Mar 31, 2009
Nobody “gives” you money (with the possible exception of your Mom, and unless she’s a mega-millionaire, she likely can’t fund your start-up)
When you’re looking for financing - rather from VCs, angels, banks, or alternative lenders - they ALL want to know how you’re going to spend the money. As one of my long-ago mentors used to say, “We’re not the Fresh Air Fund.”
In my role as a long-time advisor for the annual TVC Equity Capital Symposium, I see the “use of funds” headline a lot. Unfortunately, what follows is often lacking.
Example #1, “Use of Funds: Advertising.” What seems like big bucks to you for “advertising” will barely (if that) penetrate your target customers’ awareness, much less help against a bigger, entrenched competitor.
You’d be better off spending your millions on channel development (get larger, established companies to do the sales and marketing for you. But caution: just because they’re big doesn’t mean they’re right for you.) Sure, your profit margins will be smaller, but you’ll actually get to market and have revenues. (And, far better to have 10% of something, than 100% of nothing.)
Example #2: “Hire a Sales VP To Build Sales & Marketing.” Good that you recognize you’re not a stellar salesperson. But, are you ready to hire a big dog? Do you have a product ready to go? Can that big dog actually sell in a start-up environment? I’ve seen many a Big Pup with a Big Company resume who weren’t able to produce in a start-up scenario. They wanted their big company salaries…and expected their big company support structure and timelines. Sales cycle, schmycle. You need to close the deal in 90 days, not nine months. And, stellar sales people usually aren’t good marketers. Different skill sets.
Example #3: “Comprehensive, Integrated Branding Program.” Okay, do you even know what that means? (I thought so…;-)...) I’ll tell you what this usually means - some “marketing expert” has talked a great line about “creating a brand for sustainable creative advantage” and sold an over-priced,under-creative logo/stationary/biz card/coffee cup package. You don’t need a coffee cup; you need a product. I actually had an entrepreneur once tell me, “We’re branded! We’ve got a coffee cup!” Yes, and nobody in the investor audience could (easily) tell what his company actually did, much less why they should open their check books. (VCs can’t do due diligence on a logo.)
So before you go looking for funding, think about what you REALLY need and when…and why. Can you get to market with $600K versus $6M? (or $50K versus $500,000?) Yes, there’s the old bugaboo of “undercapitalization,” but you can spend wisely.
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“I’ve Got A Great Product, Now I Need Some Marketing.”
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There’s A Reason They’re Called “Market Windows.”
Three Things You Don’t Need In A Start-Up
Contact Mary Schmidt Today!
- Stop “Educating” Your Customer.
- Nobody Cares What “I” Want or Think.
- “WHY CAN’T THEY JUST TELL THE STORY??!!!!”
- Advertise with Google! It’s Simple! It’s Cheap! It’s Easy! (Not)
- But what if your customers will BUY a faster horse?
- The Illusion of “Incremental” Changes
- Can You Grow Out of (in) a Stagnant Market?
- Brain Food
- Do Good. Do Well.
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