Thursday March 2, 2017 1 comments
FORT COLLINS #FCSW17 -- Getting that check from an investor or a loan from a lender aren’t the only ways to obtain the monetary help a startup needs to move forward.
There are many other options for gaining financing and they’re not always simply money, according to Karl Dakin, owner of Centennial-based Dakin Capital Services.
Dakin offered a variety of funding alternatives for startup entrepreneurs to consider in his presentation Wednesday called “Colorado Capital Communities: Accessing the Capital All Around” during Day Three of Fort Collins Startup Week, which kicked off Monday and concludes Friday.
“It’s classical to go to the bank and ask for a loan or to go to an angel investor for funding,” Dakin told an audience at Mesh Fort Collins in downtown Fort Collins. “But as a startup, you probably aren’t going to meet their criteria.”
Banks, for example, make loans to just 5 out of every 100 businesses seeking funding, partly because of tightened lending restrictions put into place after the 2008 economic meltdown.
Angel investors invest in no more than 2 of every 100 requests they hear, Dakin said, and venture capitalists invest in only 1 out of every 2,500 pitches.
Constantly beating the bushes for funding can actually increase a startup’s chances for failure.
“One of the biggest problems for entrepreneurs is that raising money is a constant distraction from what you want to do,” he said. “And it contributes to potential business failure.”
Fortunately, there are many other capital sources that can be tapped to help advance a startup’s chances for success, Dakin noted.
One of the first things startups should realize is that capital is not just money, Dakin emphasized.
“Capital comes in many flavors,” he said. Capital can include local, state and federal grants but can also include people willing to defer their wages while the startup awaits revenue.
It can also come in the form of temporary free rent in a new building where the landlord is looking to attract tenants.
Capital can also be raised through “capital communities,” a relatively new concept in which groups of companies in similar industries can pool their efforts to raise money together.
Dakin said capital communities are now beginning to be formed across the state.
Dakin said startups must realize their stakeholders can be sources of capital.
“Capital sources include all stakeholders who stand to benefit from the success of your organization,” he said.
“Craft a story that is tailored to each source of capital that explains the benefit of making their capital available to you.”
Dakin offered a five-step plan to conducting a successful funding campaign:
- Step 1 – Make a list of everything you would buy if you had the cash
- Step 2—Create a strategy for identifying potential capital sources
- Step 3—Plan a campaign that focuses on sources most likely to be sympathetic to your funding pitch
- Step 4—Prepare your capital campaign, which can take a minimum of three months
- Step 5—Conduct your campaign using social media tools and personal interactions
“Use the broadest definition of capital and talk to everybody in your network you know,” he said, noting that the average person has around 200 people in their network and each of them has 200, resulting in 40,000 potential sources of capital.