RESEARCH TRIANGLE PARK, N.C. (TheStreet) -- This past week I was working with an early stage, prerevenue technology startup on financial and funding issues. We were looking at alternative funding sources (to date, the company has been paid for from the client's personal funds, personal debt and government grants).
The company has promising research results, but no commercial products. And it's reached the stage at which personal funds are maxed out, debt is not an alternative and government grants are not available for commercialization efforts such as market research and business development.
Our discussion turned to private-equity investment, and the client asked, "Who would give me money?"
For any early stage company this is a critical question. If you don't have an answer, you better be looking for one, fast.
It's also phrased as, "Why would they give me money?" and the answer is as simple. It comes down to an investor believing in you, your business and your products.
An investor must believe that you (and your team) are capable of building or creating viable products your market will want to buy, and that those sales will lead to a profitable business model. The investor must see you as credible on the business side as you are on the product and technology side.If you don't believe in your ability to succeed, quite frankly, no one else will either (well, maybe your mom). Getting your business established and positioned in the mind of potential investors -- or bankers -- requires that you establish four critical components of your business (and your answer to "Why?").
You and your organization must be capable, credible, viable and visible.
Any organization is only as successful as its ability to demonstrate it is capable of succeeding. This includes:
- Recruiting a strong team, business and technical
- Developing a robust and profitable business model
- Establishing a functioning organization that gets results
- Setting milestones and timelines and meeting them
- Building the capacity to deliver the technology, product and/or services the customer wants