It has been a while since our Sqeeqee Group’s last blog post. Let’s just say we have been quite busy with a number of things…finalizing our iPhone, iPad, and Android apps; working with our legal counsels to put the final touches on what we call “mumble-jumble,” (terms and conditions) that all websites should normally have, especially those with e-commerce features before being completely off of “Beta” status. Last but not least, we have been traveling—“making the rounds” to different funding events across several states, from New York to San Francisco and then back to Los Angeles.
We met quite a few fascinating people like Robert Tercek (http://www.roberttercek.com), a genius who is usually way ahead of our time in innovation. We sat in for his nearly 45-minute “Vaporized” presentation at a recent LaunchFEST LA event hosted by iHollywood Forum in Santa Monica, CA, and we thought some of his points were quite fascinating. Then there were the guys from a Funding Post (http://fundingpost.com) event on the East Coast who threw a great event with a ton of entrepreneurs, Angels, and Venture Capitalists all in one compact room, presenting ideas, networking, and of course chowing down on a buffet-style dinner—the buffet was awesome!
We also attended an all-women’s event hosted by the women at Women 2.0 (http://www.women2.com) where we learned from Fran Maier (one of the members of the founding team for Match.com) about how Match.com’s founder, who created the world’s biggest dating website, only walked away with $50,000. Boy, doesn’t that hurt?! We’d done a lot within the first two months of 2013, and we didn’t even include the in between flights to a number of one-on-one private funding meetings; follow-up meetings; and back-and-forth meetings to negotiate the term sheet, management, and board members! So you see, we have been busy, very busy!
Raising capital is inevitable for startups. It is the number of times concerning “Who” we meet and “Where” we meet that lead us to having a quicker answer as to “When” capital will be received. Raising capital is a never-ending story and literally a full-time job in itself. There are a lot more events scheduled for the rest of this year. While our Group is looking forward to each and every one of those events, but we are planning to keep ourselves busy ramping up a positive revenue stream for the company instead (hint!).
As we were hoping from one airport to another these past few weeks, some of the most intriguing news that we read on our smartphones was how Marissa Mayer, chief executive officer of Yahoo!, made headlines for banning “working from home” by asking all Yahoo’s remote employees to start coming into Yahoo’s offices by June and stating that anyone who couldn’t or wouldn’t should quit. WOW! Our first thought about Ms. Mayer’s announcement was that either it was quite smart if she was taking the route of “self-termination by quitting” because Yahoo wanted to cut costs and avoid a massive layoff, or two, that she may face criticism for being the head of one of the largest tech companies in the world while not understanding the nature of modern work—working remotely. Since our Group has members working remotely, we cannot say if Ms. Mayer’s decision is right or wrong because it should be based on individual companies—large or small. Only time will tell if Ms. Mayer’s bold strategy will work for Yahoo in the long run. Who knows? If it works out perfectly, “working from home” may become something of the past as others follow suit. That will certainly help boost up the currently depressed commercial real estate market, since most companies would need larger office space to accommodate all of their employees. Either way, we give Ms. Mayer “kudos” for making this very bold, courageous, and tough decision and for diving into a territory that none of her predecessors wanted to deal with. As for our Group, a number of our members are working remotely and will continue to doing so because it has been working out well for us—at least for now. Ha-ha!
Finally, based upon our experiences, we’d like to give our thoughts, opinions, and advice to the many entrepreneurs who are seeking startup funding. While Sqeeqee is also a startup, but after meeting with several dozen visionary entrepreneurs, we know that our Group is in a separate league of its own. We have a number of seasoned management members and great advisors. Bottom line is, we just know what we’re doing.
Here is our Group’s opinion on raising startup capital:
1. As an entrepreneur, you should ask yourself what stage you are in. An idea? A vision? Embryonic? Prototype? Emerging? Alpha? Beta? How about is your company “Growing” or “Mastering” its revenue? It would be extremely difficult to seek funding from Angel Investors with just an idea, a vision, or even being at a prototype stage. At these levels, it would be best to dig out one’s savings, credit cards, school loans, and most importantly, funding from friends and family. There’s a saying that goes, “If your own friends and family would not lend you a dime for your vision, why should anyone else?” Makes sense, right? We would also suggest you visit a number of Crowdfunding sites, apply to a number of University Incubators, seek out “initial seeds” Accelerators, and contact a number of “Seed Stage Angels” if you’re lucky enough.
