Good idea but no funding... what can I do about it?

[Lissa23]

I have a new idea for a project. It's been kickin' around in my head for the last several weeks (actually it's been around for a few months). I decided in the last few weeks to finally get crackin' on it. I researched my competition and really could only find two. They are both large now (in what their doing) but they lack in so many obvious things and they are VERY similar to one another offering their clients only 30% of what their 'purpose' is suppose to be. In a way i'm 'reinventing', but I think of it as better development. My idea and my two close competitors have the same idea, different concepts. I know for a fact my target audience is in need of this. So the question of 'does your client need what you're promoting' is yes.

To begin with this idea can be worked online.

I am in the process of patenting my idea and I have already written my business plan about 4 times over. It is beginning to have more structure and it's definitely a lot more solid then when it began.

Should I look into government young entrepreneur grants?

Hm i'm kind of stuck as to where I should try to get funding for this.

Thanks a lot for any advice that can be given!

[mxer210]

How old are you? Knowing your age makes a big difference when discussing finding a source of funding.

[B.Sheehan]

Hey Lissa,

Sounds like you have done your homework. I was in a similar position about 6 months ago so perhaps I can humbly offer what I've learned? I am going to point out in bold that none of these ideas are mine. I make a point to talk to as many people as will sit down with me, read as many management books as I can and spend as much googling time as my eyes will permit - so this is just an aggregation of other people's ideas.

The first thing I would suggest is be open with your idea. I saw Greg Brill speak (great great guy, catch him at a seminar if you can) and this girl put up her hand and phrased her question pretty similar to yours. He just cut her off in mid-sentence. If you walk around with your idea tucked under your coat you will miss numerous opportunities. Its like in Never Eat Alone, by Ferrazzi, the whole idea of networking (for example in sites like this) is for people to scan what you immediately need through their Rolodex. I have been fortunate enough to have been offered contacts and advice from people I would never have expected it from. So flaunt your idea! For the first 1-3 years you are your company's brand!

Financing. To draw an analogy I'll discuss my work on our project 6 months ago. I spent about 5.5 weeks generating a business plan. The financial projections, hinging on revenue, were extremely accurate. It was polished, well planned, reviewed and look great. It was also for the most part useless.
I would show my plan to bankers, friends of my parent's that happened to be bankers, I even met with a Venture Capital firm based in London, Ontario. My pitch was basically "Here is my plan. I require X amount of dollars. Here is the breakdown of why I require X and what X is composed of. Now watch X turning into X*Y in year 1. And watch that turn into this in year 2 etc. etc." Very detailed, but again useless.

These sources of financing are not willing to provide capital because your idea is unproven (this is usually a give-in because the idea is almost always to revolutionize the way business is done in your market), your product/service capabilities are unproven, your supply chain is unproven and most importantly you are unproven.

I was on the verge of giving up when I heard about this guy named Peter Ireland. Peter wrote a really simple 86 page book called "The Smart Start-up Strategy". He also maintains a website called www.antiventurecapital.com. [The following ideas are Peters - I'm just portraying them for your benefit].

Basically there are two types of entrepreneurs. There are entrepreneurs that are the above example (me in the first couple of months). This is not an entrepreneur, this is a business person without the business. An entrepreneur develops a way to get to cashflow. Thats it.

My interpretation and feedback after having changed my views to the above are that debt and/or equity financiers are not the people who should decide how viable my business model is and how proficient I am as a leader. The market should decide. Financiers come into play after the market has said yes this person has the know-how, or has learned it, to get the product from scratch to the market.

A little long winded but hopefully it can offer some help. I was banging my head against the wall until these lightbulbs clicked on.
Brendan

[DrMoney]

If you need a partner, or someone to help you find some things out, I would sign a non disclosure agreement.

Pm me.

[akula]

I have a new idea for a project. It's been kickin' around in my head for the last several weeks (actually it's been around for a few months). I decided in the last few weeks to finally get crackin' on it. I researched my competition and really could only find two. They are both large now (in what their doing) but they lack in so many obvious things and they are VERY similar to one another offering their clients only 30% of what their 'purpose' is suppose to be. In a way i'm 'reinventing', but I think of it as better development. My idea and my two close competitors have the same idea, different concepts. I know for a fact my target audience is in need of this. So the question of 'does your client need what you're promoting' is yes.

