Make Room for the Investor in the Business Model

While some investments merit an equity position because the company is on the fast track for growth in a highly desirable industry, many startups are not.  In reviewing business models, there's a cost set aside for sales, marketing, and product development, but rarely does one see the cost for funding.  In fact, most business models don't even take funding into consideration which is one factor why so many entrepreneurs spend an inordinate amount of time raising funding.  There's simply no room for the investor in the business model.

The equity raise is giving way to the revenue-based funding investment. Investors are looking for revenue streams and attaching to it.  The implication to the entrepreneur is that they have to develop business models that take in account the cost of funding.   When was the last time you saw funding as a line item in a startup business plan?

More and more the world is moving to a pay for performance and pay for use.  Funding will go to entrepreneurs who perform and entrepreneurs will pay for the use of money along the way, and not just at the end of the rainbow.

I recommend you start making room for the investor in your business model as that will be the primary way you'll be able to engage funding.

Best regards,
Hall T.

Brendan Coffey talks about Heatgenie

Brendan Coffey talks about Heatgenie

Where are you from originally?

I’m from the Chicago area but allergic to cold winters.  Love Austin.

What university did you go to?

I got my BSc. degree from the University of Manchester (England) in 1981 and then worked in industry for 10 years before going back to Johns Hopkins for a PhD. in materials science.

What is the idea behind your startup?

Basically, for all sorts of reasons, and today more than ever, people would like to be able to have a hot meal or drink anywhere and anytime.  There’s strong market research to prove it.  But while others have tried, there’s never been a self-heating packaging technology that offered all the performance, safety, and cost characteristics needed.  That’s what we bring.

What need does it fulfill?

Our technology gives brand producers of packaged food and beverage the means to make their products available to consumers.  It goes beyond the convenience of microwave ovens to create new dining opportunities: desktop or dashboard dining, freshly heated meals in a lunchbox, etc.

What exactly does it do?

We have invented and patented a compact, very efficient, and safe heater that fits into the base of a package and allows a consumer to push a button and have hot food or drink in 2 minutes.

Who is it for?

Convenience and mobility are designed into all sorts of new products, not just food and beverage because consumers want it.  Our technology is the wireless or untethered app for eating out.

What was the most challenging aspect of starting up?

Raising funds for an early stage product concept.  It’s easier now that we are funding commercialization and have active customer interest.

What is the next step for you and your business?

Our business model is licensing so we’ve already begun the process of transferring to a manufacturer and we’ll continue to work with them as they scale to high volume.  Also product technical support; along with our packaging partners, we’re working with food & beverage brands who pay us to customize the product to their specific requirements.

What advice do you have for entrepreneurs?

Put a lot of thought into the team you need to accomplish the business objectives. The right team is what will make it successful.   Network a lot.

What resource have you found to be the most helpful and why?

Every problem you encounter has been met before so we’re very fortunate to be based in central Texas where there is an active entrepreneurial community to engage with.  

Dawn Weathersbee writes Three Steps to Leveraging Your Network for a Successful Crowdfunding Campaign

Many companies launching a crowdfunding campaign believe that signing up on a crowdfunding platform will bring supporters flocking to their project. Simply post, and they will come. But the reality is that only 2% of funds raised come from outside of a company’s own network. This was the experience of Diana Mitchell, Founder and Designer at DDCC, a fashion company in San Francisco. As a client and a friend, Diana graciously agreed to meet with me to discuss the promotion of her successful Kickstarter campaign, where she exceeded her $17,000 goal for funding the manufacture of her spring line. She shared with me her ideas for activating and expanding one’s network in order to get project backers.  As Diana found, the majority of her supporters were friends and friends of friends, showing that word of mouth is still the most effective method of advertising for crowdfunding.

Our talk led me to develop a list of three necessary networking steps for any crowdfunding campaign. These three steps should happen months BEFORE the campaign launch.

Step One: Prepare Your Network

• Talk with Everyone, Early On

Diana is one to err on the side of building trust with her customers through brand familiarity. Two months before she launched her campaign, she made an effort to discuss her plans with her friends, family, networks, and just about anyone at any event she attended. She didn’t want to appear to be just asking for money all of a sudden, and felt that putting the campaign on people’s radar ahead of time would encourage them to support her project and spread the word.

• Ask People for the Right Connections

Looking back on this time period, she wished she had also considered asking people point blank if they knew anyone with extended reach in the media, or held prominence in communities associated with her fitness products. After her campaign was over, people told her they knew so-and-so at this specific media outlet with so much reach. She says people don’t always just think of it, and you should be brave enough to ask.

