The Right Type of Funding
Many entrepreneurs starting their first company have a grave misunderstanding about how financing works. First there is the delusion that because they have a good idea, VCs will come running with money in hand. Second, they have the misconception that they can get millions in investment for a relatively small amount of the company. In reality, the golden rule still applies - He who has the gold makes the rules.
For many companies VC funding is not the best way to go. If you need $500,00 or less, you are usually too small to get a VC very excited. Rather, consider debt financing or investment from an Angel. In Sunday's Deseret News Money Section, John Richards of the BYU's Center for Entrepreneurship had a good article regarding Risk and Debt Adverse Entrepreneurs (RDAVE) and Equity Conservationist Entrepreneurs (ECE). Each strategy has its pluses and minuses. However, if you are willing to take on some debt and use it to demonstrate the value of your business model, you will be able to get more investment capital and to get it on more favorable terms. If you are interested in debt financing, take a look at UTFC.
Addtionally, ask yourself, "Do I really need financing?" Some companies must have financing to launch or to grow fast enough that they are not overtaken by imitators. For other companies, however, boot-strapping works just fine. Not having extra money laying around forces the company to focus on its true needs and limits the tempation to chase down business opportunities which do not fit with the company's business plan. It also helps the owners to avoid the siren call of expensive office space and all the perks that come with a profitable company. I have seen several local businesses go under because the officers spent way to much on trying to look successful and not enought on trying to be successful.
For many companies VC funding is not the best way to go. If you need $500,00 or less, you are usually too small to get a VC very excited. Rather, consider debt financing or investment from an Angel. In Sunday's Deseret News Money Section, John Richards of the BYU's Center for Entrepreneurship had a good article regarding Risk and Debt Adverse Entrepreneurs (RDAVE) and Equity Conservationist Entrepreneurs (ECE). Each strategy has its pluses and minuses. However, if you are willing to take on some debt and use it to demonstrate the value of your business model, you will be able to get more investment capital and to get it on more favorable terms. If you are interested in debt financing, take a look at UTFC.
Addtionally, ask yourself, "Do I really need financing?" Some companies must have financing to launch or to grow fast enough that they are not overtaken by imitators. For other companies, however, boot-strapping works just fine. Not having extra money laying around forces the company to focus on its true needs and limits the tempation to chase down business opportunities which do not fit with the company's business plan. It also helps the owners to avoid the siren call of expensive office space and all the perks that come with a profitable company. I have seen several local businesses go under because the officers spent way to much on trying to look successful and not enought on trying to be successful.
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