Monday, August 13, 2012

Other People's Money


As many of you probably know, I'm not only a marketing strategist, but also the CEO of a juvenile products company called CuteyBaby. A couple of weeks ago I attended a conference in Philadelphia hosted by FundingPost. What a useful and informative day! I thought there might be other folks out there who are looking to explore funding their business using "other people's money", so here's a quick summary of some key learnings.

This event was specifically for consumer products oriented companies and investors, but they have a whole range of events listed here: FundingPost.com Events List

Pitching Workshop

If you have an opportunity to attend one of these events, be SURE to attend the pitching workshop. This one was in the early morning, so I had to fly out the night before, but SO worth it. Quick takeaways on informal pitching:
  • be able to say what your company does and why it matters VERY succinctly (20 words or less)
  • tout measurable success (revenue/sales, margin, notable customers)
  • let people know what you have invested already
  • explain why you need (and what you'll do with) their money
  • in Q&A, or if interrupted during a pitch, listen carefully, and directly answer the question

Crowdfunding

There was a whole panel on Crowdfunding* and associated legislative news. To sum up, the SEC is about to pass updated laws that allow you to reach out to the "masses" with your investment opportunity (as of now, you must only approach people you know and/or 'accredited' investors). Since there are a bunch of websites that already let you do different flavors of Crowdfunding (See Kickstarter, RocketHub, and Crowdfunder for examples), it sure sounds like they are all jockeying to be the leader when restrictions get lifted.

One-hit Wonders

During one of the panel discussions, Patrick Raymond, the Co-Host of Invention Hunters (Food Network show), said something pretty interesting. Basically he felt that any new product idea has a selling life of a couple of years - that consumers are fickle. He said it in kind of a flippant way, but point taken for consumer products inventors. It was a good word of caution for people who think they will retire on the next Chia Pet or Snuggie they've been making in their basement. You have to build a company, not just a single product.

Solid Advice from Andy Whitman and Josh Goldin

Some of the best info from the panels and presentations from my perspective came from Andy Whitman (of 2x Consumer Products) and Josh Goldin (of Alliance Consumer Growth). A summary PDF of Andy's presentation "10 Reasons why Investors Pass" is available on his company's website in the Entrepreneur Resources section. There's also a sample executive summary. Both Andy and Josh emphasized how a company has to have healthy gross margin, demonstrated growth, and proven successes to even be considered for VC investment.

My Tips for Attendees:

If you do go to one of these events in the future, here are some tips on how to maximize your experience as an attendee.

1. Do Your Homework

Read all the bios of the speakers and panelists. Figure out who you think might be helpful to your business or who might invest, and make sure you talk to them and get a business card at some point during the day. Don't be shy! They are there to network, too. In my case, there were 6 people I wanted to meet - 4 potential investors, 1 speaker, and 1 fellow entrepreneur. Of course I met a lot more, but I stayed focused on tracking down the people on my list throughout the day.

2. Understand Your Potential Investment/Investors

Venture Capital is kind of a misnomer. Even if you have some traction, I've found that if it's not $2 million in sales or so, no VC firm is going to touch you. Angel groups or individual angels are going to be a better option. If you are pre-revenue and haven't got IP and invested capital, you better know someone. Also, sector matters - investors will tell you what industries or types of companies they like. If you're not one of them, steer clear.

3. You Always Have to Sell it.

The funding fairy is not going to show up at your door. Whether you are going to approach an angel group, individual angel, VC, or set yourself up on a crowdfunding website - you will always have to sell yourself and your business concept in clear and direct language. You will have to find and convince people to invest in your company, and in you. So be confident, take rejection gracefully, and enjoy the ride!
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A cool side note - the photo at the top of this post is an interior snapshot I took at Lippincott House in Philadelphia - this B&B is totally fabulous and I highly recommend them if you're looking for lodging in Philly. Gorgeous rooms, friendly hosts, awesome breakfast.
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*Crowdfunding is a new term used to describe ways of getting people to give money for a business, creative project, or idea. Many websites help people do this with varying approaches - usually by making a "donation" to the founder in exchange for future goods/services. Thus avoiding the SEC "investment" restrictions entirely. See Kickstarter, RocketHub, and Crowdfunder for examples.

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