Should you try to raise money for your new startup business?

Having raised money for several startup businesses this is a question I get asked all the time. While I don't claim to be an expert on the subject matter I can certainly speak to my experience. I also need to say that this is an exhaustive topic that takes far more than a simple blog post to cover. That being the case, I'd like to address just a small piece of the puzzle today, what I call the TWO ENTREPRENEURIAL PRESSURES.

TWO ENTREPRENEURIAL PRESSURES

Pressure 1: Customers

As an entrepreneur you will always be dealing with customer pressure. And as the business founder you will never be far from the front lines. I've heard a number of business owners refer to the feeling of always being "on call" for their customers on nights, weekends and even during vacations. Been there, done that. Like it or not, that's real, unavoidable pressure for every entrepreneur.

Pressure 2: Investors

While Pressure 1 is unavoidable (or you'll quickly find yourself out of business), Pressure 2 is optional. I don't want to spend time here today discussing how to decide whether or not you need to take on an investment for your business, but I do want to point out that once you go down that road you have opened up pressure from a whole new dimension... Investors. It turns out that investors don't invest in your business because they like your idea or like you as an entrepreneur, although those are preliminary requirements. Investors give you money because they like money and believe you can make them MORE! If you meet or exceed your business plan you'll hear little to nothing from most experienced investors as they'll be confortable that you're hitting the goals you proposed on the front end which means they're on track for the returns they expected when they made the investment. However, when things don't go according to plan, an lets face it - they rarely do, your investors are going to demand (and deserve) an explanation and demand (and deserve) a revised plan and demand (and deserve) up-to-the-minute play-by-play until you get back on track.

SUMMARY

This post is not meant to suggest that taking on an investment in your business is either good or bad. As a matter of fact my personal experience is that the right investor brings far more than money to the table and far more good than bad to the table (see this post for details). The main point I'd like to make here is that as you consider taking on an investment for your business keep in mind that the pressure you now feel from you CUSTOMERS will potentially now be bookended by new pressure you will feel from INVESTORS. Many entrepreneurs start businesses because they believe they can build products and provide services better than anyone else in the market and don't need anyone pressure from anyone to tell then how to do it right. When you start "working" for an INVESTOR you potentially compromise that ideal scenario. 

Can you get on the next season of Shark Tank?

Since my national InkFlip TV debut (which also happened to be my national TV finale) I often get asked by other entrepreneurs about both the PROCESS of getting onto Shark Tank and the LIKELIHOOD that there will be another season.

PROCESS
Personally I found the process of getting on the show for InkFlip.com to be relatively painless. Here's how it went.

• In early July of 2009 I was told by a friend that she heard about a show for entrepreneurs that ABC was filming and that they were still taking applications. I believe she said, "You've always got all these crazy ideas - you'd be perfect for them".
• Not knowing anything other than what she told me I went to the ABC web site, found the Shark Tank section and clicked on the Casting link.
• On this page I found the following information - which is still there as I make this blog post:

• I typed up an email, included the photo below, and, as I was about to press send literally said, OUT LOUD, "This is going off into hyperspace, I just wasted a bunch of time."

• In less than 24 hours my phone range and I was being interviewed for 20 - 30 minutes by a representative from Mark Burnett Productions. I was STUNNED!
• 24 hours later I was asked to submit an official application which included signing a lengthy legal agreement and submitting a home-made video. The video included me both giving my "pitch" in 2 - 3 minutes and answering a number of questions (posed by an off-camera neighbor).
• Within a week of submitting my official application and video I was interviewed several additional times on the phone and then told that I was a "finalist" which meant there was a good chance I would be receiving a plane ticket to Hollywood.
• Three weeks later my plane touched down at LAX... and the rest is history.

All in all the application and interview process was pretty simple and pretty low stress. I would absolutely do it again and I would absolutely encourage anyone thinking about applying to hit the send button and see what happens!

