Posts Tagged ‘funding’
Capital-starved entrepreneurs eagerly await the dawn of a new capital market called crowdfunding. ActSeed is glad to support the Crowdfund Bootcamp and its mission to prepare us all for the opportunity to tap a major new vein of investor capital.
This new way of funding emerging businesses is shares a name with a donation-based funding model in use today, but is very different than offering a t-shirt or other memento in return for contributing a few dollars to a cause.
On April 5, 2012, the “Jumpstart Our Business Startups Act” or “JOBS Act” became law. A new game in the world of early stage business funding was created. The Act calls for the US Securities and Exchange Commission to now define the rules of this new game. It’s expected that the rules will be defined sometime next year and entrepreneurs will begin pursuing crowdfunding equity investments.
This “new game” is designed to increase participation in the investment process beyond existing restrictions. It’s designed to help flow more capital into the primary engine for economic growth and jobs growth: small businesses.
While the general parameters of this new capital market are defined in the law, the coming specifics from the SEC must curb fraud while encouraging participation.
Numerous crowdfunding web sites are popping up almost daily – all hoping to become a thriving “new millennium stock exchange”. Each site will serve as a mini-exchange, with SEC-compliant rules for what company information an entrepreneur must share with investors and how it must be shared. The rules are supposed to be less onerous on small businesses while still protecting both the capital-seekers and capital-providers. Of the hundreds of aspiring crowdfunding sites, most will likely fail or consolidate with other sites. Crowdfunding will spawn cottage industries of support services and trade advocacy. Insurance companies, law firms, accounting firms, PR firms and trade organizations will specialize in crowdfunding activities.
So, as an entrepreneur trying to figure out what this all means, who the players are and how to prepare your company to raise capital through crowdfunding, where do you start?
We recommend the upcoming Crowdfunding Bootcamp conference, which will be held October 9-11, 2012 in Henderson, Nevada (just outside of Las Vegas). Write the word ‘ticket’ in the promotional code box and they will knock 5% off of the already-reasonable event fee.
The early bird gets the worm. The second mouse gets the cheese. Nobody has a saying for the ones who arrive third or beyond. JOBS Act Crowdfunding is coming soon, and entrepreneurs who know what to do will be the first to benefit.
A question from Sean through our Ask ActSeed service…
I am looking for some quick funding. Do you have any resources?
We have seen deals from connections within ActSeed.com happen quickly, but investors and lenders aren’t keen on making a decision without full information. The ActSeed Entrepreneur Group profile can be completed in an afternoon if you’ve already mapped out your business model in some way. The key to quickly move from intro to deal usually depends upon how quickly you can demonstrate that you can implement the idea and make money for you and the investor. Getting the key info on the table fast is what ActSeed.com helps with.
The process to find investors through ActSeed is:
- Register on ActSeed.com and then
- Join the ActSeed Entrepreneur Group
- Complete the two Company Profile screens (public and private info)
- Search ActSeed’s network of investors (Investor Group) and
- Contact investors that you find who seem to fit your deal
ActSeed Investor Group members will also be looking for deals that fit their interests and may contact you directly.
There’s a nominal membership fee that supports the services ActSeed provides. It’s a month-to-month fee, so there’s no long term commitment and we don’t take any of your company’s equity.
If you’re looking for someone to invest based upon a loose concept without much detail and without spending any money, then the best place to look is to the people who already know you well, as they will be investing because they know you personally, and their evaluation of your business will be largely based upon your personal relationship.
In summary, if you are asking friends and family for funding, you can sell yourself first. If you are asking strangers for funding, be prepared to thoroughly sell the business model and your plan for its implementation.
We wish you success in finding your funding, and thanks for sending us your question.
The ActSeed Answer Team
Our “Ask ActSeed” team recently received a question from an entrepreneur who wanted to restart his company, find angel investors and be prepared to provide investors with the info they want. Here’s what we told him:
“The information below is an important part of the story that an investor will want to know for sure. It seems there are two parts to your question:
- How to find investors and
- What to present to them when you find them.