To begin with this idea can be worked online.

I am in the process of patenting my idea and I have already written my business plan about 4 times over. It is beginning to have more structure and it's definitely a lot more solid then when it began.

Should I look into government young entrepreneur grants?

Hm i'm kind of stuck as to where I should try to get funding for this.

Thanks a lot for any advice that can be given!

that's an almost perfect 8/10 on the nerezov flake-o-meter

you've managed to say everything indicative of a flake in the space of two paragraphs

I urge you to stop being a flake

[akula]

Hey Lissa,

Sounds like you have done your homework. I was in a similar position about 6 months ago so perhaps I can humbly offer what I've learned? I am going to point out in bold that none of these ideas are mine. I make a point to talk to as many people as will sit down with me, read as many management books as I can and spend as much googling time as my eyes will permit - so this is just an aggregation of other people's ideas.

The first thing I would suggest is be open with your idea. I saw Greg Brill speak (great great guy, catch him at a seminar if you can) and this girl put up her hand and phrased her question pretty similar to yours. He just cut her off in mid-sentence. If you walk around with your idea tucked under your coat you will miss numerous opportunities. Its like in Never Eat Alone, by Ferrazzi, the whole idea of networking (for example in sites like this) is for people to scan what you immediately need through their Rolodex. I have been fortunate enough to have been offered contacts and advice from people I would never have expected it from. So flaunt your idea! For the first 1-3 years you are your company's brand!

Financing. To draw an analogy I'll discuss my work on our project 6 months ago. I spent about 5.5 weeks generating a business plan. The financial projections, hinging on revenue, were extremely accurate. It was polished, well planned, reviewed and look great. It was also for the most part useless.
I would show my plan to bankers, friends of my parent's that happened to be bankers, I even met with a Venture Capital firm based in London, Ontario. My pitch was basically "Here is my plan. I require X amount of dollars. Here is the breakdown of why I require X and what X is composed of. Now watch X turning into X*Y in year 1. And watch that turn into this in year 2 etc. etc." Very detailed, but again useless.

These sources of financing are not willing to provide capital because your idea is unproven (this is usually a give-in because the idea is almost always to revolutionize the way business is done in your market), your product/service capabilities are unproven, your supply chain is unproven and most importantly you are unproven.

I was on the verge of giving up when I heard about this guy named Peter Ireland. Peter wrote a really simple 86 page book called "The Smart Start-up Strategy". He also maintains a website called www.antiventurecapital.com. [The following ideas are Peters - I'm just portraying them for your benefit].

Basically there are two types of entrepreneurs. There are entrepreneurs that are the above example (me in the first couple of months). This is not an entrepreneur, this is a business person without the business. An entrepreneur develops a way to get to cashflow. Thats it.

My interpretation and feedback after having changed my views to the above are that debt and/or equity financiers are not the people who should decide how viable my business model is and how proficient I am as a leader. The market should decide. Financiers come into play after the market has said yes this person has the know-how, or has learned it, to get the product from scratch to the market.

A little long winded but hopefully it can offer some help. I was banging my head against the wall until these lightbulbs clicked on.
Brendan

Sheehan, welcome to the forums

the above is an example of a flaky poster

the way to deal with them, for their own benefit, is to tell then to rewrite their business plan so it's just perfect

and then, you cross your fingers and hope for the poster to break through their entrepreneurial constipation when they start producing some actual cashflow

[B.Sheehan]

Entrepreneurial Constipation. Ha ha ha I like that.

I am not sure if I totally follow though - I'm pretty quick to seek clarification in a text-only community. Without intonation and facial/body language to rely on it is easy to mis-construe things.

[Lissa23]

How old are you? Knowing your age makes a big difference when discussing finding a source of funding.

Hi all sorry for the late reply.

I am 18 years old, i've owned previous businesses prior, but never in the need of the funding to this amount.

