As I was getting in the thick of the code for the consumer site that would present my startup concept to the world about a year ago. I was a viewer of one of the few shows on CNBC that was geared toward entrepreneurs. "The Big Idea" with Donnie Deutch was a must watch hour for me, as I winded down my day and got ready for bed. The show had a format where Donnie would cover key points that entrepreneurs should follow in their attempts to make their "big idea" a success. He had shows that covered innovative marketing methods used to companies, innovative sales tactics, how to land that first "big" sale and how to go from revenue to profit. One of the more important show topics had to do with the fact that though most startups and businesses fail, many of them fail from the founders of the business giving in prematurely. The importance of fighting through the dissapointments of the first few dozen "no" responses was pressed home.
Now that I've gotten over the development hump , I have been on the road of trying to evangelize my startup concept to prospective investors and angels and have approached some pretty big names so far with zero result. I'd like to share my experience on these efforts.
VC round 1
About May of last year I wondered if I should try and fund the launch my self or seek venture capital backing. This is a hard decision to make as it involves making a decision to part with portions of ownership of my "baby". I fought off that fear and over the course of a week contacted 8 New York based venture capital firms. I also did research on angel funding sites (like the Gobig network) but found that I spent a lot of time trying to get the attention of VC's. I was cognizant enough not to think I would get any interest from those 8 contacts. Not because I was not confident in the uniqueness of my product and the niche that it fills, but more because the number was so small and the chances of my vision being understood in the space of a 20 slide business presentation was low. Steeled with this understanding it was still a bit of sting to see the first rejection for investement come back. In those moments it is important to re-affirm in ones mind and in reality why they are doing what they are doing, why they see an opportunity and why those who say "no" many not. The latter rationalization is not so important as the reasons that VC's reject opportunities can be legion but being able to retrace why YOU think your "big idea" is still valuable is important to keep soldiering on. I did this after that first week and I was more convinced of the potential of the concept.
Self Fund Round 1
After the first set of "no" letters, I decided to focus on self funding the launch. I calculated I had enough money saved to do it but my funds were running dangerously low. I figured if worse came to worse I would dip into my 40lk to launch. I was convinced that if I had just a few months of launch time I could recoup the funds but the wrench was thrown into that plan by unforseen delays in the completion of core code. So with my consumer site approaching completion I only had to finish integration of the third party e-commerce service as the last major integration. This task would turn out to take a bit longer than I thought as chronicled in blog posts that can be read in the archive. However, in anticipation of the site launching I put a fire under the kettle by procuring the hosted servers from Rackspace that I would be using to launch the production Site. Though this was done with the anticipation that the site would be up in a matter of months it turned out to be the source of a major mistake. In other work during this time, A key promise I made and in fact is the slogan of my company Apriority LLC is:
"taking the time to properly design"
As I've been coding my framework and the applications above it, I've been constantly re-evaluation the most efficient generalized solution. More than just a commercial site , the platform for generalized distributed web development , given the buzzword SAAS (software as a service) since I started working on the idea, has to be rock solid. So if I noticed architectural issues that needed to be reworked ..even if they were not immediately detrimental to the function of the launched site, I gave them priority. Hence the name "A priority". The philosophy extends from my observation in the field that code rushed to market, tends to be code that works inefficiently...and as more inefficient code piles on top of it, the entire house of cards eventually comes down. This happened at TheStreet.com and required the redesign of the content management system I was working on only a few years after it had been originally designed. I wanted to ensure that the software I designed was generalized enough to avoid this but that generalized design requires much longer design time than is available in an enterprise where public competition and business needs constrain the work of developers. So sticking to this philosophy allowed me to make some key modifications that extended significantly the abilities of the platform for generalized use...in fact the changes made finally allow my platform to pass the "anything" test. Essentially, the question that a generalized platform must answer is can it enable the development of anything, any type of software and many of the changes made during the self fund round did that. However, it took me 6 months to get the bulk of those changes coded, the interjection of family issues put a kink on my productivity as well and by January I was again in considering seeking angel or venture capital funding.
VC round 2
As my extracted 401k funds dwindled away, and my anticipated launch date slipped from month to month I realized the choice to procure the hosting servers was a bad one. I again re-evaluated my plans. I was paying for servers without having the software ready to monetize the bandwidth I was paying for. At just over $1500 per month this was quickly eating away the money I'd taken out, along with my other living expenses. As the end of December rolled around I was again on "E". This time , I decided to do what I wanted to avoid. Take out a loan against a credit card. I had not been in the red on my finances since graduating from college and putting myself in debt didn't seem like a good idea , especially as the economy began to seriously descend into the nether regions of deep recession that we currently find it in. Now flush with loan money I decided to again reach out to potential angel investors and partners, unfortunately the climate had become even worse for startups. I decided to avoid the standard VC dance and instead try to contact key individuals. The first tactic involved approaching a third party provider of a piece of software used by one of my services, I send them a detailed proposal of a revenue sharing plan but they were not interested in persuing the deal. Another "no". In february I read a tech. news article about an idea for "open source" funding as presented by Mark Cuban, owner of the Dallas Mavericks. I figured it was worth a shot and I put up the pitch for my idea on his blog. After several days it was clear that he either didn't read it or was not interested. Again the sting of this "no" had to be shaken off, in the mean time I tallied up what remained in order for me to launch. It seemed I was only 7 items away but those 7 items have been hard to move off the list. So far 5 remain from when the list was composed a month ago. In the mean time the need to pay bills has necessitated an immediate search for a consulting gig or a part time job, fortunately the remaining items can be finished easily along the way but the need to find an assignment is now first priority. I put my experiences here as warning to those that might be embarking on the startup road. No matter how well you tend to plan things, unforseen issues will arise and delay your plans. It is always best to make a best estimate and then triple it both for needed funds and for needed time to perform tasks. Fortunately I am just getting into the search for a consulting assignment and may be able to parlay a gig into a first paying customer for my site services. I would not even be on the road at all had I listened to the several "no" responses I received along the way. This economy ironically is ideal for the type of business focused collaboration software that my startup provides but getting investors to realize this is difficult, I only grow more convinced of the increasing potential of the market and build my next steps on the hollow echo of those previous "no" responses with the belief that the big "yes" is right around the corner.