a sensitivity analysis, it’s likely to be less important than you subjectively think it is. That’s not to say it’s unimportant, but you should think about what the valuation being offered really means in terms of what you take away from the company given various scenarios. 
Ask yourself what it is you want to achieve, personally. If the valuation doesn’t seem right after that, move on and find someone else to invest. Otherwise, take the money you need and start executing. And don’t forget the spreadsheet. It really is a good tool.

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