Feedback Re: Funding Sites

[Jahsco]

Dear Entreprenuers,


I am in the process of researching and seeking some seed capital for my startup and have registered with several online funding sites (i.e. Go4funding, Raisecapital, Findthatmoney, etc.) and pitched my startup and funding requirements.
I am aware that one must be weary of scammers and protecting your ideas, but I wanted to know if anyone has received any funding from any of these types of sites or have been contacted by investors through these sites? What were your experiences? How were you approached by possible investors?

If no one has any personal experiences to share, would you know of any sites on the internet that write about people's experiences with these sites??

Thanks for the info!

[hugh009]

Jahsco, I share my YEARS of experience as a serial entrepreneur - 34 to be exact. First, have you written an Executive Summary of your biz as that is really before you write the entire plan?

Have you checked out in your local area for Angel Capital Showcasing like they do in western North Carolina. You compete and if you are chosen then you present to bankers, professors, venture capitalists, etc. Many of today's Fortune 500 companies got started this way.

Also have you checked with your local office of SCORE - these are retired businessmen that offer their expertise and some are very connected to venture capitalists and angels.

I would advise doing this before using these sources on the Net and that comes from being a former consumer investigative reporter for Post Newsweek TV.

Hugh

[Jahsco]

Thanks, Hugh, for your insight.
I have written an executive summary and a solid draft of my business plan.
I have also been to SCORE for some input on the financials of the plan. I am in search of seed capital, no more than 100K for my startup, which makes it ineligible for Venture funding and even Angel investment at this point. I was contacted by a "possible investor" from the UK on one of the sites, and his interest seems a little more legit than the scammers that have responded to my initial pitch.
I decided to respond to his email, and he now requests a business proposal to include, but not limited to, a summary of my company's products/services, proposed transaction structure, including the amount sought, use of funds, and capital structure. He is looking for an equity position of a 3 to 6 year exit period Once he has the info, he writes that we would have a basis of discussing the terms of investment.
Not sure what to think. It's so hard to find and access the right connections and networks for funding ...
Thanks for your feedback!
J.

[akula]

J, the bad news is that you're a novice and you have no idea how startup funding works. Your understanding of how startup companies are capitalised in america is so far removed from reality that it's really pointless to try and cover any one of your specific queries (because you don't understand the context of the issue at hand)

the good news is that you can correct your newbiness by accepting the fact that you know nothing about startup finance, and thus open your self up to education. the better place to start (as far as financing is concerned) is with peter ireland at antiventurecapital.com

[capforge]

Your understanding of how startup companies are capitalised in america is so far removed from reality that it's really pointless to try and cover any one of your specific queries

That seems kind of harsh. Are you saying that no companies get individual investor or angle fund or VC money to start? No, I didn't think so.

Are you saying they don't find it on internet investor posting sites? That I would agree with. But you could have just said that.

Anyway, J, before spending the money on the Peter Ireland book, all you really need to know is that the best way to approach your current situation is to rethink it and develop it in a way that you can start it with what you personally (or can definitely get from family and friends) have in cash, because the odds of raising investor money are vanishingly small.

If you don't have the cash, or you do but don't want to risk it (and that should be a big red flag to you), then start something else that you can afford to start now and grow that and then later, if you still care, you can self fund this idea that you have now.

[akula]

That seems kind of harsh. Are you saying that no companies get individual investor or angle fund or VC money to start? No, I didn't think so.

The complexity of what you're talking about is significant. For all intensive purposes, you're wrong and yes, it's true that "no companies get individual investor or angle fund or VC money to start" (save for some exceptions). External, at arms length, equity finance accounts for less than 1% of all startup finance allocated to small business in any given year accross all industries in united states. Likewise, in relation to specific private equity financiers, the typical angel/fund closes a deal with less than 1% of all their prospects. In other words, at a general level, there is a 99% chance that any given business in question is financed by something other than external equity, and a specific level, when talking to an equity financier there is a greater than 99% chance that they're gonna fund a deal other than what you're offering. Therefore, statistically speaking, external equity finance does not exist.

If you thought this was complicated, wait till you start analysing the 1% of companies that do close external equity (particularly in relation to funding series, round sizes, industry verticals and geography).

[capforge]

Therefore, statistically speaking, external equity finance does not exist.

I would hate to have to tell that to all the companies I've worked with that have gotten external equity financing- they will be disappointed to find out the checks they got don't exist!

I agree it isn't typical, and I agree that most ventures, including J's above, are very unlikely to get private equity financing from a professional investor because they don't fit the profile of what these investors will fund, and I agree that his best chance of success is to start something he can self fund or get money from friends and family- BUT, that still doesn't mean you have to imply he is stupid or ignorant for considering it or for not knowing that is is a very low probability event.

You sound like maybe you got burned somewhere along the way by an investor. That sucks, but hey, it's business. Move on and succeed somewhere else and let the bitterness go- it isn't adding anything and it is sucking energy from whatever you are doing with the rest of your life.

[hugh009]

J, another avenue that I would pursue is a local or even distant university like Western Carolina University that offers some Entrepreneurship classes. I know WCU offers a Masters online since my biz associate teaches it. Also the former professors at WCU, the world respected Carlands, have started Carland College online.

