Financing Options for Startups

You have a great idea, one that may be the next blockbuster creation.  A prototype product is assembled in your home office, garage, living room or on the kitchen table.  Friends like it and have told you to market the product and make big $$.  This is all fine and grand, but you have one small problem: you don’t have the startup funds, credibility or infrastructure to launch a major product rollout.  Here are two wonderful organizations that can help you achieve your goal: RocketHub and Kickstarter.  Each is briefly described below:

RocketHub

What is RocketHub?
RocketHub is a community for Creatives and Fuelers. RocketHub offers two distinct services:

1. An innovative way to raise funds and awareness for creative ventures (Crowdfunding)
2. The ability to submit your work to be selected for tangible creative opportunities (LaunchPad Opportunities)

We provide the credibility and infrastructure necessary to successfully leverage the financial power of your community, and offer the ability to discover and apply for curated opportunities. If you have a creative project, worthwhile endeavor, or are looking to discover valuable opportunities, RocketHub is here to help.

Who is a Creative?
At RocketHub, a Creative is anyone who would like to launch a crowdfunding campaign or otherwise seeks to have his/her creative work developed, promoted, distributed or sold.

We support entrepreneurs, actors, artists, composers, dancers, designers, directors, filmmakers, inventors, musicians, painters, philanthropists, poets, politicians, programmers, singers, songwriters, teachers, writers, and more. Let your imagination run wild. If you have a creative project, worthwhile endeavor, or are looking to discover valuable opportunities, RocketHub is here to help. (Just keep it legal and in good taste 🙂
Who is a Fueler (and what is Fueling)?
A Fueler is anyone who chooses to make a financial contribution to a RocketHub project and/or vote for a LaunchPad Opportunity submission. Creatives publicize their projects and submissions to friends, family and fans by inviting them to visit RocketHub. Visitors are asked to support Creatives in three important ways:

1. Fuel the project (aka make a financial contribution)
2. Vote for a LaunchPad Opportunity submission
3. Spread the word by sharing the project/submission with others!

Fueling is the act of making a financial contribution to a RocketHub project, voting for a LaunchPad Opportunity submission or spreading the word to friends via email, Facebook, Twitter, your blog, etc. Fueling helps Creatives and RocketHub projects fly.

Kickstarter

1. What is Kickstarter?

   Kickstarter is a new way to fund creative projects.

   We believe that:

   • A good idea, communicated well, can spread fast and wide.

   • A large group of people can be a tremendous source of money and encouragement.

   Kickstarter is powered by a unique all-or-nothing funding method where projects must be fully-funded or no money changes hands.

2. Who can fund their project on Kickstarter?

   Kickstarter is focused on creative projects. We’re a great way for artists, filmmakers, musicians, designers, writers, illustrators, explorers, curators, performers, and others to bring their projects, events, and dreams to life.

   The word “project” is just as important as “creative” in defining what works on Kickstarter. A project is something finite with a clear beginning and end. Someone can be held accountable to the framework of a project — a project was either completed or it wasn’t — and there are definable expectations that everyone can agree to. This is imperative for every Kickstarter project.

   We know there are a lot of great projects that fall outside of our scope, but Kickstarter is not a place for soliciting donations to causes, charity projects, or general business expenses. Learn more about our project guidelines.

By Dion D Shaw

Dion D Shaw is the founder and owner of Homepreneurs

Homepreneurs.  New Day.  New Opportunities.

Disclaimer

Homepreneurs does not endorse nor have any relationships with any of the services listed.  Homepreneurs receives no compensation or consideration for its suggestions.  Homepreneurs strongly urges all interested parties to conduct research and accepts no responsibility for any losses incurred.

© Homepreneurs 2010 – 2012

Financing Strategies

From the inception of a start-up company until the point where it becomes a consistently profitable business, all companies have something in common – the need to finance operation and growth. There are various methods for financing a start-up company through debt or equity securities, each of which may be advantageous and/or appropriate at different stages of a company’s development.

Typical types of financing include the following:

Bootstrapping:
Generally bootstrapping occurs when a company is funded solely by the founders without assistance from external sources of capital. Doing so provides founders with the greatest amount of flexibility in terms of running the business but also requires the founders to take on additional financial risk.

Seed Financing:
A Seed Financing typically involves a relatively modest amount of capital invested to fund the investigation of a market opportunity or the development of the initial version of a product or service. Seed Financings are often provided by the founders themselves, “friends and family” or angel investors.  Typical Seed Financing structures include:

Note Financing:
A Note Financing is a loan which is either repayable upon demand by the investor or upon a stated maturity date.  A note financing is often the simplest investment structure and is often used by founders or “friends and family” investors to allow a company to maintain its operations for a short period of time before an anticipated influx of capital, such as a Series Seed or Venture Capital Financing or receipt of customer revenue.

Convertible Note Financing:
A Convertible Note Financing is a  loan where the principal and interest are convertible into current or future equity of the company either at the option of the lender or automatically upon achievement of specified milestones (such as a Venture Capital Financing).