First, how to find them:
While there is no single “exchange” to find all prospective investors, there are many venues and approaches to finding them. The best is personal networking – talking to people you know and finding out if they, or someone they know, might be interested in your deal. The other end of the investor-search spectrum is to do Google searches and cold call banks and investment firms to gauge their interest. This is a very low probability approach. In the middle are communities like ActSeed that help bridge an entrepreneur’s lack of personal investor network with connections to investors and investor groups. Some communities are free (e.g. LinkedIn), but investors don’t dwell there as free sites attract half-baked deals and lots of “noise”. Some have membership fees (like ActSeed), are more concentrated, and have a higher quality. None can guarantee a successful deal, but the good ones can help you reach investors you wouldn’t find otherwise.
However, reaching prospective investors is only a part of the equation…
Most professional angel investors, VC and other equity investors see hundreds, if not thousands, of deals each year. Most invest in 2-6 deals each year. This leaves 97%+ of all deals unfunded. The remainder get bootstrapped (e.g. self-funded through self-directed IRAs, savings, etc.), through debt (e.g. bank loan) or likely shut down or go dormant.
The second part is what information you present to the prospective investor.
- If an investor believes the information being presented to them is incomplete, they will stop reviewing.
- If an investor doesn’t “get it” very quickly – i.e. understand the business opportunity before then – they will stop reviewing.
Through ActSeed, entrepreneurs prepare the information that investors want to see using a scored profiling system. ActSeed scores the “completeness of preparation”, not whether the idea is viable. ActSeed’s scored profile enables the investor to have a uniform comparative against other deals that signals risk of successful implementation of the business model. It’s kind of like a FICO score for early stage companies. Here’s a link to a brief white paper about the ActSeed profile and scoring process.
ActSeed’s 1-page “Business Snapshot” template is an excellent framework for an entrepreneur to introduce their business highlights on a single page; if an investor “gets it” on that first page, they will be much more inclined to read further. The scored profile and Business Snapshot are available in ActSeed.com. Once your ActSeed profile is complete, you can search ActSeed’s Investor Group for prospective investors within the ActSeed community. You can also share your ActSeed link with any investor outside of ActSeed.
If you’re interested, you can learn more about the ActSeed Entrepreneur Group and sign up if you want to use these resources by clicking here. You can also download a free copy of ActSeed’s “Business Snapshot” template when you complete your free registration on ActSeed.
There are other communities and resources available to you that will also extend your reach into the investor community. In addition to ActSeed, we advise all of our community members to also use other networks that can be helpful. The new business creation and small business ecosystem is too fragmented and dynamic to fit one application or one community; however, a balance of communities can together drive value to those who build companies.
If you think your startup or product idea can survive an interrogation on national TV, then contact us now.
Yun Lingner is the Co-Executive Producer for a TV series on ABC called Shark Tank, a Mark Burnett Productions show.
If you’re not familiar with this show, entrepreneurs are selected to pitch their businesses to a panel of wealthy investors (e.g. Mark Cuban and Barbara Corcoran) in order to land an investor. We are helping Yun find some innovative businesses, products, business ideas and of course, entrepreneurs with interesting backgrounds or stories for the upcoming season.
If you’re interested in swimming with the sharks on national TV, send us an email to firstname.lastname@example.org with “Shark Tank” or “I want to swim with the sharks” in the subject line and we’ll get you connected directly to Yun.
If your deal needs some polish before jumping in the deep end, join ActSeed’s Entrepreneur Group.
Also, you can test your elevator pitch in ActSeed’s “Inside Pitch” discussion group on LinkedIn (it’s free).
Deadline to submit your idea, startup or small business? Just say “you snooze, you lose…”, and hesitate at your own risk.
Terry Moore has been building and funding companies for two decades.
As the Managing Partner of Moore Venture Partners, LP, Terry sees up to 500 deals per year. From this list, he may seriously review a dozen of them and make an investment in about four of them.
Moore Venture Partners has established a unique niche in venture investing. Moore doesn’t seed or lead transactions, but the firm does source and qualify deals that fit the interests of the top VCs in Silicon Valley and beyond. Then, they participate in deals with top VC firms. Through this approach, Moore Venture Partners enables its limited partners to participate in investment opportunities to which they might not otherwise have access.
The Fund’s focus is technology and life sciences, particularly in southern California - companies with strong intellectual property (e.g. patents) in the early growth stages, and sometimes even in the expansion stage.
Terry has a solid track record of investing with returns coming from both acquisition opportunities and IPOs. His own operational experience helps him assess deals and their management teams. His extensive relationships with top VC and corporate investors enable his portfolio companies to have the best chance to grow and succeed. His leadership as Chairman of The VC Roundtable further indicates his commitment to bringing best practices and a collaborative spirit to venture investing.
