Big News: FounderDating is joining OneVest to build the largest community for entrepreneurs. Details here
Latest Notifications
You have no recent recommendations.
Name
Title
 
MiniBio
FOLLOW
Title
 Followers
FOLLOW TOPIC

Question goes here

1,300 Followers

  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur

Is it absolutely necessary to raise money for tech startup?

I've never been one to ask for money and I didn't start a company to raise money, however raising capital is the conversation of the day. It seems to be more important in the eyes of most entrepreneurs than actual sales. Why is that?

My company, Dycap makes software that automates cameras using recognition software to remove the need for camera operators. We have branded our tech. as the "Software camera operator". We use our technology in higher education, enterprise video conferencing and training, and houses of worship. Main focus is on higher ed. Since completing the tech back in April we have generated $20k in sales. The only money we've raised is 15k from our accelerator.

We use channel partners and the industry is very excited about fixing their problem of recording more content at a cost effective rate. Capital raised would go into marketing and sales infrastructure, but my fear is the time that it takes to raise capital will slow down the companies progress. Our bottleneck is not having the capital to give all the interested channel partners demo units to test immediately and sales cycle length.

With the vast majority of companies never getting to series A, how important is the investment process?
When are sales considered to be self sustaining for the company and outside capital is not needed?

12 Replies

Ema Chuku
1
0
Ema Chuku Entrepreneur
Designer. Product Developer. Founder @ NuPad
No it's not absolutely necessary to raise money.

On the other, it's true more capital helps in propelling a business. However, there are many ways to achieving this as well.

The truth is, you don't hear about companies not raising money and still making it. It's probably a small percentage that's raising money but somehow media only publishes that. Therefore, there's this belief that most have, I will start a company (startup) and raise capital through investors.

Quite frankly, if you can grow your company through sales, ditch the "raise money" mentality/idea.

Or perhaps, save that "capital raising" idea until when you really do not need. The process becomes less daunting.


Nofyah Shem Tov
1
0
Nofyah Shem Tov Entrepreneur
Founder BlogMyLunch
If you have good, strong social media following, or a network of social media followers that can make people act, and you have the skills and people with skills to get stuff done without the money, then you can probably get started with no money. I didn't raise money, and I run my startup on less than $200 a month, and I am in serious trouble because i have no money for advertising and my social following strength, even with over 25K still isn't enough. So think about it. Nofyah
John Seiffer
7
0
John Seiffer Advisor
Business Advisor to growing companies
No. Not only is it not necessary, the vast majority of companies don't do it. VC's only invest in about 3,000 new companies a year. Angels maybe 60,000. But there are something like 250,000 companies started. These are US numbers. In addition somewhere around 50% of the companies to IPO in the last 50 years did so without raising VC money.

Raising capital is, as you say the "conversation of the day" because it makes a more interesting story than, "I made a product and sold it to customers and we grew the company - just like all the gazillion other companies since forever..."

I'm exaggerating a little. Here's the thing.

Raising capital only pays off for the investors if you grow very big very fast and sell the company (either to an acquireer or to the public through an IPO). In some cases (though very few) growing big and fast also makes business sense. In most cases it doesn't, and it introduces a whole lot more risk into the equation. When that happens, to quote Chris Dixon (a VC), "a wide range of outcomes that would otherwise be good become bad." http://cdixon.org/2012/07/19/shoehorning-startups-into-the-vc-model/

I'm a mentor to a local accelerator (one of the best in the US) and I tell this to people all the time. It changes your business model to grow from selling to customers, it changes your definition of success, but it usually reduces risk of failure and puts more money in the founder's pocket.

Kelly Kuhn-Wallace
1
0
Kelly Kuhn-Wallace Entrepreneur • Advisor
Marketing and Strategy Consultant
External cash can help you scale, and investors often bring expertise and connections that your team may not have.

Is fundraising required? No. Not in the least.

As for your immediate sales cycle issues, I would never send a demo unit into a higher ed setting without a team member to demo it -- and close the deal. To make the travel pencil, book appointments at all of the higher ed institutions within reasonable driving distance during that same trip.

If you haven't yet, track down a professor/grad student team interested in A/V studies. If you're lucky, there might be an ongoing study on what kind of video recording is most effective for educational purposes. If not, try to engage such a study to compare video made with your device v. Off-the-shelf. Academics respond very well to research from their own team, even if it is vendor funded -- be sure to disclose to the point where it is ridiculously clear.

I also would recommend beginning a parallel path selling to corporate training departments. Many of these are asked to produce video content for the first time, and smaller companies have limited resources. Case studies told from the first person are the way to go here: tell the success story using video. Once you gain some experience in this sector, I believe you will find that it closes faster, requires less support, and accepts a higher rate than higher ed.

Wishing you the best of luck as you continue to grow.your business!





David Austin
1
0
David Austin Entrepreneur
Entrepreneur
Getting funding can be unnerving for a number of reasons ... You've mentioned one: that fund raising can get in the way of execution. If done right however (strategic fund raising via strategic partners) it can be part of you business plan and execution, forwarding instead of getting in the way of you goals.

The need for fund raising is one of vision. If your vision doesn't require it then don't worry about it. Those envisioning ballooning growth will often require it.

Furthermore experienced VCs will often pass on ventures unless they hope to increase their return ($10s of millions per startup) by an order of magnitude ($100s of millions) relatively quickly. It's a high stakes game where the seed funding you received is just a very very small preamble, but still a noteworthy start. Congrats on that.