[Lissa23]

that's an almost perfect 8/10 on the nerezov flake-o-meter

you've managed to say everything indicative of a flake in the space of two paragraphs

I urge you to stop being a flake

Please enlighten me on how I'm being a flake? Is it because I have not exactly 'spilled the beans' so to speak of my idea?

[akula]

sure....let me give you some feedback

1. Never say "I have a good idea". Finance is available to proven commercial opportunities. Not ideas. And it is up to the evidence to signal whether one opportunity is good or bad in comparison to other opportunities. What you have is a hypothesis and it is up to the people you're pitching to decide whether it is a probable or an improbable hypothesis.

2. Don't say "patenting my idea". That's just a nonsensical statement. Patents are not granted to "ideas". In fact, stay away from all legal terminology altogether. Focus on what you know - the dimensions of the problem you're solving. Seek advice on issues on IP protection because this is not your area of expertise.

3. Don't say "I've already written my business plan". A viable business plan cannot exist without prior cashflows. What you have now is not a business plan, but an ode to wishful thinking. It's just a collection of imaginary things you've thought up, and which you hope turn out to be true. It's not an audited document. If it was an exhibit in a trial, it would be found to be misrepresentative and misleading. Instead, say things like "I have confirmation from 100 prospects who say they want the stuff, and I'm in the middle of planning how to best deliver it to them".

4. Don't play stealth. You don't have to disclose what solution you're trying to commercialize, but if you want to avoid being flaky, you must disclose what problem your solution is trying to solve.

5. Don't say "where I should try to get funding for this?" There is no such thing as funding. There's only expansion capital for entrepreneurs who've proven that they can create value. From your perspective, the only way to finance a business is through customers.

All in all, avoid mentioning dirty words like "idea", "patent", "venture capital" and "funding". Instead use words like "I have customers", "I need working capital secured by receivables", "I'm sitting on contracts for delivery", "I'm looking for trade credit", "I'm thinking of issuing convertible notes to buy some expansion capital", and you will not be deemed flaky.

Good luck :-)

[B.Sheehan]

Agreed.

Lissa don't be discouraged - if we didn't care neither of us would have bothered to write a response. We would have just scoffed and read other threads. Welcome to the world of being an entrepreneur. There is no fair, no crossing fingers, its a very simple cause and effect world. Lenders use algorthym's to extend credit. Bankers will aask some questions about you and your venture then send it to a credit analyst sitting in a tower 30 miles away who issues a yes or no and a risk premium (what you will pay over prime).

It is not a totally invalid concern, the proverbial "brain-sucking", there are a couple of tales about high-tech ideas being stolen by VC's. If you're idea is to make a widget a different way then keep that part to yourself but explain everything else about your business.

I forgot to mention from your first post, there are always more competitors than you think. No matter the industry there is always a viable alternative for your consumer to spend thier disposable income on.

[Lissa23]

sure....let me give you some feedback

1. Never say "I have a good idea". Finance is available to proven commercial opportunities. Not ideas. And it is up to the evidence to signal whether one opportunity is good or bad in comparison to other opportunities. What you have is a hypothesis and it is up to the people you're pitching to decide whether it is a probable or an improbable hypothesis.

2. Don't say "patenting my idea". That's just a nonsensical statement. Patents are not granted to "ideas". In fact, stay away from all legal terminology altogether. Focus on what you know - the dimensions of the problem you're solving. Seek advice on issues on IP protection because this is not your area of expertise.

3. Don't say "I've already written my business plan". A viable business plan cannot exist without prior cashflows. What you have now is not a business plan, but an ode to wishful thinking. It's just a collection of imaginary things you've thought up, and which you hope turn out to be true. It's not an audited document. If it was an exhibit in a trial, it would be found to be misrepresentative and misleading. Instead, say things like "I have confirmation from 100 prospects who say they want the stuff, and I'm in the middle of planning how to best deliver it to them".

4. Don't play stealth. You don't have to disclose what solution you're trying to commercialize, but if you want to avoid being flaky, you must disclose what problem your solution is trying to solve.

5. Don't say "where I should try to get funding for this?" There is no such thing as funding. There's only expansion capital for entrepreneurs who've proven that they can create value. From your perspective, the only way to finance a business is through customers.

