BC Start-Up: Raising the seed money

BC Start-Up: Raising the seed money

Published in the Thursday, November 8, 2007 Edition of The Heights
By Alex Lindahl

From the moment we wake up on Friday morning at 7 a.m., there isn’t a
minute to waste. This Friday, as with almost all Fridays, we will make
five investor presentations – in rapid-fire succession.

We
won’t take breaks because there isn’t any time for them. The minute an
idea pops into an individual’s head and he or she chooses to follow
through, it’s a never-ending race to launch.

Adrenaline
pumping, I throw on some slacks and a crinkled shirt I wore last week,
shovel some food in, and race over to Miles’ house to pick him up.
Dressed in similar attire, business casual with a dash of disorganized,
Miles darts to the car with the Mapquest directions folded in his back
pocket and we are on our way to presentation No. 1. The ride there is a
non-stop discussion of personality analysis: Who is the person? What is
his relationship to us? I tell Miles this particular guy tends to be
very impatient in the mornings, and we should spare him all details
that are not essential. Miles tells me that given his profession, we
should focus on concept and steer clear of the financials. In sales we
have learned quickly that a well thought-out, strategic approach to a
meeting is almost as important as the content.

After we engage
in our traditional pre-meeting fist-pound, Miles and I enter a living
room, office, café, trading floor, hedge fund, or wherever else the
presentation may be taking place, and we attempt to do one of the
hardest tasks out there – raising money. How does one get a typically
risk-averse person to shell out thousands of dollars to two 21-year-old
first-time-around entrepreneurs with an idea? Good question. To make an
analogy, we are selling a movie on a trailer. Yes, our products are in
design and development, but we currently cannot present tangibles,
which makes investors uneasy. It’s a chicken-and-egg story. We need the
money to make the product and we need the product to raise the money.
So, we are forced to sell like nobody has ever sold before.

After an hour and a half of building rapport, presenting, fielding
questions, and introducing our start-up, Textworks, it’s time to drop
the line: "Well, we hope that we have piqued your interest today, but
in order to get this service to the market, we need a quick infusion of
capital to get V1 in the air. As you know, we are in our
friends-and-family round of financing to raise a minimum of $100,000,
and, as entrepreneurs, we wouldn’t be doing our job if we didn’t ask
you if you would like to invest. We are selling 8 percent of the
company, at a $2.5 million valuation with a minimum investment of
$10,000. Would you like to invest in Textworks?" That constitutes our
Fridays and Saturdays.

Even
as I write about this right now I can’t believe how far we have come.
The one thing about being a college entrepreneur is you are young,
fresh, and full of ideas, but given your lack of experience you are
always at a disadvantage. But, that’s almost what makes this so fun and
invigorating. We’re always a little bit hungry, always on our toes.
Nonetheless, in nine weeks we have made over 25 presentations to
potential investors, raised $90,000 in seed financing with another 30
to 50 on the way, retained a lawyer for 2 percent of the company, and
continue to present to venture capital firms, some of whom sat on the
panel of the Boston College Venture Competition where we took second
place. (I highly recommend the BCVC as a starting point if you are
interested in entrepreneurship).

We have learned valuable
lessons throughout this process:

(1) Fund-raising is a difficult
process and will take a lot longer than you think;

(2) Even though some
people will become very excited and say they will give you the money,
never count on having that money until it is actually in the bank;

(3)
Some people will be very helpful and introduce you to connections, but
other seemingly helpful people are of no use;

(4) If someone doesn’t
invest, always try and get another contact out of them;

(5) No
appointment is wasted because you will always learn something or figure
out that a part of your business plan needs more attention;

(6)
Networking is just as important as raising the money;

(7) Don’t give up
if the first 15 people don’t give you money. Instead, you should be
happy because you are getting closer;

(8) Sure, there will be some
downtime, but to launch a company is to change the way one lives.

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