Keep executing well, and at some point your vision might change and then you'll see the need for it.
Neil Licht - HereWeAre
2
0
Want To find-close Business Online without competition Before They Google Search? We solve this problem 1(508)-481-8567
Coming from an industry where the demo is a strong part of the sales process, we did one of 2 things that you can try to get immediate traction and sales plus distribution/dealer/reseller channels without having to findmore cash investment

1. We provided a demo at "cost" that our dealers "bought". We agreed that when they hit $x in sales, the demo cost would be refunded and the demo kept free orresold That got us dealers who went beyond saying "I like this" into actually comittingto selling our product/process.

It also got us the added advantage of the local reputation of the dealer leveraged on our behalf and via their locally or industry respected and connected sales folks so we were not seen as a new product or unknown. That got us a fast start and a great long-term sales relationship that we both nurtured into a long-term growth relationship. We could also add new products into that chain, fast started, upsold and adding more profit for all of us.

2. Instead of trying to get dealers and distributors to sell for us, We instead asked potential dealers and distributors why we shold select them to sell our product. They had to convince us why we shouldttakethem on as our dealer/distributor.

That worked for us in many ways re gettinga fast start and a long-term sales-market development arm for our product/service/software. We clearly got toknow the kind of committmentwe would getfrom them and we selected accordingly. The dealrs/distributors we selected that way became very active, were committed to succes, saw the value and market edge we offered and then made sales happen. We developed this into a long-term loyal relationship that grew business exceedingly well into many different channels.

While looking for ways to raise cash, please Try both of these self-funding approaches since they both work. BTW, my industry wasthe physical security industry, exceedingly competitive but we outfoxed the competition using the two approaches above.

There are apps in the CCTV industry that almost do what you do. Yourconcept seems to make a lot of sense for CCTV surveillance. You may want to check out that industry as a partner in the security space not just the camera space.
Brendon Whateley
0
0
Founder at Kugadi
No need to raise money unless it makes sense to do so. Some businesses won't be able to raise money because the goals will not align with investor needs -- so-called lifestyle businesses.

Others won't want to raise money because they can organically achieve goals or effectively can "raise enough" from the founders.

The only ones that should raise money are when extra funds will materially accelerate the company growth. Or, the more difficult case where you need a lot of money to bring the product out, but it would be a game-changer if you succeed. The former case is "we have a proven sales model and need to crank it faster." the latter is "this is a long shot, but worth so much if it works out, it is worth a bet."

Philip Wheat
0
0
Philip Wheat Advisor
CTO/Co-Founder at Drone Labs, LLC
It also depends on what type of tech startup you're doing. Consulting/services is the easiest to bootstrap. Software product depends on what you need for a MVP - enterprise companies can need a good bit of up front work, consumer products can need very little to get into the market. If you're looking at a hardware component to your startup - you'll need to at least have a plan for some investment. 3F can sometimes get you there, but it's going to take longer and cost more than you think. ESPECIALLY if you're looking at getting into any retail channel.

Don't raise unless you have to, but if you have to, don't drag your feet.
Brett Gentry
3
0
Brett Gentry Entrepreneur
Program | Product | Operations | SaaS/IaaS Engineering
Short answer: no. In fact, having little to no money forces you to focus, and hopefully test your showstopper assumptions up front. I recently tested a technology startup idea, developed a hosted MVP on Google for Work so I could validate my assumptions, all for $20 and a month's worth of personal effort. That said I knew how to do the market research, put together a website, script the MVP, interview customers and suppliers, etc... So if you need people to help in key areas you'll either need money or a good pitch to get people excited to help.

In summary, focus on the stuff that will kill your idea and do that as quickly and inexpensively as possible.
Dave McCarty
2
0
Dave McCarty Entrepreneur
Sales & Marketing Consultant w/ Startup Success
Having recently been down the path of no funding (minus some small family and friends investment) the startup I was recently a key part of sold in approximately 3 years and with very minimal dilution. This is a not easy and below are a few thoughts from my experience.

1) Start off with direct sales approach that puts you in direct negotiations / feedback with end user companies. My opinion is avoid channel players as they can more often then not impact the flow of critical prospect information and in turn negatively impact your value proposition / pitch. Channel demand will grow (and be a future option) as you establish your company as a force to be reckoned with.

2) You need a talented sales person capable of not only closing your initial clients but negotiating contracts that best monetize your offering consistent with your current company capability and market value proposition. That means also a keen eye for cash flow opportunities including prepayment opportunities and monetizing of select customization requests. Get some experienced sales talent embedded in your key customer facing positions. Somehow sales is often overlooked as a function anyone can do and frankly that's just not the case.

4) Find and develop VIP client(s) that are willing to subsidize key development initiatives that mutually satisfy their critical needs while simultaneously advancing your product road map. This is the best type of funding and a win /win for you and the client if done correctly

Good Luck

-Dave


Join FounderDating to participate in the discussion
Nothing gets posted to LinkedIn and your information will not be shared.

Just a few more details please.

DO: Start a discussion, share a resource, or ask a question related to entrepreneurship.
DON'T: Post about prohibited topics such as recruiting, cofounder wanted, check out my product
or feedback on the FD site (you can send this to us directly info@founderdating.com).
See the Community Code of Conduct for more details.

Title

Give your question or discussion topic a great title, make it catchy and succinct.

Details

Make sure what you're about to say is specific and relevant - you'll get better responses.

Topics

Tag your discussion so you get more relevant responses.

Question goes here

1,300 Followers

  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
Know someone who should answer this question? Enter their email below
Stay current and follow these discussion topics?