Nothing Ventured

As I said in my earlier post, I met up with a Venture Capitalist (lets call him Charlie) and had a very interesting discussion over a bite to eat along with my business buddy.




We discussed many things including sources of finance and developments on my idea, and I thought I would give you a flavour of our discussions, but leave the details on my gorgeous ravioli for another time...




SOURCES OF FINANCE



Basically Charlie and most VC's don't get out of bed for anything less than £2m! And this £2m is not the total, but probably more than likely just the start of seed capital. And luckily for me, VC is one way to get funding, but not the only way.


He suggested a couple of sources of finance...

Family & Friends - using friends & family to contribute sufficient funding to get to the next level, such as banks, Venture Capitalists by proving the viability of your concept (either by actually producing the physical idea or by researching the concept with users).

Banks - through a number of different ways banks can help start the ball rolling. They can offer personal overdrafts or perhaps credit cards can offer a solution. They can also be approached for loans for equipment or other assets. The government's small firm loan guarantee scheme may be an option to consider.

Grants - A list of grants is available through Grantnet or through the Government which has an array of funds available but also in most cases requires matching private sector finance. European funding is also available through http://ec.europa.eu/enterprise/funding/index.htm or http://ec.europa.eu/enterprise/entrepreneurship/financing/index_en.htm

Third Parties, like Business Angels who are individuals willing to invest start up cash in return for a share of ownership in these companies... its a bit like Dragon's Den...

Local Enterprise Agencies - these are quasi public bodies throughout the UK that support and sometimes finance local business and start-ups. They may be able to help across a number of areas... helping to find premises, marketing & sales support, consulting, training and counselling - the NFEA will help you find your local Enterprise Agency. Business Link is the probably the best place to start to find out general information

DEVELOPMENTS ON MY IDEA

I pitched my idea to him over lunch in a straightforward way and, in his eyes, this was a "niche" idea, especially as it wasn't developing breakthrough technology or radically changing the economics of it all. Now part of me at the time was like "Niche? I'll give you niche!" but I think what he was meaning was that it was specific to a certain field and a certain area. He's probably looking at fields which are broad in their use like bio-technology or electronics - both of which have much wider opportunities.

One thing he did start to point out was that my level of experience in starting up a business is limited and the industry into which I am plunging I know relatively little about, and he suggested that I gain some kind of support either directly with a partner who has background in this type of area or perhaps a mentor who can guide me through some of the ups & downs. Not a bad idea for the future...

He also suggested looking at different sources of income and also different sources of supply. Income was an interesting one as he thought the key was in offering my product for as little as possible, perhaps even free and fund the cost through advertising or selling data. Both of these revenue streams I had considered in the past but am not confident they will cover my costs never mind actually offer margin for myself or for the retailer. Definitely one to consider in the future to help improve my margins over the long term.

As for sources of supply, this was actually a key thought about how I can get from where I am now to where I want to be. I am testing my product by using a bodged method of different components and perhaps by using a third party's systems I can reduce my per unit costs until such times as i reach a critical mass and can spin this out on my own. The other great benefit of this is great expertise

I asked him about how people pitch their ideas to him. Generally with an "elevator" pitch of 2 sides of A4, and then, if he likes or is intrigued by the idea he invites them for a follow up meeting with a short 40 or so slide presentation. A business plan is not critical but it can help.

So all in all, I found the meeting pretty helpful, though I did leave in a bit of doubt. Doubt about what was the right way to finance and other income streams to consider But at least I know that VC is not for me...