Believe it or not young entrepreneurs seeking funds are the ones that will feel the effect of the economic downturn the most. With money more difficult to come by these days, even filthy rich investors and VCs know the value of every quarter. They are all being more tight fisted and more careful about who gets their money. Don’t get me wrong there’s still money swimming around Silicon Valley in large quantities. Infact so far in 2009, well over $5billion has invested in several companies in various stages of funding. That is a whole lot of money, however the focus of VCs and angels these past few months had been on companies like twitter, olx e.t.c. companies already in existence and well established. They are quite confident that these companies will bring returns and that’s what every investor seeks at the moment.
One can also look to the several local funds and loans set up by government agencies and private consortium set up for the sole purpose of helping new companies grow.
I have been talking to a lot of people, reading a lot of books and articles on what new entrepreneurs can do to secure some funding as well and here’s a few things I found:
1.) Build a confident and relentless team. In previous posts I had talked about the importance of having a team rather than go solo. For some reason you are more “attractive” to angels and investors if you have a team in place compared to you being alone. It’s an unspoken rule in silicon valley that the more people who find the idea and venture worthwhile (regardless of if they are part of the project or just admirers), the more worthy the venture is likely to be.
Once you have a team in place, you have to ensure that confidence is instilled in each and every member of that team about the quality of the product you intend to deliver. If the confidence is there, trust me, it shows whenever you talk about your venture and this is always a good quality. Now you’ve also got to make sure you and your team are relentless. Never give up or take no for an answer. I know of an entrepreneur who currently builds gaming platforms on Facebook that required some funding to bring his ideas to life. He spoke to several angel networks and VCs and all he got was no. Did he give up? Did he look for something else to do? No…he and his team pressed on, they sent “thank you for reading through our resume and business plan” letters to all the people that said no, and 3 days later they resent the plans to these people. They kept at this routine 4 times until a Boston based angel had enough and decided to meet with them. 5 minutes into their meeting the “young, hip and game geek” angel was sold and invested several millions in their venture. Now they rake in well over $10million in revenue from the entire social network clientele.
Never give up! You and your team MUST keep at it.
2.) Are you in a business that doesn’t respect the recession? Certain industries thrive and boom whether it’s the recession or not. Technology, science, biotech are only a few examples of sectors that are not really affected by the recession.
3.) Build and use your contacts. I once had the opportunity to sit in on a startup 2 startup conference in California early in May 2009 and a veteran investor was speaking on what he looked for in an entrepreneur. He went on and on, but what really concerned me is if he was interested in investing in a freshie or not. I knew the answer even before he took the microphone so it was no surprise when he said it. I don’t know if he planned on saying it or not but as he went on in his speech he said “the chance of me investing in a new entrepreneur is zero and that is the case with every other investor I know”. He went on to say he only invested based on referrals. This is not news to anyone except new entrepreneurs obviously and that’s the point of this blog.
As much as I will like to say otherwise, your chance as a new entrepreneur to secure funds is pretty much non –existent if you don’t have that inside connection. Build your connections now!
