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Advice on Seed Funding for Startup

Discussion in 'Offline Marketing' started by BGceo, Oct 30, 2013.

  1. BGceo

    BGceo Newbie

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    Hello to all -

    Here is a brief overview of the situation. My business partner and I are at the stage where raising capital is absolutely necessary for further improvement/success. We have a small start-up company that deals with both hardware and software; in other words its a tech start-up. The last 4 months were spent on developing a prototype to showcase our conceptualized idea. We had reached a stage where professional renderings of our product just weren't enough. We are both part-time students which means that we are obviously tight for cash. Its also important to mention that we don't have much of a technical background and initially we struggled finding the resources needed to make the initial prototype. We really had to improvise, however, not having some sort of a demo prototype was just not acceptable. We took measures into our own hands, improvised and developed the device ourselves. The total cost amounted to less than $1000CAD as we used a lot of parts that were already available. The software part came from MITs App Inventor which is a very user friendly Android platform to those that aren't familiar with writing code. We did not have the resources or capital to develop a device from scratch.

    Currently we are in the process of scouting talents such as programmers as the major component of our device will revolve around the complexity of the software. Our company will require a team that can help us develop a second more advanced and complex prototype that can be showcased to potential customers. This product is very unique and it is targeting an industry that has not been tapped for decades. It's definitely something that an investor would love hear. That being said, here is where things get tricky. We are at the stage where we have a simplistic demo prototype which isn't advanced enough to spark interest from investors. The next crucial step would be to develop this second prototype with a small team which will be a far more convincing move. We have presented our demo to a few organizations and so far the feedback has been great. We are also MaRS clients and have access to some amazing resources which we have taken advantage of already. The problem always comes down to the money as many of you know.

    Are there any recommendations and ways for us to raise capital? I know that our options are very limited as we are a pre-revenue start-up. We have looked into many options such as government grants, loans etc. We have found that government grants tend to focus more on projects that would benefit the agriculture or health industries such as clean-tech. The chances of us getting a grant from the government would be astronomical. We are also well aware that VC firms are out of the question as they look for revenue and established customer relationship. Furthermore, bootstrapping isn't really an option. We are looking to gather around $50, 000CAD for the development of the second prototype, however, the more the better. Realistically, our chances of success are better off if we can raise somewhere north of 100, 000CAD. This is the sort of money that we are sure won't come from any friend of family member. When I did my research on seed funding I understood that it is a form of financing that is catered to start-ups in the pre-revenue phase; much like our situation. Are there any investors that post on this form that may be of help? Any recommendations any of you might have would be gladly appreciated.
     
  2. svracer142

    svracer142 Regular Member

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    Last edited: Oct 30, 2013
  3. originalposter

    originalposter Jr. VIP Jr. VIP

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    Time to get on Dragons' Den
     
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  4. washington2010

    washington2010 Regular Member

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    hey let me ask blackhatworld how to get money for my startup...

    you really know how to ask the right questions for the right people
     
  5. originalposter

    originalposter Jr. VIP Jr. VIP

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    On a serious note, congrats on taking action to start your company and building something unique, But like you admitted, you guys are on the very initial stage now with limited (or no) funding, no proven revenue stream and most of all, lack of technicial skills (especially important since you mentioned you are a tech startup). So it seems like you are really on a disadvantage here, and $50,000 CAD seems to be a risky investment from an outsider point of view. And i am sure you already know that every startup says their solution/idea is revolutionary and unique - so VC are probably not going to buy that (nor a regular joe).


    I know you mentioned that bootstrapping isn't an option, but i guess you just really need to force your way through, at least enough for a more advanced version of your prototype, so that you can showcase your concept to a bigger crowd.


    Assuming you are from Toronto, another option is to join "startup weekend", and go form a team of coders/developers/marketers and have it built. Keep in mind that your idea/concept might not be chosen, and if thats the case, then your idea/concept isn't really as good as you think it is.


    Otherwise, you can go with what svracer142 mentioned above: kickstarter.com.


    Of course, I have no idea what your idea is, so I am making comment based on a very general scenario.


    Hope it helps.
     
  6. W3bN1njaX

    W3bN1njaX Registered Member

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    I would suggest that you check this out..
    a blog post on Tim Ferriss's 4 Hour Work Week Blog titled..
    "Hacking Kickstarter: How to Raise $100,000 in 10 Days (Includes Successful Templates, Emails, etc.)"

    fourhourworkweekdotcom/blog/2012/12/18/hacking-kickstarter-how-to-raise-100000-in-10-days-includes-successful-templates-e-mails-etc/

    This should help you out
     
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  7. BGceo

    BGceo Newbie

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    This crossed my mind as well don't worry. Sometimes it works to try unorthodox methods of finding useful information and as you can see, there are individuals who posted legitimate suggestions lol.
     
  8. lancis

    lancis Elite Member

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    As someone who once visited Angel investors and VCs, and finally came to conclusion that bootstrapping is the way to go. My best advice - if you can go with bootstrapping/crowd funding, better go with bootstrapping/crowd funding (i.e. kickstarter).

    Finding an investor is a process that can continue for a year or two, thats way too much time to waste IMHO.

    But if you still insist on an investor, better try to find one on LinkedIn. That is usually the shortest route.
     
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  9. GuinnessMan

    GuinnessMan Junior Member

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    You know - the Dragon's Den idea is actually a better idea than you think. But not so YOU can get on. Great insight can be had by watching others fail on that show. Most notably:

    1. If you're going to ask for money, you should have sales.

    2. If you don't have sales, you need to show you've busted your ass to get the idea out there and that the idea is well received. How do you know your great idea is solving a problem if no one is buying your solution (and therefore doesn't really have a problem)? Have you been hammering away on the phones of people with this problem and pitching the idea? It is possible to sell a product in advance of having the product or service in the first place.

    3. If you don't have a product to bust your ass for, what have you been spending your time and money on? You spent $1,000CAD on building a prototype you can't use? That shows me your business model doesn't take into account how time and money are spent. If it does work, why have you not been showcasing it? Why not apply for patents?

    4. Above all else, do you have a business plan? I know it's so cliche to talk about business plans but, how do you intend on getting an investor's money back? What's your plan for R&D, marketing, etc...?

    Investors need to know also if you're expecting just money from them...or do you need them to work for you and provide the connections and experience you need.

    I'm very entrepreneurial at heart. I appreciate taking a good idea and making it available to the public. In the past, I've skipped steps because of either my excitement or my attachment to the products/services without any regard for the bigger picture. I would suggest in this case to get your plan together to figure out exactly how much you need. "The more the better" is a very, very disenchanting thing to hear because it tells investors that you feel that money will solve your problems. Tell that to Blackberry.

    Once you figure out how much you need, and your plan to earn it back (while not starving your business for money) then hit up the channels mentioned here. If it's socially strong, go to Kickstarter. If you can get your prototype to work - mock up some charts, handouts and info with your prototype and take it to trade shows. If you don't have time for it, cut your losses and come up with a better idea.

    BTW: This is meant to encourage you to action, not discourage you from trying.
     
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  10. blkmagic

    blkmagic Junior Member

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    Great advice, but just because others reject his idea doesn't mean it's not profitable or good. Their are and will be many inventions and ideas that are skipped over despite their brilliance.