Funding start-ups

After two painful start-ups of my own that did not get funded, I realised that I’d done battle with many who out-gunned me. It was a lousy and humbling experience, which I don’t want you to repeat, so I’m writing to you as a fellow CEO.

With that hard-fought know-how gained after these two funding failures, I learned the ‘correct recipe’ to get financing. The outcome saw my third start-up obtaining $20 million from Goldman Sachs, and my fourth start-up received $20 million from Wedbush Securities.

Navigating the funding jungle

It occurred to me that the funding pathway your group is navigating may diverge from the standard recipe we discovered in the funding jungle. In my experience, this may well explain why after a year or a half-year of activity, your team cannot get financing. The funding quest usually takes six to nine months. There is hope, but currently it might feel like you are walking through butterscotch. In the spirit of serving you and your team, here are some random thoughts.

Is this a hobby or a business?

You have looked through your inventor’s eyes to pull this out of the dirt.

I get it. Great. Now stop it.

Going forward, only look through the eyes of investors and customers. When I ask you how investors and customers are going to make a good profit from your invention, you might reply, ‘That’s a good question. I don’t know.’ But you need to know! Ask your team, ‘Is this a hobby or a business?’

Investors need to see the profit math for themselves, and customers need to know you are in the wealth-creation business too.

Your funding answer is external

The funding rejections you have received are golden nuggets, telling your team where your proposal veers from the universal recipe. Investors are speaking as loudly as they can. You have learned that investors want an economic transaction, so give them what they want. You love your dream; they never need to.

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