“Normal Angels” invest in a company when it is at a “Growing” stage, and Venture Capitalists (VCs) and Private Equity (PE) players will dive right in to give you money if:
● your company is in an industry that has huge potential
● your company has a seasoned management team with a proven track record of making business decisions and executing them appropriately by understanding its own business, its competitors, and the markets it is competing in; and
● your company is profitable, which would be a great thing, but it is the “sustainability of your business” that is usually more critical. Most importantly, have a vision to make it big—huge!
Our Tip: VCs mostly focus on technology, bio-tech, and clean-tech types of industries, whereas PE companies invest across all industries. PE companies almost always buy 100% of a mature and publicly traded company through leveraged buyouts (LBOs) of at least $100 million and up into the tens of billions for much larger companies, in a combination of equity and debt. VCs only acquire a minority stake—usually less than 50%, less than $10 million for early-stage companies (like Sqeeqee ), sometimes pre-revenue (like Sqeeqee ), and strictly in equity only. So, if you’re just a startup, forget about Private Equity firms and stick to either Angels or VCs.
2. “Angel Investors” normally only invest from several thousand to no more than $1.5 million ($2 million is rarely seen). If your company has what it takes to seek that “Series A” Round (like Sqeeqee ) of more than $2 million, then it would be best to sit down with a number of VCs for a VC deal syndication. Why “Venture-Capital Syndication?” Well, let’s just say that there is a limit to the amount of capital that a venture fund can commit to any given startup. If your company has two VCs (as commonly is the case for the Series A Round), the theoretical amount of capital available to your startup is greater. Voila!!
Our Tip: Be prepared to give a clear and precise “Exit Strategy” since you will be asked. We’ve heard a lot of entrepreneurs’ answer that they would take their company to IPO 3 to 5 years out. We are NOT saying this is the “wrong answer,” but if we were to take a look at the data, which we believe is for every 30+ million businesses, there would only be 10,000 or so able to seek the IPO market. Therefore, it wouldn’t be a great choice as an answer to an exit strategy question. A great exit strategy is purely having your company acquired. It is every Angel’s and VC’s dream!
3. Which top three cities in the U.S. have the most startup funding due to them having the most active startups? According to a report written by Jeffrey Bausch: “25 Most Active Startup Cities in the World,” here are the top three cities:
#1 is Silicon Valley (San Francisco, Palo Alto, San Jose, and Oakland)
#2 is New York City (NYC, Brooklyn)
#3 is Los Angeles
Globally, London, Toronto, and Tel Aviv fall somewhere between NYC and Los Angeles, but if you stick to just the top three areas in the U.S., you should be in great shape!
Our Tip: If you are launching a business outside of these top three areas, MOVE! While traveling to any and all events offered in these top three areas should be most productive to getting that first initial investment check, it is also quite costly. If your company can sustain it, then more power to you. Otherwise stay local. Our Sqeeqee Group has been traveling nationwide, and we believe it is quite beneficial. The more people you meet, the closer you’ll be to obtaining the capital your company needs.
We will conclude this blog post with this: As “bloggers” ourselves, we often like to read a number of other people’s blog posts as well. One of our most-liked blog posts is “Learning by Shipping” (http://blog.learningbyshipping.com/stevesi/) by Steven Sinofsky. As you may or may not know, Steven was the former president of the Windows division at Microsoft. He ended his 23-year career with Microsoft just late last year. Particularly, our Group really enjoyed reading his latest blog post, “Dealing with Doubt and Over-confidence in Building Something New” that he posted on February 27 because concerning many of his viewpoints, we have been there and done that. There are a number of things, challenges that will always lie ahead for each and every company, startup, or mature business—some known, some unknown. Take Steven’s advice, “…just stubbornly move ahead as though no one has expressed any doubt.”
Our final tip from one startup to many others out there is this quote by Henry David Thoreau, “What you get by achieving your goals is not as important as what you become by achieving your goals.”