Local entrepreneurs got the skinny on what it takes to get funded at Seed Stage Capital Outlook 2011, yesterday morning’s Potomac Techwire breakfast roundtable. Two panels—one with funders and one with entrepreneurs—generously shared their time and expertise with those of us engaged in the hunt for money.
The panels provided invaluable (and sometimes contradictory) insight. There’s too much to share in one posting, so we’ll focus on the top 10 tips from each group starting with the entrepreneurs today. They advised:
- Focus on creating a business, not on raising capital.
- Get good lawyers (and accountants) who understand how startups work.
- Make sure your spouse is on board (or if unmarried, have a support structure) because it’s going to be a long ride.
- Your idea is just an idea unless you execute. You have to show action and results before someone will open their wallet.
- Go out and build it. Don’t wait for funding to get started.
- Working on a shoestring forces you to be creative, and you can do a lot more than you know. (You’ll also be working on a shoestring more than you think.)
- Spend a fair amount of time looking at new media and traditional media outlets. Get to know these people and share your story.
- Start early and have every conversation you can with angels and Venture Capitalists (VCs). It takes a while to get to know them and when you take funds, they become your partners. You’ll want to choose wisely.
- Be passionate about what you’re working on and focus on the one thing you really care about.
- Get used to the word ‘no’… and don’t give up.
Oh, and there’s one other gem. It’s 10x harder to be an entrepreneur and get funding in the Metro DC area than it is in San Francisco. West coast funds invest 10 times the money and have a well-established network that can support entrepreneurs in many other ways. And they do.
At the end of the day, VCs on the east coast tend to be more conservative and want to see performance, then revenue. First, they’ll ask you to come back after you’ve built the product. Next, they’ll ask you to come back after you have customers. Then, they’ll ask you to come back after you’ve generated some revenue. By then your needs for funding may have changed.
On the west coast, investors want to know how big the space is and whether your team will be able to execute. There’s a higher tolerance for risk—although you still have to focus on building a business. Test, iterate, fail. Test, iterate, succeed. This appears to be the expected approach, and there seems to be an understanding that failure breeds innovation.
Perhaps the difference between east and west is also grounded in a general attitude about people. The room got a little chilly when one of the funders panelists proclaimed that entrepreneurs are “commodities.”
Daniel Odio, co-founder and CEO of PointAbout, Inc. offered the following counterpoint. “The entrepreneur is a very special driver and really is the core of the value chain because s/he creates something from nothing.”
Daniel hit the bulls-eye. A company’s value flows directly from the quality of its people, which starts at inception. The quality of leadership and whom you have on board in every role determines how well you’ll execute, which in turn is your source of differentiation and, ultimately, market success. So how, then, can a successful entrepreneur be a commodity? The local funders need to reconsider the source of value creation.
Thank you to the sponsors and panelists for staging an informative discussion. These events make an incredible difference to the entrepreneurs, professional services providers, and investors in the Metro DC area.
In fact, the information provided today validates the experience we’ve had with our own startup. We recently began looking for funding in San Francisco. As a community we need to think of the brain drain that happens when startups leave the Metro DC area. We’re losing a vibrant part of our local economy. So, if we don’t like hearing that startups are moving west to where funding is more favorable, then we can choose to change that dynamic one startup at a time.
Tune in tomorrow for the top 10 ‘must haves’ from the funders’ perspective. You’ll find their advice equally enlightening.