Tag Archives: Bootstrap

Do You Need To Rely on Venture Capital Funding? Three Questions

Interview with Charles Bellavia, CEO, ElectraDrive

Situation: High tech entrepreneurs frequently see venture capital funding as a quick route to enabling their ventures. However VC funding is highly variable by tech sector and company cash needs, and few companies are ever funded. Do you need to rely on VC funding and what are the alternatives?

Advice from Charles Bellavia:

  • The first question to ask is what you want from VCs. In the past they brought both contacts and funding. Now, generally, they just bring funding. So ask three questions.
  • Can you fund the company out of your own pocket?
    • Far more companies are funded by founders, friends and families than by VCs. However self-funding demands conditions.
    • Cofounders should have alternate income sources so that they can operate without salaries for periods of time.
    • Watch the life stages of start-up cofounders. Avoid joining a start-up when your kids need your attention, especially during their teen years. Can you forgo regular income if you are paying for college? If an annual 2-week summer vacation is important, don’t join a start-up.
  •  What is the minimum funding needed for the company?
    • What funding do you need just to prove your technology and generate cash?
    • Focus is key. People will suggest variations. You have to know your path and whether variations will help or distract.
    • Stay with your core idea and think in terms of product generations. Build fitting variations into future plans if they will delay initial launch.
  •  How do you keep project workers motivated?
    • Plan for turnover. Know who is key to the project, and where you need back-ups.
    • Start-up life is all consuming. When the picture on the wall is crooked, everyone jumps to straighten it out.
    • Have fun and make it fun. This needn’t be expensive, like parking lot pot-luck barbeques with a CD deck and music.
    • Be generous with simple, low cost recognition. Acknowledge employees for who they are and where they came from. This is especially important when you have diverse employees and builds camaraderie. One company has pot luck lunches and employees are asked to bring their national dish; the food is wonderful and helps employees to appreciate one another.

You can contact Charles Bellavia at cfb@electradrive.net

Key Words: Funding, Venture Capital, VC, Bootstrap, Self-fund, Friends, Family, Income, Salary, Founder, Life Stage, Focus, Core, Iteration, Turnover, Fun, Recognition

Financing: OOM or OPM? Three Things to Consider

Situation: An early stage web Company is looking at steep ramp up expenses. Many companies have bootstrapped their way to success. However outside investment may speed the process. How have other CEOs evaluated these two options?

Advice from the CEOs:

  • Raising money takes time and is a major distraction to your development process. The two big variables will be investor interest and timing of investment.
    • Talk to Angels and VCs now. Start by presenting a broad outline of your technology and business model. Ask what they will want to see to offer you funding at different levels.
    • This will give you a reality check as to investor interest in funding you, and creates a roadmap to funding if the response is positive.
  • What are you seeking? Money or accountability? One CEO bootstrapped the company early, then looked for outside investment to gain accountability and advice – a whip to help move things along.
    • This CEO found that investors brought few of the anticipated assets, and added a new level of distraction and pain.
  • If you are looking for funding to purchase content to serve through your portal, consider a more creative way to gain content.
    • Can you use a Web 2.0 portal through which your target audience provides both the content and the consumer audience in a marketplace exchange? Establish the audience and add premium services to monetize the model.
    • This can minimize your upfront cash investment requirements, and may create a faster track to positive cash flow.

Note: OOM = Our Own Money; OPM = Other Peoples’ Money

Key Words: Investors, Investment, Ramp-up, Bootstrap, Financing, Cash Requirements