ActSeed is glad to have firms like Moore Venture Partners involved in its Investor Group.
ActSeed provides Terry with visibility into a community of innovative startups – each having a series of ActSeed Scores that provide an indication of the company’s “investment-readiness”. The scores calculated for each startup in ActSeed’s Entrepreneur Group enables Terry to immediately get a sense of whether the startup has established a solid foundation on which to grow and where gaps in the business might exist. Gaps won’t necessarily kill an investment opportunity, but not knowing what issues need attention may become quickly fatal for both entrepreneur and investor. ActSeed’s contribution to the VC process is to bring any issues to the front of the conversation.
Moore Venture Partners is on track to provide great value to both its portfolio of startups and its limited partner investors. Terry Moore leads this effort by leveraging his experience and administering a thorough due diligence. Each year a few startups may become part of the Moore Venture Partners’ investment portfolio and benefit further from Terry’s guidance and extensive network. The hundreds of deals that don’t quite make the cut will need to look elsewhere for their capital needs. ActSeed is glad to help Moore in his quest to find appropriate deals for his fund and provide a resource for the deals he sees that may not be ”investor-ready” and need to find funding elsewhere.
To learn more about Moore Venture Partners, please visit the Moore Venture Partners web site.
To learn more about how ActSeed can help your startup become investor-ready and find VC or individual investors who may be interested in your venture, please
- Download ActSeed’s 5-page white paper,
- Register on ActSeed.com and
- Join ActSeed’s Entrepreneur Group.
How University-Affiliated Angel Groups are Helping Fuel Startups While Supporting Higher Education.
Angel investors typically congregate into formal angel groups based upon geographic proximity and interests in certain industry sectors and/or specific growth stages. While these characteristics generally reflect the commonality within the Baylor Angel Network (BAN), what makes this angel group unique is how they have integrated Baylor University into their operation.
Operating an angel group within a university setting drives benefits to a broader group of beneficiaries, from business students to the business schools they attend.
In addition to the standard angel-entrepreneur activity, Baylor’s Hankamer School of Business receives an angel-designated percentage of the profits from each successful investment in the form of a gift to the University – on average, 25% of the profits generated by the donor from a successful exit. Also, a few students at Baylor are selected to serve as research analysts who contribute to the evaluation of prospective deals. Baylor Angels also mentor the student analysts and share their wisdom with students taking entrepreneurship classes. BAN doesn’t require its angel members to be alumni of Baylor, but they do expect each BAN angel to contribute some of their returns to the University.
ActSeed is grateful to have the Baylor Angel Network involved in the ActSeed Investor Group.
The disciplined, methodical approach that BAN applies to their investment decisions meshes well with ActSeed’s own methodical process for helping investors quickly understand “what’s under the hood”. While BAN does very well in analyzing their deal flow internally, ActSeed Company (Entrepreneur) Scores provide BAN angels with another indication of how well a startup will perform in the due diligence phase. In other words, ActSeed can help entrepreneurs quickly “bubble up” to the surface with angels and reduce the time it takes to go from first contact to funding decision.
Kevin Castello, Executive Director of the Baylor Angel Network, shares his thoughts:
“Excellence is revealed in execution. A lot of emphasis is placed on the vision, the business plan, the team, and other components but without execution they are just words on a page. There are so many challenges for a new entrepreneurial venture and it is critical to have an honest evaluation of your business. I love that ActSeed is committed to help entrepreneurs be prepared for their venture and to provide them tools for that process. BAN looks forward to a continued partnership with the ActSeed community.”
Before approaching the Baylor Angel Network or any angel group, an entrepreneur must first explore whether investors would even be interested in their venture. ActSeed’s Investor profile helps clarify this. For example, an entrepreneur can review the Baylor Angel Network’s ActSeed profile to learn:
- What types of deals generally interest the 40+ angel investors who are members of BAN,
- Where BAN angels are looking to invest (across five southwestern states), and
- How much they intend to invest (amounts usually between $100,000 and $300,000, including participation in larger deals up to $2 million when there’s a lead investor already established).
For entrepreneurs who may be thinking about approaching the Baylor Angel Network, consider approaching them through ActSeed’s Entrepreneur Group where you can do more than pitch them an idea – you can demonstrate your “investor-readiness” through your ActSeed Scores and possibly get moved to the front of the line for consideration.
