Venture capital
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Gollnick
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In Japan?.... that I haven't got a clue about.
In America, there are venture capital conferences that you can go to where you pay a small entry fee (often a few hundred dollars) and are allowed to set up a small booth with whatever presentation you want. The VCs then walk around and look at the presentations and talk to the prinicpals and see if there's anything that catches their eye that they want to research in greater detail, often over dinner that night.
The other option is to put together a binder with your business plan and a white paper about your invention and send it to prospective VC firms unsolicited. They will review it and call you if they're interested. Hint: you're binder better WOW them because they get dozens of these per week and they are able to invest in only a few a month so they're looking for the needle in the haystack. You'd better make your needle awefully shiney.
In America, there are venture capital conferences that you can go to where you pay a small entry fee (often a few hundred dollars) and are allowed to set up a small booth with whatever presentation you want. The VCs then walk around and look at the presentations and talk to the prinicpals and see if there's anything that catches their eye that they want to research in greater detail, often over dinner that night.
The other option is to put together a binder with your business plan and a white paper about your invention and send it to prospective VC firms unsolicited. They will review it and call you if they're interested. Hint: you're binder better WOW them because they get dozens of these per week and they are able to invest in only a few a month so they're looking for the needle in the haystack. You'd better make your needle awefully shiney.
Gollnick
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Most American VCs are looking for a company where there has already been some personal investment on the part of the principals. If there are four or five guys trying to start this company up, they expect you each to invest maybe at least $25,000 of your own money in your company. This means that the company starts off with $100,000 in the principal's own money. This is more than enough to get a lawyer to incorporate you, get patents pending you your intellectual property, get models made, a little proof-of-concept work done, write a business plan, etc.
Often one VC will then step in with a "seed round" which is perhaps $1,000,000. That'll allow the principals to quit their jobs and put them on salary with the new company for at least a year. It'll get you some low-rent office space so you can put your car back in your garage. It'll pay to hire some contractors or consultants to help you flesh out the technical details of your idea. It'll pay for a lawyer to batten down the IP position. And it'll pay to put together the roadshow for the "first round funding."
For example, let's say you have a great idea for a machine that makes peanut butter and jelly sandwiches. You've drawn some sketches and diagrams and flowcharts. You used some of that initial $100,000 to build a prototype that sort of works. And you used some of that $100,000 to get to at least patent-pending on the original aspects of it. With the seed-round money, you'll be able to hire a contract mechanical engineer to refine it and to do all the detailed blue-print drawings that a machine shop needs to really make this thing. You'll be able to afford to hire a contract electrical engineer to design the circuitry to control it just the way you want it. You'll be able to hire a contract software engineer to develop cool, touch-screen user interface for it. You'll be able to pay yourself a full-time salary to really concentrate on it. You'll be able to rent a bay in an industrial park so you'll have the kind of facility you need. You'll be able to buy the materials you need, get the parts made, etc. You'll be able to pay the lawyer to really tighten up those patents and get all the IP in order. And you'll be able to hire a graphics artist to help you put together a really wow presentation.
Your seed VC will then open some doors for you and persuade some other VCs to come to your offices for a day and see your machine and listen to your really wow presentation. Hopefully, three or four of them will decide to buy into your first-round. They may invest $10,000,000 each. Now, you have $50,000,000. You can now hire a real staff, work all of the remaining bugs out of the design, market the product, etc.
If that $50,000,000 starts to run out, you can try for a second round. A third round is even possible.
Eventually, you'll want to do a mezzanine round. This is the money you'll need to build your factory and tool up and actually fill you first orders.
And from here, IPO; you take it public. All that money that comes in from selling the shares then goes back to the VCs... and to the original investors... one of which was you!
Often one VC will then step in with a "seed round" which is perhaps $1,000,000. That'll allow the principals to quit their jobs and put them on salary with the new company for at least a year. It'll get you some low-rent office space so you can put your car back in your garage. It'll pay to hire some contractors or consultants to help you flesh out the technical details of your idea. It'll pay for a lawyer to batten down the IP position. And it'll pay to put together the roadshow for the "first round funding."
For example, let's say you have a great idea for a machine that makes peanut butter and jelly sandwiches. You've drawn some sketches and diagrams and flowcharts. You used some of that initial $100,000 to build a prototype that sort of works. And you used some of that $100,000 to get to at least patent-pending on the original aspects of it. With the seed-round money, you'll be able to hire a contract mechanical engineer to refine it and to do all the detailed blue-print drawings that a machine shop needs to really make this thing. You'll be able to afford to hire a contract electrical engineer to design the circuitry to control it just the way you want it. You'll be able to hire a contract software engineer to develop cool, touch-screen user interface for it. You'll be able to pay yourself a full-time salary to really concentrate on it. You'll be able to rent a bay in an industrial park so you'll have the kind of facility you need. You'll be able to buy the materials you need, get the parts made, etc. You'll be able to pay the lawyer to really tighten up those patents and get all the IP in order. And you'll be able to hire a graphics artist to help you put together a really wow presentation.