LIKELIHOOD
Before you apply, however, you may want to consider that there has been NO CONFIRMATION THAT THERE WILL BE ANOTHER SEASON OF SHARK TANK. ABC has not said yes or no, they simply have not said anything. Just the same, there may be an alternative worth considering.

Dragon's Den, the Canadian version of the show, is now casting (Season 6) and, as best anyone can tell, it's open to all (i.e. not just Canadians). Here's a LINK if you're interested. The show is very similar in format to Shark Tank and even has two of the ABC Sharks on the panel - Kevin O'Leary and Robert Herjavec - who are both Canadian born. It seems that you can apply online like I did for Shark Tank or in person (ala American Idol) by looking at the Audition Cities and Locations tour schedule (follow link above). Auditions are currently in progress so if you're interested you'll need to move quickly.

Having no idea about the audition process for Dragon's Den I would say it's likely not the same as I described above for Shark Tank.

Should Shark Tank be picked up for another season I'm sure the application pool will be much larger and thus make it more difficult to get on the air. As I discovered through my Shark Tank experience however, if you've got a solid idea and an entertaining presentation (meaning really good OR bad - again think American Idol, specifically William Hung) you've got a shot and SHOULD take it.

Next thing you know you'll be writing your own blog - feel free to plug InkFlip.com!

Money Minus, Money, Money Plus

I've been getting a lot of questions lately about raising money for InkFlip. Questions like:

• Have you found an investor yet?
• Are you still interested in taking on an investor?
• What are you looking for in an investor?

Answers: No. Yes. See below.

I've been fortunate to have no lack of opportunity to speak with potential investors. While there are many ways I could categorize those I've spoken with (institutional investors, angels, tire kickers, sharks : ), etc.), in my mind I've now got them pretty well separated into 3 distinct groups - Money Minus, Money, and Money Plus.

Money Minus
Those in this group have the money. The problem is that their money comes with tremendous baggage. The inexperienced investors will have unrealistic expectations, very little patience and, based on their inexperience, bad advice they will not only want to give but see implemented to the detriment of the company. Then there's the, "I love this concept let me risk it all" investor who is likely to have zero patience and keep me up at night with phone calls and emails. It's one thing to watch your money, it's another thing completely to be watching you last few dollars. I simply don't want to be along for that ride. There are others in this category but I'm sure you see my point. This Money Minus group brings money and a side-order of negatives.

Money
This one is easy. This group is comprised of people who have the money to risk, are typically involved in a number of other investments, and are willing to financially support what I'm doing... from a distance. In other words, "Here's the check, let me know how it turns out". I know this sounds GREAT on the surface - no pressure, no strings - but the reality is that the right partner can bring wisdom, guidance and connections to the table that these money-only guys do not.

Money Plus
In this group I've found investors who are seasoned, savvy, and want to bring not only money but expertise and, in some cases, resources (marketing, sales, fulfillment, etc.) to the table along with that money. Money Plus is clearly where I want to be.

Maslow's Hierarchy of Needs
While you may have never studied it, Maslow's Hierarchy of Needs applies here. Maslow suggested that we all have basic needs that MUST be met (sleeping, breathing, eating, etc.) but we also have other needs that, if met, greatly enhance our quality of life (creativity, spontaneity, problem solving, etc.). Not having the "other" needs met won't kill us, but our life experience and chances of "success" as defined in our culture are severely diminished. So how does this apply to money?

First off, it's ALL green and it ALL spends well. However, when I survey the sources available the money is not equivalent across the board. Some actually does LESS than meet the basic need (Money Minus), some meets the need (Money), and some meets the need and provides a much greater chance of success (Money Plus).

Needless to say, I'm still talking to investors in all three groups - after all the basic need must be met. As you can imagine, now that I have this picture clear in my head, those in the Money Plus category are getting most of my attention. I write this today not just as an InkFlip update but as a reminder to all entrepreneurs that there is a higher goal in raising money than just getting a check in the bank. Maslow would say, "Get the check and, if you have a choice, get a blue-chip investor to write it!"