Step Two: Identify Your Numbers 

• The 10% Rule

It is said that in sales one out of ten people you approach will buy. In the online world, you probably need more than ten impressions to gain one sale. Based on her backer rewards list and financial goal, Diana realized she would need to have a minimum of 250 backers. She decided that she must try to reach 10,000 people, and set about finding ways to meet that number of potential backers. She looked at the membership numbers of organizations she was involved with, and also looked at the follower numbers of organizations, blogs, and businesses likely to want to support her product and its values.

Step Three: Extend Your Network

• Be Active in Your Own Communities

You should already have established your own social media platforms and developed your own audiences long before you launch. From there, ask your supporters to spread the word for you. Diana did these things and also extended her reach by recruiting her loyal customers to be the stars of her pitch video, and asked them to promote her campaign, too.

• Join and Be Active in Your Targeted Communities

Based on her goal of reaching 10,000 people, Diana did research on the top 20 blogs associated with her product and her brand values. She emphasized that it is important to become a member of any online community before you ask them to support your project, otherwise, why would they care? When I asked her about her positioning in each of her online and personal event outreach efforts, she said to be authentic, but speak to the audience at hand. Think about what your product and your brand values have in common with the audience on any given platform and engage on those topics.

• Gather Emails

Email marketing is still cited as being the number one online sales tool. Build your list whenever you can. Diana used online sign-ups for events, in-person sign-ups at trunk shows, industry events, etc. to build her list. Other ways to grow your list can be found here on Hootsuite’s blog. When approaching friends, family, or loyal customers, always make your email appeals personal. Always offer something of value when you send your emails, and people will keep opening them.

Running a crowdfunding campaign means reaching, interesting, and activating a crowd of people. The most successful way to do this is to build your network ahead of time, and keep building throughout your campaign cycle. No one said it would be easy, but the right type of prep work will make it run more smoothly for you and help you reach the backers you need.

You can reach Dawn Weathersbee at her site here. 

Best regards,

Hall T. 

Karen Soeffker Talks about All Things Kids

Karen Soeffker Talks about All Things Kids

Where are you from originally?

I’m from Leicester in the United Kingdom originally but have spent most of my life in Germany.

What university did you go to?

Beauchamp College in the UK

What is the idea behind your startup?

Provide an alternative to toy stores that are stuffed  with mass produced, plastic, battery driven, whirring, mind numbing toys.

What need does it fulfill?

Children today have very limited access to high quality educational toys, particularly European toys. Our concept includes a Play Zone where all our toys and games are out of the box - children can interact with our toys and games in a beautiful setting.

What exactly does it do?

All Things Kids offers Exceptional toys, books and events. Each aspect of our concept has been designed to provide an exceptional experience whether it be product, service or event. The focus is always on educational, not just the toys and books but also the Play Zone which hosts toy themed birthday parties,  after school and summer classes, workshops for parents and foreign language play groups.

Who is it for?

With our flagship location on Main Street Georgetown and our 2^nd location at The Domain in Austin, our future franchisees will be able to select from 2 models – Downtown and Uptown. Although the look and feel are similar, the Downtown concept has been designed to have a more classic look and the stores marketing and communications plan is based on working closely with local businesses, schools, churches and non-profits. 


The Uptown concept has a modern, upscale finish and gravitates more towards retailing of the toys and books than the Play Zone services. Both stores are fitted out with solid wooden shelves and floors, the best possible staging for our beautiful toys. The toy islands are all on wheels and can be moved aside in a matter of minutes to allow room for magic shows, balloon artists and even talent shows! Yes, we’ve done that before. 

We have been careful to design the stores to be an experience for both children and adults. Classic toys and books remind Grandparents and parents of their childhood and are eager to share them with their little ones. 

What was the most challenging aspect of starting up?

We started out with a little inventory and in a location with little foot traffic. It took us a year to fix both issues – now both locations are fully stocked and enjoy strong traffic.

What is the next step for you and your business?

We are currently working on franchising our concept. The plan is to roll out 40 stores within the next 5 years both in downtown communities and high end Malls. Our Domain location is a Simon Property Mall, they have recently used our store as ‘Best Practice’ at their national convention. We are working with the Simon Property Group to identify similar malls to place our franchises.

What advice do you have for entrepreneurs?

-         Surround yourself with brilliant people.

-         Ask for help and take it!

-         Passion is contagious and will always get you to your goal

What resource have you found to be the most helpful and why?

The Georgetown Chamber of Commerce has been very helpful, they provide many workshops and even SCORE sessions. They have been able to connect us to business leaders as well as financial and marketing resources that we have needed.  We received the Small Business of The Year in 2012 so that was a real honor to be recognized by our peers so early in our journey.

