As stated before, your startup will have little or no money for the first several months. The most important activities you can do in this time are to create as much value to make the company fundable. “Chicken or Egg” is the best analogy one can provide to the situation you will face.
It is possible to find help along the way from people that are former executives and have an ability to take a risk. These highly experienced people are some of the best employees you may ever have because they may work for equity, provide the much needed skill sets, and they serve as mentors for your startup.
You may be able to get some initial funds from Friends, Family, & Fools. These are the ones most likely to invest because they know you, they just do not know any better, or both. Government or not-for-profits agencies have granting processes, loan programs, research contracts, or other services. These are dependent on the field of your technology and the state your company is to reside in. Many companies are able to advance to prototype stage based on some combination of these funding sources.
At some point, you will reach the need to obtain some greater sums of funding. The funds come from a wide range of sources like VCs, Funds, Super Angels, Partners, and other business relationships. Most likely, you do not know these people and the game is a bit like the old TV show “Dialing for Dollars.”
One great way to get non-dilutive financing is by partnering a product you may not wish to develop or sell yourself. Identifying a company that may be interested can be via business associates, board members, advisors, or cold calls. Reaching out to them requires having a sales pitch that is product specific and demonstrates the value of the product in general and to the possible partner. If they are interested, the negotiations start and hopefully end with them paying money for purchase or license of rights to the technology. These deals can take many forms. Having a business advisor and a great corporate counsel is important to the final deals structure.
Finding investors can come from cold calls. Most often, it is better to get an introduction from someone that knows the fund. This can be your counsel, accountant, a friend, an advisor, or someone affiliated with the company for example. Most funding groups see large numbers of deals each year. When they do not know you, it makes it easy for them to ignore you and spend their time with a company introduced by a friend or contact. One local VC indicated they review more than 600 deals per year and invest in around 6. The VC said they typically only review those that came via introductions from friends. They just could not handle all the others.
Maybe you can see why networking is so important. Finding a way to advance your company takes all the resources you can muster. This not only includes your energy, money, but your friends and associates. Your network includes your extended sphere of contacts plus the people they know. Any one of them may be the key to your getting an invite to show your company to a funding group or prospective partner. You will always be “Dialing for Dollars!” If you network well, you may be able to call fewer people before being invited for a visit or even getting the FUNDING.
You can follow Taffy Williams on Twitter by @twilli2861 and you can email him with questions at email@example.com and his company website or photo website. You can also find him in the group Startup Group on Linkedin. Other articles can be found in the Charlotte, NC- small business section of Examiner.com. This blog is now listed on StartUpRoar and on Alltop®.