Common Stock Financing:
In Common Stock Financings, investors receive an ownership stake in the company (i.e. they own a certain percentage of the company) in the form of common stock in exchange for their investment in the company.

Series Seed Financing:
In a Series Seed Financing, investors receive preferred stock in exchange for their investment in the company.  Among other things, investors who hold preferred stock often receive the right to get their investment back (plus an additional return in some circumstances), called a “preferred return”, before holders of common stock are paid upon the sale or liquidation of the company.

Venture Capital Financing:
A venture capital financing typically results in a larger investment in the company from venture capital firms, in exchange for preferred stock of the company.  In addition to receiving a preferred return like in Series Seed Financings, venture capital investors also typically receive important corporate governance rights (like seats on the Board of Directors and approval rights on certain transactions).  Companies that receive venture capital financings typically can demonstrate the potential for exceptional growth rates in large markets, and a need for capital to exploit the business opportunity.

Source:  http://www.goodwinfoundersworkbench.com/financing-strategies/

How to find microfinance groups in your area

By Karen E. Klein

January 10, 2011

Dear Karen: I recently graduated from USC, where I started the first chapter of a microfinance organization on campus. Are there other microfinance organizations in Los Angeles?

Answer: Microenterprise development aims to provide financial services to the poor. Microfinance, a frequent component of microenterprise development, involves lending small amounts to entrepreneurs who probably would not qualify for conventional loans.

There are seven professional microfinance organizations operating in Los Angeles, including CHARO Community Development Corp. and the Pacific Asian Consortium in Employment.

Contact information for all seven programs is available through Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination, a nonprofit that tracks the nearly 700 microenterprise development programs in the United States, at http://fieldus.org. Hover over “publications” and then click “microenterprise program directory” to search for programs by state.

• Start-ups, be ready to adapt

Dear Karen: I want to start a business this year. What advice can you give me?

Answer: Be flexible and creative. Even the best business plans can be sidetracked in unexpected ways. “Business conditions change and the original idea can’t be executed in the ‘planned’ way. Stock markets crash, credit is tight, customers disappear and so on,” said Bryan Janeczko, founder of Wicked Start, a website resource for start-up entrepreneurs.

“To adapt, you must be flexible and willing to change the business model or your approach,” he said. “Overcoming challenges is the only way to drive your business success.”

Small-business questions? E-mail Karen at smallbiz@latimes.com.

Source: http://www.chicagotribune.com/business/smallbusiness/la-fi-smallbiz-qa-20110110,0,1459147.story

Should Your Startup Apply for the sFund?

Esteemed venture capital firm Kleiner Perkins launched a new fund called sFund last month.

That’s not specifically remarkable; VC firms launch new funds all the time. What makes the sFund remarkable are its other key investors: Facebook, Amazon and Zynga. Not only are these major tech companies investors, but they’re also offering startups funded by the sFund advice, perks and “relationship capital” to give them an advantage over their competition.

What is the sFund all about? What are the advantages and disadvantages of the fund? And finally, is it something your startup should consider applying for?

Let’s take a quick look.

sFund Q&A

Q: What exactly is the sFund?

A: The sFund is a $250 million venture capital fund designed to fund startups and companies focusing on social media-related initiatives. Its manager is Kleiner Perkins partner Bing Gordon, current board member of Zynga and Amazon and former chief creative officer of EA.

Q: What makes the sFund unique?

A: The first thing that makes it unique is its investors, which include Facebook, Zynga, Amazon, Comcast, Allen & Company and Liberty Media. All of these companies have committed to providing assistance in their areas of expertise to startups funded by sFund. Facebook, for example, is giving startups early access to its platform and APIs, while Amazon will give them a free year of access to Amazon Web Services. sFund also has a broad mandate within social and is allowed to make investments as small as $100,000 and as large as $100 million.

Q: Who has been funded by sFund?

A: Cafebots is the first and only company to receive funding from sFund so far. It raised a $5 million Series A.

Q: What is the biggest advantage to being funded by sFund?

A: While the money is nice, the biggest benefit to being part of sFund is the direct access to some of technology’s most important companies. Priority access to Facebook, Amazon and Kleiner Perkins could be what helps a startup launch quicker, secure big partnerships or get substantial press. sFund companies also get access to some of tech’s most successful entrepreneurs.

Q: What is the biggest disadvantage to being funded by sFund?

A: Unfortunately, the answer to that question is not clear quite yet, as it’s also an untested fund. But one disadvantage may be that joining sFund will tip off these companies to exactly what you’re doing. There’s no guarantee that Facebook won’t like your idea so much that they build their own version.

Q: I have a startup and I’m looking for funding. Should I apply for sFund?

A: Here’s a question to ask yourself: will my startup benefit greatly from priority access to Facebook’s platform, Amazon Web Services or Zynga’s gaming platforms? If access to these companies could make all the difference for your company, then it doesn’t hurt to try. Once you tie the knot with an investor though, it’s almost impossible to break off the relationship, so the most important thing is figuring out whether or not you and your potential investor are on the same page.

Source:  http://www.openforum.com/idea-hub/topics/technology/article/should-your-startup-apply-for-the-sfund-ben-parr