Posts Tagged ‘Funding’

There is a trait among entrepreneurs that people both love and hate at the same time – their optimism.

Let’s face it, taking the leap from security into the unknown must be backed by a healthy dose of optimism. If that wasn’t the case, most people wouldn’t do it, would they? No one would start a business if they weren’t completely convinced deep down in their gut that they were sure to succeed.

However, if you want to build a strategic plan, access funding through angel investment or venture capital, and deal with those first few tough years, you need to temper your enthusiasm with a healthy dose of reality.

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“I always tell my kids if you lay down, people will step over you. But if you keep scrambling, if you keep going, someone will always, always give you a hand. Always. But you gotta keep dancing, you gotta keep your feet moving.”

Morgan Freeman -1937, actor

We all know raising money can be really tough. But some entrepreneurs make it look easy. Ron and David are two of those people.

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As a second follow-up to my original piece two weeks back on “Funding for the Rest of Us Entrepreneurs”, I would like to discuss a second area of alternative funding, that being the Community Development Financial Institution (CDFI). CDFIs provide financial products and services to people and communities underserved by traditional financial institutions. They normally work in low wealth areas and can take many forms (ex. banks, credit unions, micro-lenders, etc.).

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I received a comment to last week’s blog, “Funding for the Rest of Us Entrepreneurs“, asking for specific alternative lending sources that start-ups could access. I had mentioned peer-to-peer financing as a potential funding growth area. Peer-to-peer financing or crowd financing are financial transactions between individuals without the intermediation or participation of a traditional financial institution. Peer-to-peer financing can take the form of debt, equity or grants.

Peer-to-peer lending sites registered with the SEC, such as Prosper and Lending Club, have become viable funding sources for debt capital, with $196 million and $113 million funded loans to date. This past week’s announcement that Diaspora.com, a proposed Facebook alternative, had raised more than $100K in pledges in less than 12 days on Kickstarter.com increased awareness and greater hope for peer-to-peer pledged capital.

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One of the first items that an entrepreneur considers when starting their business is funding. Commercial banks, venture capital firms and angel investors are the most recognized sources of debt and equity financing. They also are the least likely to fund start-ups.

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If you’ve ever made a pitch for funding from a venture capitalist, you’ll know all about the laundry list of must-have financials and projections that you have to prepare – and if you’re smart, you’ll also know everything you do has to follow the venture capitalists golden rule: He who has the gold makes the rules!

Not surprisingly, this should prompt you to want to know more about how VCs make choices about spending their gold. Sure, you’ll read all the well-intentioned advice in the world about how to woo a potential VC with a clear, crisp pitch that shows the brilliance of your business idea and its likelihood of making them millions. Then you watch an episode of Dragon’s Den or Shark Tank, and you soon discover that nine times out of ten, the men behind the money table respond less to the business idea than they do to the person pitching it.

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