Well, as I am often approached by many start ups that are looking for finance . Most of the start ups either have no funding or have a little funding left over from round one or round 2 that will last them another 3 - 4 months .
The ideas out there are really great and probably one of them will make it big. The problem is that the two factors involved , the money needed and the time needed are a drain on resources . This demands a lot of patience and a very big time investment .
Is the business viable ?
Assuming that you have identified that the business is a good idea and the "go to market " timetable is acceptable. All well and good , but what about the resources as mentioned that are needed.
Looking at the funding requirement , which is normally well short of target as dates by the CEO this is only part of the assessment . Generally, the CEO states a figure that he thinks is needed. This number is usually about only 50% of what is needed over a 18-24 month period .
The other factors involved such as time and planning for the start up are a lot more expensive then the initial funding .Team expertise is called upon to analyse and assess the business case. All of this is cost , time and manpower .
Team work
It's obvious that the once an idea comes to the table then it's a matter of sourcing the funding and finding the right match . The start up and the investor have to get the foundations right. That means there has to be a natural chemistry between the parties . More often then not the money maybe available , but the parties just don't see eye to eye.
Unfortunately, this only comes out at a Peter stage once the details of the deal come out and are discussed and often at the Due Diligence stage . I have seen many deals go to advanced discussions and agreements to breakdown at the final stage .
More often then not , the Angel investors and the first VC, or incubators have a Major say as they also invested thus making it a 5-6 Party negotiating team.
Since there are more then just the host start up and the investor involved things get complicated .
So how do you succeed
In overcome the above , which are only a few of the hurdles there has to be a clear recognition by the Start Up that there will need to be a lot of give away at the negotiation table .
To try and get all the parties to agree often at different share prices will need intense and sensitive handling . This is where you will need a person in effect a very good broker that can handle all parties and get them to see eye to eye .
To leave the new investors and the existing investors to negotiate is possible but can cause a little tension and a breaking of the deal .
This is mainly due to the fact that new investors have not need there at the beginning of the Start up thus there emotional attachment is not there . The gap between the two can be bridged , but again needs a good broker to handle the 2 very different positions .
Summary
There is little summary here as each case needs to be looked at . Probably , lots of great ideas are falling between the gaps , but that's business . We will look back in time to come and say " Wow, I was presented that idea " when it's sold for hundreds of millions !!!!!
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