The Texas Downtown Association has also been instrumental. Last year, we were awarded the Best Downtown Business in Texas – this has opened the door to other downtown contacts throughout the State.

Chris Forgey Talks about Light Bohrd

Chris Forgey Talks about Light Bohrd

Where are you from originally?  

I was born in Groton, CT, but grew up in Lubbock, Texas.

What university did you go to?  

Texas Tech University.

What is the idea behind your startup?  

My oldest son was the inspiration behind the idea.  My wife and I bought him a skateboard for his 8^th birthday.  It quickly became his biggest passion in life.  So of course, as parents we supported his passion by taking him all over to skate parks.  I spent countless hours filming him and taking pictures.  One night he and I were talking about some of pictures and I came up with the idea of adding lights to the bottom of the board for better artistic effect.  So that led us on our journey to see if we could make it happen.  The idea and technology have evolved from that point.

What need does it fulfill?  

Our lighting technology has evolved with a purpose of improving the way people are seen.  Better visibility improves safety.

What exactly does it do?  

Our lighting technology is unique in that it’s fully embedded.  There are no wires, switches or batteries to worry about.  The lights are motion activated and the internal power source is wirelessly charged.

Who is it for?  

We’re seeding our technology into running apparel, snowboards, marketing apparel and helmets to name just a few of the applications.  Our next focus will be safety apparel.

What was the most challenging aspect of starting up?  

There are many obstacles and challenges with starting up a business.  We originally had a focus on bringing our own product to market.  This is a very difficult challenge.  Don’t underestimate the importance of branding and marketing.

What is the next step for you and your business?  

We’re now ready to scale the business by recruiting the right team and talent to exploit our technology and seed it into several market applications.

  

What advice do you have for entrepreneurs?   

There will be many ups and downs.  The key is to keep pressing forward.  Build out a strong advisory board.

  

What resource have you found to be the most helpful and why?  

Other entrepreneurs that have had success.  They can more easily help you navigate through each stage as an entrepreneur.  They help you avoid some of the pitfalls that can detract from the real things that matter in getting your business off the ground.

Crowdfunding Strategy -- Break it Down into a Series of Communities and Campaigns

I talk to entrepreneurs all day about raising funding.  I notice that when I ask how much they are raising they give me their ultimate raise figure.  It's the amount they plan to raise over the entire life of the company.  And then they grow frustrated because it seems like an insurmountable number.  That's because they are thinking they have to raise it all at once. In fact, it's best to break the raise down into multiple campaigns.

With the emergence of crowdfunding there are now more tools to use for raising funding.  These tools include donations, rewards, equity, and more.  Each tool takes a different approach to raising funding and leveraging a different community.  The donations portion focuses on family and friends who will just give you funding to help you start.  The rewards focuses on customers who want the product.  The equity focuses on investors who want ownership.  By leveraging all three one can stair-step their way up the fund raise ladder.

Most crowdfunding campaigns run 30 to 90 days long.  After that backers and investors grow tired of seeing the deal and look elsewhere.  It's best to set a goal that can be accomplished in that timeframe. With money raised at each stage the entrepreneur can go work on the business and move it to the next level and then start another campaign.

If you would like to learn more about crowdfunding strategies, please contact me

http://texasenetworks.com/contact/

Best regards,
Hall T.

The First HyperLocal Crowdfunding Portal in Texas--the Wilco Funding Portal

The First HyperLocal Crowdfunding Portal in Texas--the Wilco Funding Portal

Williamson County recently launched their own community-based crowdfunding portal called the the Wilco Funding Portal to help their citizens raise funding for donation, rewards, and equity deals.  As the fastest growing county in the USA, the community sees quite a number of startups and growth companies.  

Companies seeking funding from their local community first whether it be family and friends or people in their area.  The funding portal is up and running with four deals on it. The cities of Round Rock, Cedar Park, and Georgetown funded the development of the portal and made it a county-wide initiative.   It was sponsored by the Chamber of Commerce and Economic Develoment Advisory councils in the area. 

Crowdfunding is the concept that allows companies to access desired funding by leveraging small contributions from many parties. With the ability to maximize smaller contributions, crowdfunding has become the latest tool young enterprises, that may otherwise struggle to secure traditional financing, are using to find the necessary funding to grow their operation.

The Texas Entrepreneur Network will be responsible for administering the website while the Round Rock chamber, along with other partnering Economic Development organizations in Cedar Park, and Georgetown will market the website to small businesses and provide oversight of the website's activities.  Focusing only on businesses located or locating to Williamson County, this will be one of the first hyper-local crowdfunding websites in the nation.