Your seed VC will then open some doors for you and persuade some other VCs to come to your offices for a day and see your machine and listen to your really wow presentation. Hopefully, three or four of them will decide to buy into your first-round. They may invest $10,000,000 each. Now, you have $50,000,000. You can now hire a real staff, work all of the remaining bugs out of the design, market the product, etc.
If that $50,000,000 starts to run out, you can try for a second round. A third round is even possible.
Eventually, you'll want to do a mezzanine round. This is the money you'll need to build your factory and tool up and actually fill you first orders.
And from here, IPO; you take it public. All that money that comes in from selling the shares then goes back to the VCs... and to the original investors... one of which was you!
Any suggestions for that!?
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Anyone wanting to supply finance firstly wants to know that the idea is going to work. This is before they want to see values, payment schedules and security. Why is that although they can take your house when you don't pay this is messy and they would rather have a sucessfull project.
Time is your worst enemy. Firstly no patent no interest. Take the shortest route to get you to where you are going. Sell it whore it or develope it inside 6 months.
There are several billion people out there. Many people facing similar challenges that your idea addresses. I have heard the agonising cry they stole my idea! Nope it is called parrallel thinking. There is a need and someone will find a way to plug it.
When our clients want building developments we troll through several banks for interest by giving a 1/2 page summary. Many institutions have different attitudes towards different sectors due to over subscribing, specialising or no expertise etc. They always respond kindly, some interested with terms and expectations, most are not into say 'Fuel stations' but more into 'offices'.
Time is your worst enemy. Firstly no patent no interest. Take the shortest route to get you to where you are going. Sell it whore it or develope it inside 6 months.
There are several billion people out there. Many people facing similar challenges that your idea addresses. I have heard the agonising cry they stole my idea! Nope it is called parrallel thinking. There is a need and someone will find a way to plug it.
When our clients want building developments we troll through several banks for interest by giving a 1/2 page summary. Many institutions have different attitudes towards different sectors due to over subscribing, specialising or no expertise etc. They always respond kindly, some interested with terms and expectations, most are not into say 'Fuel stations' but more into 'offices'.
Sounds right for up here as well. If you don't put up any capital up front - and the VC's fund it - there's also a good chance you may not have any control in the start up as well. You may have say in the implementation of the startup, but then if you need more money, it might be tough. If the idea is good enough to attract the VC's they may be kind enough to go 49%/49% and 2% shares in escrow until the idea actually makes money. Depending on what the idea is, $2M, IMHO, is a good number. It's just big enough, that the investors will take interest as there is some potential there for them to make a reasonable return for their investment - which is something else you have to keep in mind - if they give you money, you have to be able to show that you can make them more money than if they just stuffed into an interest bearing bank account somewhere. They may be looking at something like 15 to 20 percent ROI within 3 to 5 years and they probably will be looking to take a piece out each year, which means that's a part of your overhead, so a good business plan is not only necessary here - you have to make sure the idea has good hope of being a success.
Gollnick is very right about personal investment - an idea is one thing, comittment is another. If you are not going to risk something, why should they?
My $0.02 - gord
Gollnick is very right about personal investment - an idea is one thing, comittment is another. If you are not going to risk something, why should they?
My $0.02 - gord
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gordonk said:
I don't have any personal experience in this area but my wife does stuff like this on the government side, usually $100-million per prject and up. The first thing they ask an applicant: "How much are YOU investing?" If all they have is "...a great idea...", that's usually where it ends.
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Also check out things like SBA loans (http://www.sba.gov/), asset based financing (equipment financing, leases, etc.), and money from friends and family. Also look into strategic partnerships or strategic investment from major suppliers or customers. For example, if your product is a new way to keep produce from south america fresh in transit, see if a shipping company might be interested in putting in some $$. Strategic investors often choose to not get involved in the operations of the company. For example, Intel has an investment arm that puts money into complimentary technologies and they specifically avoid stitting on the board of directors of their portfolio companies.
Vulture capitalists demand a very high return - the 15 to 20 % ROI mentioned above doesn't come close. They're usually looking for a 10x return in 3-5 years. They'll structure their investment so that they get paid first and they get paid more than you on a share by share basis. They'll take over your board of directors and call all the shots going forward. You'll be replaced as soon as they think the company can afford someone better. They will also try to sell the company as soon as they can so that they can get their money out. If the company's primary asset isn't you, you may not be invited to the party. On the other hand, a lot of VC's are very smart guys who can help you build your business and become successful. Just keep in mind that they're not doing it because they're nice guys - they're doing it to make as much money as possible.
Vulture capitalists demand a very high return - the 15 to 20 % ROI mentioned above doesn't come close. They're usually looking for a 10x return in 3-5 years. They'll structure their investment so that they get paid first and they get paid more than you on a share by share basis. They'll take over your board of directors and call all the shots going forward. You'll be replaced as soon as they think the company can afford someone better. They will also try to sell the company as soon as they can so that they can get their money out. If the company's primary asset isn't you, you may not be invited to the party. On the other hand, a lot of VC's are very smart guys who can help you build your business and become successful. Just keep in mind that they're not doing it because they're nice guys - they're doing it to make as much money as possible.