Getting Venture Capital (VC) funding is very unlikely if you’re a newbie entrepreneur- unless you’ve got a prototype or proven model. We all hear tales of a VC-backed company getting bought by Google or going public in an IPO. While this does happen, your everyday startup won’t generally get funding from a VC. Only 1 in 500 startups is VC-backed and that’s typically limited to the Silicon Valley tech startups. Usually, you seek VC funding once you’re up and running. There are exceptions of course but watch this short video of Divya Gugnani, VC turned entrepreneur. Divya has a lot of insight on the possibility of getting VC funding as a startup, and other alternative options for the many startups that can’t get VC funding. I’ve known Divya for a couple of years now and respect her advice and guidance.
So, where do you get funding to get going? At this stage, leveraging your savings or tapping into friends and family is the best bet. Also, for smaller amounts- say less than $50k, crowd funding is an option, check out ProFounder. The founder, Dana Mauriello, is truly brilliant. Rather than sell you an equity stake, investors buy a percentage of your future revenue streams. Think of it as a royalty of sorts. It’s a great way for people to invest small sums in startups and help you get $$$ to launch.
If that isn’t an option because you need a lot of capital- something in excess of $100k- and you don’t have the resources to do it, there are Angel investors to consider, who are wealthy individuals who will take risks to invest in startups. These folks don’t know you so if you get the opportunity to get in from of them and pitch, make sure that you get them to really understand your business, how it’s going to make money, and why you’re the person to make it happen. Make sure you’re prepared to invest the time to foster these relationships because it can take several months at minimum to secure a deal. Gust has an extensive list of Angel investors.
In summary, unless you’ve got an online/scalable prototype, don’t waste your time looking for VC funding as a startup. Start with your own resources, and then hit up friends and family. Once you’ve got the business going and you think you need more capital, Angel investors or possibly VCs may be next on your investor hit list. Good luck and keep me posted.