There are a lot of great people out there looking for funding. They have a great idea and have put together a business plan. Perhaps they have talked with some venture firms or some angel groups. While they are not completely sure about their business plan or strategy, there is one thing they are sure about - they want (need) funding to give their idea a go.
What is the best way to raise seed capital? I get this question a lot. Quite some time ago, I previously posted "Should You Take Venture Capital?" about some points of consideration for taking venture capital. If you are still certain that you want to raise money, here is one thing you need to know - MONEY IS NOT FREE.
I know this sounds obvious but it is clear to me than many entrepreneurs don't understand the many expectations that come with receiving funding. By laws of economics (or perhaps greed), at any point in time, money tends to find its way to places that have the highest return. Call this economic efficiency, call this maximization of potential, whatever you want to call it, if money comes to your company in the form of seed or venture funding, it is coming to you for a reason. It wants to be multiplied many times over and your company is the vehicle to allow it to do so. If you are lucky to be working with a classic venture investor who sees beyond return and wants to create something with technological, social, or cultural value, then you are one of the lucky few. But on the whole, if you get money from an angel or venture firm, know that they are expecting large returns.
What does this mean for you the entrepreneur? Well for one thing, it means that you need to know your investor's expectations. If you know your funding source is looking for returns, then you need to plan and show a trajectory that leads to this. Too often, I see people that just WANT THE MONEY IN THE BANK! They have no clue that once they have money in the bank they will also have someone that is up their XXX every day, week, or month. They have no clue that in 6 months to a year the money will run out and their world will crumble all around them if they don't find more money. They don't know that they will have lost that time earning wages, have probably lost some significant personal funds that they invested, and that they will have potentially ruined their reputation as an entrepreneur if they do not handle things responsibly.
Don't get me wrong, I am a huge advocate of angel and venture funding. I believe in it and believe entrepreneurs benefit from funding. However, I really feel that many entrepreneurs do not understand that taking funding is a serious thing. Are you ready to be the steward of someone else's money? Are you ready to report on the progress of their investment on a daily or weekly basis?
Remember - Money Is Not Free!
You're right about money not being free. Grants are wonderful, but they take time and alot of footwork. My wife and I have a business plan put together and are more than willing to share the wealth. We are looking for a creative investor who wants to make money without robbing us blind at the same time. For more information about the plan contact me.
Michael
Posted by: Michael Bugh | June 26, 2007 at 06:22 AM