The UltraLight Start Ups network, lead by Graham Lawlor, held its December meeting with a great panel on business capital called Bootstrapping vs. Venture Funding. Financing has been an age old debate whenever start up founders discuss the initial financing needed for their business. The panelist for the ULS gathering were: Art Chang, CEO of Tipping Point Partners; Brian Cohen, Founder/President of iFluence PR and Board Member at New York Angels; Mark Davis, IT Venture Capitalist at DFJ Gotham Ventures; and Dennis Mortensen, Director of Data Insights at Yahoo! and founder of Canvas, Evonax, and IndexTools.
Altogether the panelists provided the overview of what the outcomes are for choosing bootstrapping or seeking venture capital and angel investment. Dennis offered great cautionary comments on accepting venture capital for the sake of increased value (and at the expense of founder control), and that an acceptance of venture capital can be in a sense a “defeat” for the entrepreneur — the business is asking for capital to cover expenses to a milestone. Having successfully sold his businesses, Dennis is a strong believer in entrepreneurs building equity in their business.
Mark Davis provided the audience with a great chart that matched business structure to financing structure, stating that businesses should “simplify the decision process for capital”. Brian reinforced the idea, stating that the one question start-ups must answer is “How does the money help to achieve the goal?” In fact Brian’s reference to “capital as a tool” is one of my favorites, because I believe the same. He also stated how one investment group, Band of Angels, had 60% of its investments underwater, that venture capitalists generally have a poor success track record, with about 1 in 14 invested businesses succeeding.
Art summed up the concepts of value creator (creating value for the customer) and wealth creator (creating wealth from an investment) — because of these concepts, Art warned, entrepreneurs (value creators) can be at odds with investors (wealth creators) when it comes to investments and the associated terms.
Art provided some truly memorable statements, but his best comments sums up a consensus view of the panelists – “Don’t focus on the capital. Focus on the proof of concept.” No matter how capital is selected, a great action for a business is be analytical with how well it is deploying the capital.
From a web analytics perspective, reviewing captured data — time on site and visitor recency, for example — can provide insights into customer needs and wants, but the data can also imply how capital can best be used to meet those customer needs and wants. For example, if customers are more interested in a start up retailer’s webpages that display blouses over the pages that display slacks, then the retailer would consider not tying up so much inventory in slacks. Or the retailer can use keyword performance to get an idea of what it should be offering, and can adjust its funding request accordingly. The key is to be alert to how to use a business’ best tool, capital.
The UltraLight Start Up network is one of the best groups I have encountered in my time here in New York. With presentations by entrepreneurs of all services, the ULS group is an excellent network for resources and true-blue idea exchange. To learn more about the group, take a look at the website as well as viewing the group on Meet Up.