All in all, avoid mentioning dirty words like "idea", "patent", "venture capital" and "funding". Instead use words like "I have customers", "I need working capital secured by receivables", "I'm sitting on contracts for delivery", "I'm looking for trade credit", "I'm thinking of issuing convertible notes to buy some expansion capital", and you will not be deemed flaky.

Good luck :-)

Great thanks for the advice. After reading that I realized that although I have done what should have been done, I just chose to use bad triggering words. Of course if I were in the state to go out and look for investors my words should be carefully picked.

So with re description. I'm having problems with this project is because with my last few projects that I did, I had enough money coming through to support my idea (whoops sorry) and to establish it on my own. After establishing it and working it for a few months - year, when I got bored I would sell.

The project that I am trying to execute now came to me through my current job. I work at an association that helps small-medium size businesses overcome 'big box' issues. For example, in Vancouver right now we are prepping for the 2010 Olympics. The Rav Line is being built all the way down Cambie St. And all the businesses on that strip are closing down. There are a lot of 'one off' stores in BC just itself and I'm the development/program coordinator and inside sales/outsides sales manager so I hear a lot of the concerns and the new proposals on what we can do as an association to help small-medium sized businesses. A lot of business (unfortunately) don't have all the knowledge that they could have to run their business successfully. Some people just enjoy baking and making costumes so they decide to open a store. So basically in a day of work I listen to a lot of troubled retailers so I know exactly what they're wanting. Anyway, getting side tracked.

With being there for only a few months now, I can see a huge trend in business owners, product buyers, small-medium sized business, and designers. There are a lot of small-medium sized businesses out there looking for resources. Which is my concept. My two competition prides themselves of helping the small-medium sized business to business community. Sure they are doing well right now, but even just surfing their first page you could see that if you were an actual small-medium sized business, this is not helping you at all. They have totally lost what their purpose is, and it's basically a big puddle of mud. So, my idea was to really is a more developed and structured model of theirs but in the end giving off more benefit to whom is my target audience.

I know as in numbers that I have about 1000 retailers in my area itself that would jump on this like hot cakes. Because a) It's VERY inexpensive. I'm talking like small dollars not hundreds or thousands but they get a lot out of it b) It is not time consuming and c) They can see that this was made for them and strictly how it would benefit them.

So of course that is just BC - eventually taking it throughout Canada and internationally the numbers will grow.


So where can I go from here? I have the problem and I have the solution.

[akula]

Okey dokey....so it's some sort of a business consultancy play.

1. If you're gonna be out there pitching for capital, you gotta have a scalable business to compensate for all the liquidity risks that come with private equity. In other words - you must have a product. Not a service. A product, one with very low marginal costs of production.

2. Provided you have a product, get out of seed stage. You must have cashflow. It doesn't matter where you're getting it. If you let your self get pigeon holed as a "pre revenue concept" - you're buggered. You must appear as an expansion stage investment.

3. To get off the ground, go and get letters of intent (LOIs) from the "about 1000 retailers in my area". Get them to promise you that they'll buy your stuff when you can deliver it.

4. Get your stack of LOIs, put together a shortlist of people you need to get in contact with and go pitch them using Allen's 10 commandments for pitching.

5. Having spoken to one prospect, you'll need to apply the secret for closing private equity deals (I explain it towards the end of the post...but you must read all of it to understand it).

6. Deliver the stuff to those who signed the LOIs/Surveys, book a profit, rinse, lather and repeat.

Remember; don't annoy people with enthusiasm and wild forecasts of untold riches. Go get the damn surveys filled out, get the LOIs signed and use those documents to make people give you what you want them to give you.

It's simple - if you have the docs, things work. If you don't, you are being flaky. Don't be flaky.

Great thanks for the advice. After reading that I realized that although I have done what should have been done, I just chose to use bad triggering words. Of course if I were in the state to go out and look for investors my words should be carefully picked.

So with re description. I'm having problems with this project is because with my last few projects that I did, I had enough money coming through to support my idea (whoops sorry) and to establish it on my own. After establishing it and working it for a few months - year, when I got bored I would sell.

