In the interview below, Acton’s Master Teacher Phil Siegel explains how you can still get funding for your venture, even in today’s economy.
I recently read that a US version of the hit Brit series, Dragon’s Den, is in the works. In the show, to be called Shark Tank, budding entrepreneurs will get three minutes to pitch for investment from five multi-millionaires willing to invest their own, hard-earned cash.
“Even in these harsh economic times, people with big ideas can still make their dreams come true…” the preview claims. If you’re not quite ready to pitch your idea to five investors, picked specifically for their ruthlessness, in front of millions of people, or if becoming a reality TV star doesn’t factor into your entrepreneurial plans, don’t throw in the towel just yet.
The news ticker on the TV at the gym shows more job losses. The morning paper forecasts economic uncertainty. The radio program that you turned on in your car bemoans the subprime mortgage crisis. The economic outlook appears to be dreary everywhere you turn. However, given the right opportunity, now is a good a time as any to get funding for your latest entrepreneurial venture.
“If you’re looking for money for a new venture, there are plenty of investors out there,” Master Teacher Phil Siegel explains. “The current economy hasn’t really affected the enthusiasm for great ideas.”
However, he cautions that all the normal “do’s and don’ts” of seeking funding are magnified in this kind of environment. Siegel urges entrepreneurs to ask themselves these five questions:
- Do you have a plan? “Come up with a business plan that is clear, concise, internally consistent, and reasonable for the market opportunity,” Siegel advises – “and of course, make sure the unit economics work!”
- Do you know your customer? “Understand your customer and know why they would buy your product or service instead of what they buy today to ease their pain. Do market research, and have customer ‘pilots,’ if necessary, to prove that your product has value.”
- Do you have experts who can lend credibility to your operation? “Bring experts to your aid…They can help increase your credibility. In good times, people tend to believe your story, but in bad times, they’re more skeptical. Experts can also get investors excited about your market, technology, service offering, etc.”
- Where are the investment dollars going? “Having done your business planning and preparation, ask yourself how you’re going to spend the money that you are seeking. Who do you want to invest in your venture? What milestones are you going to reach in this round of investment capital? What will you need in terms of financing after you achieve your initial goals to get cash flows to break even?”
- Are you trying your hardest and achieving the most with the least? “Set the bar higher for yourself in these times. Otherwise, everyone else will do it for you.”
These five kernels of wisdom should help your startup weather the economic storm. “People are still willing to write checks,” Siegel adds, “They’re jut a little bit more careful, and a lot more cranky.”
Phil Siegel is a private equity investor and a teacher at Acton. He has both started and funded successful companies. He currently works for Austin Ventures, where he was promoted to general partner in the fall of 2007. There, he has a wide range of responsibilities: he works with entrepreneurs and the CEOs of the companies Austin Ventures has invested in, and looks for new investment opportunities, in addition to spending time on internal management functions. His favorite part of teaching at Acton is seeing students’ transformations over the course of the school year. “I get to see people who are very talented walk in the door, maybe a little lost, or perhaps lacking some key skills, habits or practices. But when they walk out, they are on the way to becoming great business people,” he says.
