Small Start Ups Need Funding

It has been an interesting time begin involved with many micro start ups in the capacity of senior financial officer. I can never get over the unwavering confidence of the perceived success of the entrepreneur's product.

When I asked a founder one day what he thought made someone a successful entrepreneur he stated simply that it is the belief that the product will work, be accepted in the marketplace and somehow get funded. As for the functionality and market acceptance I am not sure I could be visionary enough to lead that every day.....what I do however is raise money for these people. And, when it comes to micro caps the need to raise funds is often a life and death situation because they have often tapped out all the friends and family money and are fighting to survive.

So how do we get the message out? Of course the first thing in my mind is to model the business' flow of funds....how do they generate enough revenue to cover the fixed and variable costs. In this process, with the aid of a few pie charts (can't resist graphics), we work on getting a better understanding of the business.

I can say that few entrepreneurs fully understand their product mix and have really thought about the contribution margin of the products they sell. Once this is done in enough detail we know that the business is well enough understood so that when we are pitching for funds we won't get blind sided by some savvy investor asking a basic question about the business that we can not answer.

So what presentation do we use? Often a 10 slide PowerPoint, a one page summary of the business and an executive summary. Now it is off to network to find investors who will listen. That is the big challenge. There are angel investor groups, people who want to take you public into a pink or OTC stock. Now you have to learn about what their reason is to invest the money versus what your objective is for using the money. Before we get into that in a later post consider how well you could explain the detail of how you turn a dollar of revenue into some net income.

photo from merchantfunding.org