Startup Funding – Chase for Business – Chase


Hennessey: It’s interesting, all three of you touched on the cost of different types of funding. Can we go back and do kind of a nuts and bolts
look at what funding types are out there and maybe even address why a lot of startup folks
don’t understand the cost of the money that they’re raising or borrowing. Levine: For me the hierarchy is: Revenue, that’s the cheapest money you’ll get, meaning make something that people want to buy; and then
debt and various forms of debt. And then very far down the list that would be forms of equity.
Obviously, there are different forms of debt, there are different forms of equity. But I
think Wole was exactly right in pointing out to companies that they should look at all
of these things. I’d also try and make the point here that, and it’s an important point,
that we’re in a hangout that is sponsored by and brought to us by Entrepreneur magazine.
We think about entrepreneurship sometimes a too narrowly, at least in my world, around
tech startups and maybe things that sort of loosely fall under the umbrella of something
Google might buy, and I think that’s way too limiting. When you think about the percentage
of jobs that are created by small businesses and entrepreneurship and entrepreneurial activities,
the vast majority of those don’t fall into the tech sector. I think and I’m sure that
your readership are entrepreneurs that are working on businesses that are businesses
that would sell to Google and I think it’s important to point out that entrepreneurship
is a very broad tent and as we think about funding businesses and we talk about that
we should think about how broad that group. And these are businesses that have, for example,
fixed assets that they can more easily finance with bank debt which you wouldn’t want to
finance with equity dollars for example. And you know I think that depending on the type
of business that you’re building that will dictate both the total need for capital as
well as the type of capital that you seek. Coaxum: One of the things that came up here in Denver for StartupWeek and really having some fabulous conversations with entrepreneurs as well as
social investors who are very focused on the $5,000, $10,000, $15,000 investment which
on the surface may not seem like a lot of money but if you have a startup opportunity,
there are lots of places I think that are worth exploring for funding and which may
not require that you give up some of the flexibility that you would have to give up if you deal
with the Foundry Group, for example, at an early stage. Levine: Along those lines there’s also grant money available to various startups. I just was part of a small group through the SBIC that
helped grant $50,000 to each of 50 in this case business accelerators but that was no
strings attached money. Right, I mean, there are that’s a little bit of a different type
of grant whether they be from the government, from the non-profit sector or other sources
for grant money. They’re not a bad way to fund your startup if that’s available to
you. Nager: I agree with both of you guys and to get back to some of the nuts and bolts of this thing, why do people even need money? I think that’s
often if you survey entrepreneurs that’s always the No. 1 thing that people point towards
and it’s really a tool for risk mitigation. Because people think about starting a business
as being risky. Well, they need some guarantee of financial security before they can quit
their other job. You know that’s probably the most common story that we hear. And that
narrative is actually I think one that is worth looking at a little bit more seriously
because the average cost to start a business is on average less than that of a new car
these days. And so when we have this sort of notion of risk really tied to starting
a business, yes it’s risky but we take risks in our life all the time. It’s an opportunity
to buy a car, it’s an opportunity to start a company. I think that as we start to dive
into the conversation understanding financing as a tool for risk mitigation is really the
most common narrative for folks in understanding as entrepreneurs just ask yourself, why do
you need the money? Do you really need the money? Coaxum: It’s funny when you put that kind of frame around it you ask the tough questions. Maybe I don’t need to have the Rolls Royce prototypes.
Maybe a basic prototype will do which will allow me to get proof of concept and allow
me to get customers. As Seth pointed out earlier, revenue is one of the cheapest forms of financing.

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One thought on “Startup Funding – Chase for Business – Chase

  1. Good points about small businesses are mostly NOT in the tech sector! So for most startups Angels are the best answer. For 8 short, free training videos go here: www.investorsformybusiness.com –

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