In late 1999, everybody wanted to do a tech startup. Guess what, it was too late. The big money had been made and those who jumped on the already rolling bandwagon usually didn't get anywhere. Being a successful entrepreneur takes courage. It means doing things that aren't obvious.
What's evident today is that the stock market is all over the place and we're fighting a war on terrorism. This leaves us all with this general sense of unease about what tomorrow might bring. It's also obvious that the overall economy is not as ugly as the stock market.
So, what's the conclusion? The conservative conclusions are keep your money in insured money market accounts and don't quit your day job.
Interestingly, because of what I do as a columnist, and technology and intellectual property lawyer, people continue to fill my ear with thoughts that aren't conservative at all. New ideas didn't die with the collapse of the financial markets (although I think my 401K did). Ideas are out there and I'm starting to hear some good ones again.
However, the good ideas are up against the mantra that there's no money out there. Perhaps, that's not quite true.
My observation, and the comments from my friends that I filter deals to, is that there is an almost counter-intuitive increase in available funds for earlier stage companies and for robust companies looking for private investors to help them get to the next level. While I have no empirical studies to cite, this seems to be what's happening.
Now, let's do a reality check here. The days of a 30-page business plan creating eight-figure valuations are over. The days when it was "easy" to find money haven't yet reappeared. (These things are cyclical and as depressed as you may feel about everything having to do with the economy, I can assure you that that there will be easier to find money days ahead.)
Still, even today, there is money for good ideas. Moreover, if you are lucky enough to have one of those good ideas, your timing couldn't be better. Whether you want to do a startup or an expansion, if you get moving now, you'll be poised to take full advantage of the inevitable recovery.
Finding the Money
It is back to basics in finding money. You absolutely need two things to find investors. You need a great management team and a great idea. Either one alone just won't cut it.
Investors invest in people, not ideas or technologies. A potential investor must believe that the management team you've amassed has the wherewithal to get it done. (Of course, "it" means make your investor obscene amounts of money.)
Whether it's capital for a startup or an existing and successful business, it all begins with the business plan. You have to make your business case in your business plan.
You'll want to start with an Executive Summary that captures your reader. Figure you have about one-minute to capture them. Please avoid jargon.
I'm a tech lawyer and read business plans all the time. I can't tell you how frustrating it is to read a jargon-filled Executive Summary with more clichés than the play-by-play of a baseball game. I read them sometimes and scratch my head because I can't figure out what it is they were trying to tell me. My feeling is that if even I can't understand the "great" idea, something is wrong with the business plan.
I strongly suggest front loading the plan with information about the management team. Yes, that's right -- the team. The information about the great idea should follow the information about the team. Personally, I skip to the management team section if it's not at the beginning. I don't care how good the idea is. I know that I can't sell it to investors if the management team isn't strong.
Once you have your plan together, you need to pitch it to potential investors. If you're like most people, you don't have these contacts.
Again, it's back to basics. If you don't have the moneyed contacts, you need to choose your law firm and other professionals carefully. They can be your lifeline.
According to David Wamsley, the Executive Director of I.T. Florida (www.itflorida.com), "The number one way you meet venture capitalists (VCs) is through law firms. First, you pitch the law firm like you would pitch a VC and then the law firm pitches the VC. Finally, the law firm introduces you to the VC." (ITFlorida's mission is to make Florida a leader in high tech advancement by serving as an umbrella organization comprised of both public and private technology leaders in the state.)
I would add that other professionals, like well-connected accountants, can serve the same purpose.
It comes down to this. It's like the mid-90's again. Those with good ideas and courage, who jump in now, will be 2005's major success stories. Will that be you?