Yesterday I sat down with an ambitious young entrepreneur who was having a hard time raising $10 million dollars. I seem to be having a lot of this same conversation recently.
In today’s world I can promise you that raising $10 million dollars for a concept is next to impossible. I feel like saying that unfortunately it still does happen (but there is something else at play…a serial entrepreneur with a long term track record, an expert with a revolutionary and proprietary technology, a wealthy investor with an idea meets the right team to execute, etc). Still those “starts’ give everyone else a false hope. At other times, doing so has been much more likely (before the financial crisis, or the late 1990s, for example).
My advice was to start something, no matter how small, first. A going concern can gain traction, “pivot” (and then gain traction) or show proof of concept. I’m consistently hearing the same thing from both angel and VC investors…money is tight, liquidity has been difficult over the past few years, returns are skewed (to a minority of VC funds) and a lot of great already operating companies need growth capital. Complain all you like about how investors are doing more late stage than seed capital investments but it won’t change the reality.
Neither Facebook nor Google raised venture funds until they had a working product (not that they didn’t iterate, scale and change later).
One example I used was my eight year old’s favorite “Epic Rap Battles of History” videos on YouTube. Not the highest production quality but very cleverly done, my son eagerly awaits the next video (according to him there is a new one every month…but I didn’t verify his assertion…he certainly checks daily to see if he’s wrong). My son sings along to these things; he quotes them and has started reading one of Stephen Hawking’s kid books (check YouTube for why). They get five plus million views or more in the week after they go up (again….my fact checker on this is eight). I’m personally willing to fund the creator (but understand I was beat to the pitch). I just got my son a Flip for his birthday.
Do something. The costs are minimal. If it fails, at least you find out and probably quickly. Then try something different. Test your ideas in the marketplace (of truth not dreams). Raise $50,000 from people you know and scale it after it’s up and working. Money is never a panacea for a bad business plan; it just makes for a higher profile bust.
Megan Lisa Jones is an investment banker who works primarily with companies in the digital media, technology, gaming and other emerging industries. Her experience includes time with Lazard Freres, Needham & Company and Merrill Lynch. Her investment banking blog is at www.ibla.us; and she released a novel, Captive, in late 2010 (www.meganlisajones.com). This was also published on her blog.