To learn more about the Baylor Angel Network and how they are integrating angel investing within the University, you can download their introductory document here.
ActSeed’s mission of reducing small business failure rates depend upon both well-prepared entrepreneurs and well-informed investors. This new series of articles, called “Kick the Tires”, will help both investors and entrepreneurs align for the best chances to achieve reciprocal success.
["Kicking the Tires" - an idiom - giving something an initial inspection before making a decision to pursue a transaction - origin: early car buyers would kick a vehicle's tires to see if they properly held air]
So far, we have been more visible on the entrepreneur-preparation side of the equation. Recently, we have started to make significant inroads on the other side of the same equation - sharing “best practices” with a new generation of small business investors and attracting seasoned investors with our methodologies that will help them accelerate the review process (“due diligence”) for making investment decisions.
“Kick the Tires” is a new series of articles that highlight the many issues that a small business investor or “startup angel” should address before making an investment decision. We’ll include red flags to watch for. We’ll review “tangibles” and “intangibles” alike. We’ll explore small business investing from almost every angle, including legal, financial, organizational, strategic and cultural.
To date, our primary efforts toward building new reservoirs of investor capital have been through our workshops and webinars (“How to Evaluate Prospective Deals Like a Professional Angel Investor“). These workshops are well-attended, but it feels like we try to cram two months of information into a two hour presentation. Seriously, we do share a lot of information in a short period of time. From there, we develop a relationship and rapport with the attendees to assure they have tools to find and evaluate small business investment opportunities within the ActSeed entrepreneur community and beyond. Kick the Tires is meant to supplement, expand and reinforce the knowledge shared in our workshops.
Who will benefit from reading the articles in this series?
Small business investors - both novice and seasoned. Whether you want to invest $5,000 or $5 million, you still should apply a defined due diligence methodology and process to assure your interests are aligned with your investment choice.
Entrepreneurs. These articles don’t contain fabricated hurdles or secret handshakes, but they do outline the issues that together create a solid business foundation that will give the business the greatest resistance to failure, which is another way to say the greatest chances for success. Investors don’t want to invest in a company destined for failure any more than the entrepreneur wants to build a business exposed to avoidable failure. In other words, what’s good for the investor is also good for the entrepreneur, making this series equally relevant to those building businesses.
Beyond the articles in this series, what can be done to help connect “well-prepared entrepreneurs” with “well-informed investors”?
Join ActSeed. Apply the knowledge that is shared in the articles by joining the ActSeed Entrepreneur Group or the ActSeed Investor Group. The principles and issues we highlight in “Kick the Tires” are the same that we use to connect compatible ‘treps and investors within ActSeed.com using our scored profiles and filtered search tools.
Finally, please send us suggestions or questions about small business investing that you’d like us to cover. We’ll do our best to address these issues here as well. Please send your questions about small business investing to: email@example.com.
Together, let’s get to work and build some wealth!
“Most people start businesses simply because they just don’t like working for someone else.”
If this quote resonates with you, or even if you have another motive for becoming an entrepreneur, you should read this book.
Scott Shane packs this book with statistics and information that really helps you understand the realities of building a business. If you are a true entrepreneur, this book should sober your expectations and then bolster your resolve. If you aren’t quite there yet as an entrepreneur, this book will properly discourage you from burning too much of your own time and money (not to mention the time and money of others) until you are truly ready to “do it the right way.”
In this book, Shane shares statistics and data about where funding comes from for new business creation, what impact VC and angels have on new business creation, which industries receive most of their funds and who may likely be the best source of funds for your own business. He shares data about how long it usually takes to “turn the corner” with a new business and the demographics of entrepreneurship, too.
The Illusions of Entrepreneurship pulls data from a multitude of resources, including the Federal Reserve Survey of Small business Finance and the Center for Venture Research in New Hampshire. Essentially, Scott Shane has condensed thousands of pages of research into a single, coherent book.
This book is one of the first ones you should read if you are contemplating the plunge into the world of entrepreneurship.
You can purchase this book from ActSeed’s Amazon store here.
What is compatibility in the context of small business investing and why is it important?
Private direct investment is very different than buying a publicly traded security. Investors do not have the same regulatory support or liquidity as a publicly traded stock. While we have witnessed a number of publicly traded companies mislead the public with incorrect or incomplete information in the past, at least there is a formal structure with a set of reporting regulations and consequences for failing to adhere to those regs and provide certain information to investors. With startups and small businesses, there is much less information available and very little regulation on what must be shared with investors.
