The Next Generation of Launching Your Company: 5 Steps to Get You Off the Ground

Traditionally, every Entrepreneur ran from one Venture Capital firm to the next with their pitch book, power point presentation, and objective of raising between $1 to $2 million to get their company off the ground. Their plan was to hit all the milestones and objectives, raise another $5 million, ramp sales and waited a few years to get acquired or go public.

Now let’s face reality: times have changed….fewer funds are looking at firms in the $1 to $2 million space because they need their portfolios to have high exists, north of $100 million in order to get an adequate return on their investment. The concept was covered in a previous post “3 Factors When Choosing a VC” under Size of Fund.

The next generation of raising money consists of showing your product has a market, sales growth potential, and the ability to hold its own against competitors. Here are 5 steps to get your product off the ground without going through the traditional methods of raising money:

5 Steps to Get You Off the Ground

Step 1 Getting Started: You need to call, write, email, and beg friends and family for an initial seed capital. If you’re a student you can enroll in incubator programs at your University, which are highly effective because not only do they provide funding but internal resources such as lab space, other talented students, and expertise from faculty and staff. They also have external connections to law, accounting, and venture capital firms.

Another route would be to enroll into an external incubator such as TechStars for a complete list of similar programs check out our list. You can also bootstrap yourself, which means you basically take no salary, have no real office, and keep your job at Apple to make ends meet. When you do need to meet, the local library, Starbucks, or empty classrooms becomes your executive board room. The point of this step is to get your team on the same page and start building.

Step 2 Start Small: Rather than trying to become the next Google from day one, start with the two man team in the garage. Attend all the free events in your community and check out the organizations that are dedicated to helping Entrepreneurs. Put up your website, attract your Alpha users, and then set out to  acquire beta testers by talking about your product; the more you publicize your product the more feedback you’ll receive.

Now, you’ve built a small fan base and are gaining ground on a daily basis without having to raise any money or giving up any real ownership. In conjunction to starting small and growing your business it’s a good idea to start thinking about law firms that can support your business. Make sure you keep the buzz alive as you continue to build; tweet, make Facebook and LinkedIn groups, fan pages, etc… to get some traction.

Step 3 Grow Reoccurring Users: You might be late to launching the next version of your site or finishing a section of a product but at least you’re not burning $200,000 a month on expenses and lying at board meetings to your investors about glitches. You’re moving onto Beta users and building some traction. Hopefully you get Scott Kirsner to write a little section about your company on his blog or better yet in The Boston Globe under the technology section.

Keep the focus on your customers while continuously rolling out new and improved ways of using your product. Plan for the next milestone and slowly make your way there; your users will love the fact that you’re continuously working on improving your product/service. Make sure at this point you are a legal entity and have your books in order.

Step 4 Let Loose: By now you’re product has a user base, built some reputation, and is starting to grow 10% to 15% every week or two. You take a step back, look at your accomplishments and pat yourself on the back; okay back to work. The team is still worried about how to grow the company but you have at least started to monetize your product through sales, sponsors, and other creative selling tactics.

You have a company that’s generating some revenue, a dynamic team, relative market, and expansion opportunity.

Step 5 Financing Options: Now you can start to think about whether or not you need that VC cash infusion to take your company to the next level.

5 A – Continue doing what you are and keep building your company, without dilution.

5 B – Start looking for Venture Capital firms that meets your criteria of investment.
If you decide to go for outside investment, now that you have a tangible product or service rather than just an idea, you will be able to raise more capital, give up less, and have more control of the future direction of your company.

Check out the following post for getting ready for those meetings:

3 Factors When Choosing a VC, Building a Presentation 101, and The VC World: Funding-raising and its implications

5 C – Pick up the phone and meet with Google, Yahoo, etc… and start to work with the big boys.

Good luck taking your venture to the next level.

If you have any questions, be sure to send me an email or post a comment.
Ashkan

Ashkan[at]greenhornconnect[dot]com
 
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