The project that I am trying to execute now came to me through my current job. I work at an association that helps small-medium size businesses overcome 'big box' issues. For example, in Vancouver right now we are prepping for the 2010 Olympics. The Rav Line is being built all the way down Cambie St. And all the businesses on that strip are closing down. There are a lot of 'one off' stores in BC just itself and I'm the development/program coordinator and inside sales/outsides sales manager so I hear a lot of the concerns and the new proposals on what we can do as an association to help small-medium sized businesses. A lot of business (unfortunately) don't have all the knowledge that they could have to run their business successfully. Some people just enjoy baking and making costumes so they decide to open a store. So basically in a day of work I listen to a lot of troubled retailers so I know exactly what they're wanting. Anyway, getting side tracked.

With being there for only a few months now, I can see a huge trend in business owners, product buyers, small-medium sized business, and designers. There are a lot of small-medium sized businesses out there looking for resources. Which is my concept. My two competition prides themselves of helping the small-medium sized business to business community. Sure they are doing well right now, but even just surfing their first page you could see that if you were an actual small-medium sized business, this is not helping you at all. They have totally lost what their purpose is, and it's basically a big puddle of mud. So, my idea was to really is a more developed and structured model of theirs but in the end giving off more benefit to whom is my target audience.

I know as in numbers that I have about 1000 retailers in my area itself that would jump on this like hot cakes. Because a) It's VERY inexpensive. I'm talking like small dollars not hundreds or thousands but they get a lot out of it b) It is not time consuming and c) They can see that this was made for them and strictly how it would benefit them.

So of course that is just BC - eventually taking it throughout Canada and internationally the numbers will grow.


So where can I go from here? I have the problem and I have the solution.

[Lissa23]

Okey dokey....so it's some sort of a business consultancy play.

1. If you're gonna be out there pitching for capital, you gotta have a scalable business to compensate for all the liquidity risks that come with private equity. In other words - you must have a product. Not a service. A product, one with very low marginal costs of production.

2. Provided you have a product, get out of seed stage. You must have cashflow. It doesn't matter where you're getting it. If you let your self get pigeon holed as a "pre revenue concept" - you're buggered. You must appear as an expansion stage investment.

3. To get off the ground, go and get letters of intent (LOIs) from the "about 1000 retailers in my area". Get them to promise you that they'll buy your stuff when you can deliver it.

4. Get your stack of LOIs, put together a shortlist of people you need to get in contact with and go pitch them using Allen's 10 commandments for pitching.

5. Having spoken to one prospect, you'll need to apply the secret for closing private equity deals (I explain it towards the end of the post...but you must read all of it to understand it).

6. Deliver the stuff to those who signed the LOIs/Surveys, book a profit, rinse, lather and repeat.

Remember; don't annoy people with enthusiasm and wild forecasts of untold riches. Go get the damn surveys filled out, get the LOIs signed and use those documents to make people give you what you want them to give you.

It's simple - if you have the docs, things work. If you don't, you are being flaky. Don't be flaky.

Hey Akula,

Thanks for your help. Good to know i'm moving along in the right direction and even though the process is still new, I won't be going back and forth missing things that should have been done in the beginning.

I have a lot of those documents because I have done request forms previously but I would definitely have to get them all done in order to get a good base number.

As for the consultanting plan, I guess the way i've worded it here sounds like it, but i'm not a consultant nor trying to be one. There are about 3 products at the moment that I have incorporated into my business as of today, so solidifying it will come in time.

I'm not looking to get this off the ground tomorrow and start making mega bucks, but I definitely want to start off on the right foot and get it going in the right direction. So thanks for your help - I don't want things to slip especially since i'm doing this on my own right now.

[akula]

good good lisa

if you have problems with this startup, I'm available here to talk you through them

I do, however, expect you to make rapid progress

btw: since you're interested in vc, here's a list of 170 odd vc blogs. what you need to do is put these guys on your mailing list, tell them you exist and ask them for referrals to guys who do the kinds of deals you're offering.

also, you need to get your self a mentor; a woman in her early 40s, in a career that you ultimately want to emulate

the startup process is beyond painful (with startups, labour lasts 2 years!) and you're gonna need a steady shoulder to turn to :-)