Coachology: Get angel funding for your business idea
There is a glut of people who are dying to fund business plans. Especially now, as starting a business online becomes less and less expensive, people require less money from investors, so investors have to look harder for startups to fund.
The problem is that people only want to fund good business ideas. It’s very hard to tell if an idea is stupendous. But it is easy to tell if an idea is terrible. And it’s easy to tell if you are pitching your idea for a company in an incompetent way.
Of course, there are a lot of resources online to help you get started with a business plan and a pitch. Entrepreneur.com is full of great resources. Pamela Slim’s blog, Escape from Cubicle Nation is a great community for getting moral support to make the leap into entrepreneurship. And Guy Kawasaki has a classic list of ways to screw up your pitch.
To get funding, you need to know how much money you require to execute the business idea. If you need a lot of money you need to go to a venture capital firm. If you only need a little money (e.g. $50,000) you can go to an angel fund. Guy Kawasaki lists ways you can get to a venture capitalist, and Paul Graham has an essay on how to fund a company on a shoestring.
But to make any of this work, you need a plan that is good enough to make people who know business plans think, “Hm. I wonder if this will work?” So you need a great elevator pitch — the one-minute summary of why your idea is good — and you need a smart business plan that you can send to potential investors.
This week’s Coachology will match you with an angel fund manager, Teresa Esser. She oversees Silicon Pastures, a group that funds early stage startups. She wrote Venture Cafe, a book about entrepreneurship, and she teaches entrepreneurship at the University of Wisconsin. Teresa will help you sharpen your elevator pitch and business plan so you can land the angel funding you’re looking for.
To work with Teresa, email three sentences to me about the business idea you have. The deadline for sending an email is Sunday, April 8.
Web business is making life really great with less of VC problems, web business needs low resources.
Another source of funding often overlooked for some reason or another is commercial factoring. DISCLAIMER, I work for a factorer.
Angel, VC, and bank funds are all long-term solutions. Bank lines of credit and loans are probably out of the question for any number of reasons:
1. start-up so no history
2. bad credit or no credit for principals
So, Angel and VC money is a good substitute, but since it is too high a risk for banks to take the deal VCs and Angel investors will ask for more than banks would. They want interest and equity. These both have their place, but there are some times when you don’t want to use long-term finance to solve short-term problems.
Factoring is an industry that has been around since the time of Christ. It allows company owners flexibility. For instance, once a customer’s client is approved for factoring then our customer can pick and chose which invoice they sell.
Factoring is essentially treating your invoice as just another asset that you can sell. You deliver your widget, and create an invoice. You have to wait 60-90 days for large companies to pay, so during that period it is an asset that hasn’t paid yet. You can accellorate your cash flow by selling it at a discount and moving on.
But factoring doesn’t create a long-term debt situation. That invoice is sold to the factorer and you don’t owe anything more.
Just thought I’d add that to your list of ways to finance a company.
For those of us who submitted, when would we expect to hear from Teresa?
* * * * *
I’ll send emails to everyone today.
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