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US Funding Style
What a wealth of info in this group. It's been a pleasure to read.
I'm a Canadian who recently received seed money from a local community
mentor/investor to pursue a startup venture. We had a developer on board
until last week when he selected a different project (tech talent is VERY
hard to come by in my city). The mentor/investor is still willing to move
forward with the concept.
Our initial plan was to go fast and furious with a 6 month runway to build
an MVP and then pitch the concept to investor groups or apply to a variety
of well-known accelerators. Now, with no developer on board, things have
changed a little. Our mentor has had a number of successful exits within
the US to large, well know companies and has mentioned the possibility of
pitching the concept ONLY coupled with a very strong business case and
pitch deck (no prototype building). Although somewhat foreign in Canada, he
says that this is somewhat common in the US. Can anyone substantiate this?
I'm in Toronto and in my first year doing the startup thing I can say
that there are surely more sellers than buyers when it comes to
anything entrepreneurial. Some have told me what your mentor has,
which is that in the US, many companies get funded before revenue,
however in Canada this is not as common. My $0.02 is that there a
simply so many entrepreneurs around and relatively fewer investors
than in the US, investors in Canada can largely reduce their risk by
waiting until there is revenue before investing. Admittedly I have
not aggressively pursued funding yet since I am not at the MVP with
revenue stage yet, although I foresee looking locally will be tough,
and like you I think an accelerator is a more likely option as there
are a few of them in Toronto now. I'm not sure what Canadian city
you're in though, but I know there are incubators elsewhere.
On a related note, others have told me one of the biggest difference
between Canadian and American investors is that Canadian investors
prefer to fund you in stages and see how the market develops, however
in the US if the investors are sold on the market potential, the
amount of funding is increased to help discourage competitors from
entering the space.
I'll find all this out for myself soon enough, but I will say that I
haven't even dreamed of pitching to local investors before I have
launched and am seeing sales.
Thanks for your comments, Bill and David.
Bill: yes, to pitch for investment.
The question that I was really asking didn't have to do with
talent acquisition (as we have yet to really start looking), but to do with
a style of funding that is perhaps very common in the US. Pitching a
concept, to my knowledge, doesn't happen within Canada. You need to show
revenue or customers in order to successfully raise capital.
It used to be the status quo in software. Now it's not because it's so
much chraper to get to an initial product. If you were in cleantech or
biotech it would probably still be the norm.
It still happens in the valley but it is not as common.
Generally it happens based on the strength of your (team's) personal
brand. Track record, good relationships, etc
It also depends on what class of funding you are after. E.g. an angel is
more likely than a VC who has to explain to her LPs what she's Investing in
I advise putting yourself in the shoes of your investor. What makes what
you're doing so much more exciting and so much less risky. Extreme
examples: you are Marc Andreesen. You know how to 3D print DNA. Kleiner
gave you 10 million in seed. You have animal magnetism.
I'm sure its all of the above but to a lesser degree. To which degree
will probably determine your odds.
My two cents fwiw.
On Dec 20, 2012 2:17 PM, "Daylin" <day...@dotdotduo.com> wrote:
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