Best regards,
Hall T.

Austin Recycling Innovations Funding Forum Showcased New Technologies for Resource Recovery

I had the privilege of leading a funding forum program for the City of Austin called the Recycling Innovations Funding Forum.  We had ten entrepreneurs pitch for funding of which 6 have received follow up interest from investors so far.  

As a Zero Waste community, Austin is aggressively pulling recyclable materials from the waste stream and seeking companies to start-up, expand and relocate in Austin to use these raw materials in value-added processes. Ten companies were  chosen to make 10-minute pitch presentations before an investor audience. 

Presenting companies included local, regional, national and international companies that engaged in recycling, upcycling and reuse manufacturing. Early stage and growth stage companies demonstrated proven technology and scalable business models interested in Austin/Travis County locations and were encouraged to submit proposals.

Venture capitalists, angel investors, banks and others participated to learn more about the tremendous growth opportunity in recycling manufacturing in Austin.  The City of Austin provided information on its possible incentives through various programs and departments that make Austin a great place to be in the business of recycling.

The event drew over 130 attendees.  The presenters for the event were:

EcoGridEnergy– tire recycling– https://www.ecogridenergy.com/

Ecostrate–make signage and flooring materials from recycled plastics – http://www.ecostratesfs.com/

FillaBox–collection systems – http://www.fill-a-box.com/

Goodwill Central Texas–upcycling brorken glass – https://www.goodwillcentraltexas.org/

Grey’s Paper Recycling–recycling waste paper and old cotton – http://www.greys.ca/

Organics byGosh–composting of organics – http://www.organicsbygosh.com/

Re-Sourcery–creates crafts from upcycled materials – http://re-sourcery.org/

Rewall materials–recycles milk cartons into building materials – http://www.rewallmaterials.com/

Stitzii–recycles grease from pizza boxes – http://stitzii.com/

Technollo–recycle mobile phones – http://www.technollo.com/

You can view a recording of the presentations at this link.

Best regards,

Hall T. 

Robyn Metcalfe talks about the UT Food Lab

Robyn Metcalfe talks about the UT Food Lab

Where are you from originally?

Los Angeles, CA

What university did you go to?

University of Michigan/Boston University

What brought you to Austin?

Husband and I had been in New England since 1994 and decided it was a time for a change, better weather, new challenges, and opportunities to learn about a new area and field.

What is your group’s mission?

To promote food entrepreneurship in Austin and throughout the world. To provide new and creative opportunities to learn more about the food system.

What need does it fulfill?

A need for food-specific entrepreneurship that addresses specific issues related to food, such as food safety, security, public health. A need for a non-polarizing, public conversation about food.

What exactly does it bring to startups?

Knowledge about the food system, access to experts and entrepreneurs that possess knowledge that is applicable to the food business.

What type of startup would benefit from your group?

Early stage startups that are looking for teams, access to expertise, and general business planning skills.

What was the most challenging aspect of starting up the initiative?

Lack of a critical mass of food startups.

What advice do you have for entrepreneurs?

Solve a problem and be able to articulate both the problem in the food system and how you plan to solve it. It should save time and money for the customer.

What Austin-based resource have you found to be the most helpful and why?

UT’s research faculty who are thinking in creative ways about our food system. Also local incubators, such as The Incubation Station, who are working with food-related startups. 

Texas Intrastate Crowdfunding Law: How will it Work

Texas Intrastate Crowdfunding Law:  How will it Work

Texas will soon have its own crowdfunding law. I recently blogged on the proposed rules which you can see here.  While the JOBS act works its way through the SEC, states are passing their own version of crowdfunding.  It's currently thought that the SEC will need until first quarter of 2015 to finalize the federal version of the JOBS act.  These intrastate offerings as they are called seek to reduce the cost of raising funding.  Under the proposed rules, a company can raise up to $1M per year from non-accredited investors who can invest up to $5000 per person in any one year.  There's no limit on accredited investor investments. The startup raising funding must have 80% of their assets and revenues located in Texas and their principle office must be here as well.  The startup must raise funds through a registered Texas Crowdfunding portal and the funds must be escrowed in a bank under the laws of Texas.

The startup must post on the portal the offering which usually includes a description of the offering, the business plan, the use of funds, the management team, and owners of the business with more than 20%.  The startup must provide current financial information but the CEO need only certify it, rather than provide audited financials.

All communications about the offering must be made through the portal and captured for all investors to view. Only Texas-based investors can view the offering.  Typical forms of verification include a drivers license, a voter registration card, or tax records.