Start Ups: How is Your Financing Going (or Not)?

Every day, our company receives calls and emails from companies seeking investment.

The large ones we route to our investment banking practice and the small ones to our investment conferences in New York, where they can represent themselves to investors without an intermediary.  (Others call about our narrow angel investment criteria in telecom or board positions).

But the great majority of callers do none of the above.  Some want something for nothing.  Others are dreamers whose aspirational companies are unlikely to get off the ground, but remain the subject of loving and lengthy monologues.

It is pretty easy to separate the wheat from the chaff –
(a) those callers who understand the endurance race aspect to raising capital vs.
(b) those who think  they just have to talk someone's ear off to collect no-questions-asked checks.

The following paragraphs include snippets of  seven, initial conversations with members of the latter group (the naive idealists or what?) followed by my behind-the-scenes interpretation.  What is your first impression?  Do you think the caller will be taken seriously by a finance professional?  If not, do not be like them!

Entrepreneur 1: “I don't need to hire your investment bank or present at your conference.  I will be funded by then.”
Us:   “Then how can we help you (I'm wondering,  uh, why did you call us)?” and “Wonderful news!  Are you currently negotiating a letter of intent?  (No)  Do you have a closing date on the calender (No)."
Entrepreneur 1:  “But we have several initial meetings scheduled and they'll love us.”
Interpretation: This caller does not know that investment is often a needle – in-a-haystack search, followed by a lengthy period of due diligence, a letter of intent, negotiated terms, legal advisors, finally culminating in a well defined closing date.  In other words, it entails a protracted and wholly predictable schedule of milestones.  Therefore, this blithe comment reveals that s/he has never worked with investors before.  Some service providers may take advantage of that.  In any case, s/he has lost credibility with professionals who know what s/he does not.

Jr. Iditarod Race from Our Front Porch

Living out in the boonies as we do, we see more eagles than people. But once a year, we have front row seats for a dog mushing race that runs right past our cabin.  We look forward to this each February.

A racer passing by our porch

The Junior Iditarod is a two day, 150 mile race for teenaged competitors (14-17) that has been run in the vicinity of Willow, Alaska since 1977.  Each musher must raise, care for, train, and race his or her own team of dogs (usually 10), so the competition is the culmination of many months of commitment.  The entry fee is currently $150 – 250, depending on date of payment.  The prize money of about $10,000 is split among the fastest finishers, but that surely doesn't even cover the expense of feeding and training a whole kennel of dogs. Before the recession (before 2009), the peak number of participants I found was 22. Most years, though, the entry pool consists of only 9-12 intrepid racers.

It is fair to say that more volunteers than competitors participate, many of whom are long timers.   They have volunteered their time as pilots, snowmachiners, ham radio operators, check point timers, cooks and bottle washers.  Each gathering includes some reminiscence of the kids who graduated from this race to enter the “senior” Iditarod – the grueling 1000 mile race that starts  the following weekend (First weekend of March) and lasts for ten days.  Our only full time neighbor (within ten miles) has offered his small lodge as a check point for a decade or more, which is why the race route passes us.