This is the best info that we have found on startup traction and communicating it properly to investors. (Hint: It’s all about the messaging!)
At Tech-Rx, we see many executive summaries from startups and companies looking for funding. Most of them are okay, but few are truly great. The great ones seem to all have similar key points and these key points are……
No one will read your stuff. No one seems to care about your brilliant idea. Why, oh why? …
Thanksgiving is a celebration, but sometimes we forget that the first Thanksgiving was the result of overcoming hardship and collaborating with others toward a similar goal.
The reason the Pilgrims and Native Americans had such a large feast was due to the celebration of the end of preparation for the harsh New England winter to come. Similar for companies, celebration comes AFTER the hard work. Successful businesses combine grit and preparation in order to survive, the same qualities the Pilgrims needed to prepare for winter.
Celebration of Ants
Preparing for winter is a fitting metaphor for growing companies. You may remember an old Aesop’s tale called The Ant and the Grasshopper. While the grasshopper spent the entire summer singing and frolicking about, the ants worked hard to prepare for the bitter winter to come. Much like the Thanksgiving originators, the ants were able to celebrate before winter began as it meant survival. Meanwhile, the end of November meant death for the once happy grasshopper. A outcome sure to meet young companies who fail to put in the hard work.
Collaborating with Native Americans
The Pilgrims could not survive without the help of Native Americans. Being survival experts who knew the scope of the land, the Native Americans taught the Pilgrims everything they knew and provided them with invaluable capital. Today, companies need leadership experts, technology whizzes, sales savants, operations gurus and marketing specialists in order to survive. With a solid team in place, young companies have a shot at survival as they weather through the bounty of obstacles ahead.
I share these two anecdotes to stress the timing of celebration. Celebration should be saved for the success and success takes perseverance and determination. More and more, we see companies celebrating at the deposit of the first investor, but the true celebration shouldn’t come until profit is made. Like the Pilgrims and the ants, it is wise to work hard now to reap the benefits later.-Steve Hogan, Managing Partner, Tech-Rx
Unicorns think they’re so great because they’re all mysterious and magical……
I have an issue with “Shark Tank.” Continue reading
Q: What is the difference between the top 5 venture funds and ATR (all the rest)?
A: “That’s where the money is.”
Eight days ago, the fundraising scene was changed when the ban on general solicitation was lifted. For the first time in eighty years, small businesses can now raise funds publicly. Under the new 506c rule, companies who file Form D with the SEC can solicit to the general public. However, no one is restricted to filing Form D if they want to raise money. There is the option of doing it the old fashion way!
Here at Tech-Rx, we are sticking to our time-tested and trusted 506b. There are several reasons we are not jumping the boat, the chief reason being that the alternative is quite onerous. Our first turn-off with Title II of the JOBS Act is that companies are required to take dramatic steps to verify investor accreditation. Investors in 506c deals will need to provide private documents such as tax returns or broker forms to companies they are interested in supporting in order to prove their accredited investor status. I don’t know about you but I try not to make it a habit to release such private information, especially with no guarantee of privacy. (Does anyone else smell unwarranted government intrusion into personal matters?)Our second turnoff is from the standpoint of the company. Companies are required to submit details to the SEC 15 days prior to general solicitation. Do you know anyone who has their presentation materials ready two weeks in advance? It is unheard of!
Lastly, failure to follow strict protocol will result in a one year ban from fundraising. In other words, certain death. A year is a long time in the early stages of a company and a year without funding is even longer.
Amidst all of the craziness of the new rules of engagement, we want to assure you that Tech-Rx is sticking to the traditional methods of fundraising through our accredited investor network.
What are your thoughts on general solicitation? Have you ran across any issues with the new rules?
-Steve Hogan, Managing Partner, Tech-Rx
While the great recession was ugly for most, it did have a silver lining. Amidst a society where the institution of marriage is in the decline, the divorce rate surprisingly decreased during the great recession. When times got hard, marriages buckled down because they could not afford to get divorced. The risks of failing were higher, thus more work was required to keep marriages alive.
Coming out of the recession, our nation rediscovered a part of its character long-forgotten in the recent decades of prosperity. The trend of “fixing” is making a comeback. Believe it or not, there was a time when people fixed things that were broken, but at some point, it became easier and cheaper to just start over or buy new.
Relearning how to tough-out the rough times applied to the business world as well. While money never really grew on trees, pre-great recession companies certainly acted like it! Today we are seeing more and more companies bootstrapping and cutting lavish or unnecessary expenses. In fact, investors are now demanding this characteristic in companies and companies are responding with more fiscally-responsible business plans.
While the partners at Tech-Rx are natural-born fixers, die-hards and visionaries, this culture is beginning to spread throughout the industry. Companies now have an alternative to failure. Founders no longer have to throw away their hard work and precious time because they can now turn to micro private equity as an option to fix or save their company. As the Bare Naked Ladies eloquently put it, “Learn to lose, it’s easier that way.”
Micro private equity has been a long time coming and there hasn’t been this option for early-stage companies. Now there is. Hopefully with our arrival, and with others surely to follow, more innovative companies and technologies can be saved.
-Steve Hogan, Managing Partner, Tech-Rx