Funding Your VentureTBOP2017 ⋅ 2:58 ⋅ Filmed May 12, 2017
Many aspiring entrepreneurs get a little touchy when it comes to the subject of funding. What’s the best approach? When is the right time to seek funding? What do you do when nobody agrees to cut you a cheque? In this insightful clip, Derek Ball talks brass tacks about one of the biggest challenges of entrepreneurship — and cautions against some of the most trending methods business owners are trying.
TC: So, what's interesting about the team that are operating here is, that for the duration of this project, they're trying to raise capital online. A little like a Gofundme operation. For anybody else doing a startup, in your experience, the funding of course is a key element to all of this. Where to do you go for funding?
[00:26] DB: There's a lot of focus, I think especially on the technology and innovation world, [on] venture capital funding. Ben, who will be up on the panel with us shortly said yesterday, that's not always the right fit. Yet, we seem to think, as first time entrepreneurs that that's going to be the secret.
[00:42] DB: I remember when I was building one of my first companies and I was living in Calgary. I was invited to present my company to Banff Venture Forum and I thought, 'This is great! I'm going to whirl in there. I'm going to give my pitch and someone's going to write me a cheque for a couple million bucks. I'm off to the races.' It was a harsh wake up call when I walked in there and nobody wrote me a cheque. I had to step back and realize, 'Why not? Is my idea terrible?' It was because I was going after the wrong money for the stage and time in my business.
[01:14] DB: So, you don't usually (right out of the gate) run and pitch a venture capitalist. Your idea might not even be the right fit for a venture capitalist. You really need to understand your business, it's economic model and what kinds of monies you should be seeking. Most of the time, your first money is what we call the 'love money'. That's going to come from your friends and family. They're going to give you money because they love you, not because they believe in your business or their going to get a big return on it.
[01:40] TC: Well, they love you now.
[01:43] DB: Professional investors like to see you've taken some love money because they know Christmas dinner is going to be very uncomfortable if you screw it up. You need to get a little bit of that just to help you pay the bills, get things started, incorporate your business.
[01:58] DB: And then you can go out after seed or angel money because they have a different threshold of what they're looking for. And Angels are generally high net-worth individuals. They don't have investment committees. They're not going to do as deep a due diligence but they're going to buy into your passion and your vision of what you're trying to accomplish and if they buy in, they will usually write you a cheque — $5K, $10K, $25, $50K — and you'll get a handful of those who are buying into your vision. That's also good validation. Somebody who has been successful thinks that whatever you're doing has potential. Once you get that, then you can move into seed and if appropriate, venture capital, growth capital and private equity later on in the stage of business.