Because of this, there is a greater element of compatibility required between the small business investor and the small business.
Trust and Alignment of Purpose
Understanding this need for compatibility is one of the key topics in the ActSeed Investor Workshop (“How to Evaluate Deals Like a Professional Angel Investor”). Simply stated, we strongly recommend that seed stage investors and startup entrepreneurs are fully aligned in purpose and culture as well as around expected return on investment and “exit strategies”. At the early stages of a business, investors should be viewed as a partner, not as a transaction – a co-pilot and navigation assistance, not merely gas in the tank. The business risk is extremely high in the early stages of a new company and the investor should play an active role in helping the entrepreneur steer clear of pitfalls.
Last year, we created a fun vignette about how ActSeed was like an “eHarmony for startups and investors” – how we help match investor-entrepreneur compatibilities. Recently, we had an inquiry from an entrepreneur who didn’t quite understand our analogy, and interestingly, was persistent in trying to understand how we were an “eHarmony to investors”. So, we drafted a candid reply:
“Simply put, most early/seed stage investors look for strategic and long term compatibility, not “quick hits”. The days of throwing money into something based upon a whim or basic concept are gone.
eHarmony markets their community as one where “people are brought together based on the things that really matter” (the current front page quote on eHarmony.com). ActSeed does the same for investors and entrepreneurs.
To further apply the personal relationship / eHarmony metaphor: investors aren’t interested in “one night stands” and “casual encounters.” Investors are no longer being seduced by what sounds good without verifying what IS good. ActSeed provides a mechanism to help the investor verify and accelerate the due diligence process by 60-90 days.
The common theme from our growing Investor Group members is that they don’t have time to see millions of interesting ideas, but they want to quickly find a few good ones that match their interests AND that provide evidence of preparedness in the core areas of business …PLUS a demonstrated ability to execute a sound plan.”
We know ActSeed isn’t for every entrepreneur, but we pledge to our growing group of Investors that the companies and entrepreneurs they will find within ActSeed’s Entrepreneur Group are ready to “extend trust” through an early presentation of the due diligence issues that will eventually need to be addressed anyway. The sooner this information is “on the table”, the faster a deal can be done or the parties can move on. If you can use the ActSeed process to cut 60-90 days out of the due diligence process, why not?
Within ActSeed, in order for a successful investment to occur:
- ActSeed presents the questions to be answered
- The Entrepreneur must provide the answers
- The Investor must trust the answers
Are you an ActSeed Investor?
If you are someone who wants to invest an amount between $5,000 and $5 million in early stage, seed stage, startup or small businesses, please join ActSeed’s Investor Group. It’s free to join, takes 15 minutes to set up, and allows you to interact on a username basis and allows you to reveal your real identity when and if you choose (to avoid the possibility of “overly ambitious” entrepreneurs).
Learn more about ActSeed’s Investor Group through the resources below:
Click here to download a 1-page PDF about ActSeed’s Investor Group
Watch a two-minute video about ActSeed’s Investor Group:
Join ActSeed (no cost).
Let us know how we can help you get set up.
Thoughts for your first pitch:
Relax and enjoy the experience.
Let your passion come through, but keep it simple and concise, and don’t get defensive if you “cross nerves” with your audience.
Make sure you can quickly and clearly explain: what customer “pain” you’re solving, why your solution will sell, how you make money (and when), and how your investor can expect to realize their return on investment.
It’s ok to not have answers for everything. If you don’t have an answer, offer that you will get back to them with the answer. You might even acknowledge that their question is a good one and ask them if they have any insights to share toward converging on an answer.
Things we suggest not saying:
- “We have no competition.”
- “Our revenue projections are conservative.”
1. Investors may only listen when you tell them about a good idea.
2. Investors may “open their checkbook” if you (A) have a good idea and (B) can demonstrate that you have a plan to implement that good idea and turn it into a profitable one.
We champion all of this and more within our ActSeed.com community.
This note was originally a reply to a young entrepreneur on LinkedIn who was about to make his first investor pitch and was looking for advice about pitching.
In addition to our quick response to “making the first pitch count”, we also recommend buying the book, “Pitching Hacks“.
Now, go out there and make every pitch count!