#start-up financing

[josephmchammas]

Where will I get the Money?

Going forward with my business, if I did want to expand a little bit and start thinking about building out a proper ecommerce site to sell my books, I would require a small investment. Based on the very small size of my business, I would most likely use a combination of my own personal funding (personal investment) as well as a “love money” investment, borrowing from my parents. In the case of my used book sales business, my mother would technically be considered a subject matter expert on the product itself, with insight into the books being sold as well as what a parent might be looking for in a book for their child. My relationship with my parents has been such that we are always honest and open about finances and there is a level a trust that I can count on there that I will likely not get from a third-party lender right away.

Parents, family or friends that I am trusting as “love money” investors would be people who I have an established relationship with who know me well enough to be aware of my financial maturity and professionalism. Showing that I have put together a detailed, catalogued list of our products would be one way to show that I am developing a plan of action to sell. The fact that I have also done some “digital word-of-mouth” marketing through platforms like Nextdoor and Reddit” (and even made some preliminary sales that way already) are also factors that would help to instil confidence in the business.

The already established relationship or rapport I would have with “love money” investors makes the question of the personal guarantee even more personal. If there is enough established trust already, this could also work to my advantage when asking for an investment.

[hyvo]

Where Will I Get the Money?

Currently, I alone operate VoSymbol. However, if I plan to expand my business, I might consider bank loans. They're a prevalent source of capital for small firms with additional benefits. Generally, bankers prefer firms with a proven track record, an effective business plan, and a personal guarantee from the business owner, things that I can manage. It's much easier than government grants with strict criteria or venture capitals where investors are eying on leading tech businesses. Another source would be a personal investment. After all, I should already have enough budget when starting a company. Lastly, I could negotiate some money from my family to assist the growing business, aka the "Love money."

[jweatherlyneal]

How VCs filter Inquiries from Entrepreneurs

My understanding is that some VC firms are inundated with over 100 business plans daily. I wonder how they manage to sort through those opportunities in determining whether an entrepreneur’s vision is a fit with their investment thesis. Some- like Peter Thiel’s Founders Fund and Valar Ventures don’t even provide entrepreneurs an email address at which to contact them! Libertarians you know- market forces drive ideas to their islands I guess. Let’s call them Elitism Capitalists. That’s particularly odd given that save for Reid Hoffman at LinkedIn referring Sean Parker to Thiel after having decided that he might have a conflict of interest in being Facebook’s first outside investor, Peter Thiel would never have seen the opportunity to make a $500,000 investment for a 10% interest in Facebook that he ultimately cashed out for over $1B. And I bet you thought PayPal was his big hit? (In a sense yes: Reid Hoffman was the ultimate payoff pal to Peter Thiel.)  

Back to the more meritocratic VC firms. Regardless of how big they are, how do they makes assessments about inbound emails from entrepreneurs? I’ll explore this further by asking that question to a few industry leaders I know. I’m all the more curious after having received emails from two major firms which took a  pass on a business of which I am a director. I had loose affiliations with both parties. 

What I found curious is that neither VC so much as once logged on to the secure website where we have a user-friendly slide deck which one could scroll through in a minute. They didn’t fucking look at the slide deck, one going so far as to say “we don’t invest in business which have yet to post revenues.” 

The business did $20m in sales last year. That information was a keystroke away.

More to come.