Monday, October 13, 2008

Start-ups Looking for Funding: What should you do?

All we keep hearing about is “a credit crunch” and a "global financial crisis". But what does this exactly mean on a day-to-day basis for a start-up in the tech world? It means that CEO’s are going to have stretch that funding as far they can and try to reach positive cash flow without relying on that second round of funding, as economic recovery will be long. I see so many start-ups that are out of touch with reality. It’s time to re-examine that business model and make sure your business plan is realistic. Here are some key points to consider: - Manage what you can control, such as spending and debt - immediately; - Focus on quality and know your customer; - Series B & C rounds will be small (so cuts are a must); - Valuations will drop - ($15 M raise @ $100 M post valuation is gone according to Sequoia Capital); - Mergers & acquisitions will decrease and profitable companies will be in favor; - IPO’s – don’t count on that exit for some time to come! Investor criteria is going to be tougher so here’s the checklist of must haves: 1. Superior/Must have product 2. Understand market demand 3. Understand consumer’s ability to pay and expenditure constraints 4. Do your competitive analysis and product positioning 5. Established revenue model is a requirement 6. Need for profitability sooner Next Blog: we’ll look at operational and marketing issues. Got a question? Blog away or email businessissuestoday@gmail.com

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