There you can discuss with professors like my partner, Dr. Frank Lockwood, at WCU that has a career of over 20 startups and owned two seats on the Chicago Board of Trade. Frank like myself wanted to give back to young entrepreneurs like yourself and others that visit this site.

Hugh

[Jahsco]

I appreciate everyone's comments, even Akula - albeit more harsh than constructive. I hope someone was not as dismissive of you when you were a "newbie" yourself.
However, the most important thing is sharing information and, yes, educating when necessary. We are all at different levels in the game and everyone's feedback is most helpful.
I am fully aware that my chances are slim to none of securing angel investment or venture funding to launch my business. I did say that in my post that I was ineligible at this stage for funding from these sources, and I agree that self-funding is my best bet right now. I am trying to secure $20k from personal sources to get started. However, I have been approached on some of the funding sites sites on which I posted. All, save one, are outright scammers. I just wanted people's feedback on these kinds of sites and experiences if any. I realize that, regardless of what the owners of these sites say, many people will never get any legitimate sources of funding from these outlets.
Thanks again for all the comments, esp capforge for conveying it an a more constructive manner.
Best of luck to everyone.
J.

[akula]

Jahsco, my single function on this board is to make sure that you get your business launched and broken even as soon as possible. As a matter of indisputable fact, that's not gonna happen if you fail to delete words like "angel investor" and "venture capital" from your vocabularly. You also need to appreciate the fact that I'm not kidding.

Those two words need to disappear, and what's gonna happen after that is a liberating experience that's gonna define for you how companies actually get capitalised in america.

[JLeezer]

akula,

I have to say, I've never liked your responses. You nearly always come across as a complete a-hole. I know you have a little bit of useful knowledge up in the brain of yours, but what else is up there that causes the bitterness you frequently display. I find it interesting that you seem to think that the only way to provide help to others is by acting like a jerk while providing the advice. If you keep up this little act of yours, you're going to either find yourself alone or with a bunch of people what will dump you as soon as the next jerk with a bigger wallet than yours walks in the room.

And could you PLEASE replace your picture with one that isn't so freaking CREAPY!

[Cole Taylor]

OP,

Stay away from online funding sites. Despite what they all claim, investors dont sign up to those sites to find deals. Thankfully you've been smart enough to detect the scams, many are not so fortunate.

All of these sites "claim" to give you access to accredited investors. Do you realize that every accredited investor, in the U.S. at least, is on a list?

When I started raising capital years ago I was given 3x5 cards from FNIN. I pounded the phone telling pitching accredited investors on pre-ipo deals. That's how it used to be done. In fact, the Angels weren't even organized back then although there were "investment groups."

It's a lot harder in todays market. Personally, I think it's easier to get family and friends to put in the seed capital and do a self filing with the SEC and open on the OTCBB. Issue S-8 stock for all of your development costs and when it gets below a penny do a reverse split...rinse, repeat.

Anyway, something to think about. You seem to realize that you're not going to attract the angels or VCs. So, if you really want to put your deal in front of accredited investors I think you'd be much better off just picking up the phone and pitching them. That's "supposedly" who your deal is supposed to be seen by on the online funding sites right?

Just a warning: you better have a sexy deal with a lot of sizzle, a ton of upside, and a clearly defined exit.

If you want to know more just ask because there are a ton of regulations you need to be aware of that I'm too tired to go into right now.

...enjoy all the typos

[EasyAutoSales]

J, chasing money is hard and it really takes an awful amount of time. If you can bootstrap your startup and create a product or service w/o any external financial support, I would start there. You'd be much better off spending your first six months creating a product than spending your first 12-18 months chasing after funding. Besides, angels and VC's are more likely to fund you once you have some traction and numbers you can show. Also, once you have your product developed, their piece of the pie would diminish by a lot.

While it does suck to hear the harsh reality, I would have to agree that seeking money online is not the way to go. If you truly need the money to start your venture, I would try networking with local entrepreneurs and angels and get on their good side. I'm not sure where you're from, but it seems like a lot of cities today have a group for entrepreneurs, local incubators and angels. Like-minded people will flock to the same events so you just need to go out and meet them.

Also, don't be afraid to discuss your idea. You don't have to give away all the secrets but if people like your idea, they may just refer you to someone they know who invest in that particular type of business.

[akula]

akula,

I have to say, I've never liked your responses. You nearly always come across as a complete a-hole. I know you have a little bit of useful knowledge up in the brain of yours, but what else is up there that causes the bitterness you frequently display. I find it interesting that you seem to think that the only way to provide help to others is by acting like a jerk while providing the advice. If you keep up this little act of yours, you're going to either find yourself alone or with a bunch of people what will dump you as soon as the next jerk with a bigger wallet than yours walks in the room.

And could you PLEASE replace your picture with one that isn't so freaking CREAPY!

i have a hate mail adress gofuckyourself@nerezov.com

[JLeezer]

i have a hate mail adress gofuckyourself@nerezov.com

Ahh, that is so cute...pretending to be so cute & such a rebel all at the same time!! Did you giggle after posting that, too?

Really, could you possibly have been less mature in your response than you were?