A few start up and backing questions
 

Hey guys,

Right now, a friend and I have an idea that we want to turn into reality. We're to startup our own company and see how things take off and I have a few questions regarding creating a startup and how to get financial backing. Hopefully you guys will help point us in the right direction!

We're both university students that are really keen in new technology and things that'll eventually change how we interact with the things around us. We have an app idea in mind to help get us started but right now we don't have the means to get things going. I'm capable of developing apps, but this one is a little bit of our scopes and would need a lot more help.

Right now we're trying to find friends that would be interested in something like it but a lot of them are just focused on school and don't really have any time to dedicate on a big project.

We've started to look for investment firms around Vancouver and we're planning on sharing our ideas with them to see if they'd like to help us. We're not 100% sure how it works entirely but our assumption is
1. Pitch the idea
2. Investment firm likes the idea
3. Gives us the funding for the project
4. We pay them back or give them a % of what we make?
Would bringing our ideas to an investment firm be a good choice? Are there any local investors you guys would recommend us contacting?

Any other insight or advice that deal with startups would be appreciated! I'd love to hear any stories you may have regarding starting up your own company as well.

Thanks a lot!

Basically that's how it works.

The reality is it is usually much more difficult.

Typically, you will need angel investors. In most cases, you have a solid idea that you really believe in so you pitch the people you know or have connections with to buy shares in your company, or as you mention, you write a promise to pay the money back in 12 or 24 months or whatever it may be.

Be prepared for a lot of no's but if you really do have a good idea, hit the streets and good luck. Many friends of mine have done something like this and one of them managed to walk away with a smile.

As far as app investment goes, I doubt any investor would be interested if you can't write your own code. And if it's an idea of apps, it basically means that any serious programmer could copy it within a matter of days if not hours.

AI are interested in one thing, return on investment. By just telling them the idea won't work as they won't even know if you could pull off exactly the thing you want your app to do. Furthermore, you have to have a concrete idea how to use the money if you get it and what difference will it make in your project.

As it stands right now, even if you could find an AI, he would ask ridiculous amount of % (don't be surprised that he would gives you x amount of money for 100% of the proceed)

My recommendation is that, build the app first in a prototype form, and then go from there. I actually have some connections with AI who invest in app creation. PM me if you want more info (on condition that you could produce a prototype, they won't even return email if you don't)

will give you a couple of names on monday. i dont know these people personally but something is better than nothing.
the guy is local, is an investor in a tech co. in gvrd.

Till then, whey don't you email the guy from dragons den?
Bruce Croxon - Round13 Capital - Bruce Croxon (Dragon's Den)


How much dough are you looking for?

We're not looking for that much dough, we've estimated around $5-$8k mostly to fund the development and hopefully for some space for our team to work in.

We're currently in the process of developing a prototype for this weekend and we'll be making a pitch at Startup Weekend Vancouver!

Thanks!

Also, make sure you get everything involving funds and ownership in writing. I was recently involved in a legal case over the ownership of a company which originally only had an oral agreement as to the division of profits and such was nasty.

What ever you do, even if, and especially if you end up working with friends document everything well from day one.

If you are pitching any ideas to people, get them to sign NDAs (non-disclosure agreements). I agree with getting a working prototype first. They are much more inclined to invest in something that they can see and play with.

there are some government grants/loans available as well

+1 for prototype and business plan..

Kind of in the process of knocking on a few more doors myself, PM me for more info if you'd like some help.

Angel investors aren't your only choice. But regardless, any investor, angel or firm, will want to see that you've put your own time and money into the starting stages of development. If you can't invest in yourself, why would they want to invest in you? Take a loan, part time job, ask your family, sell your girlfriend, whatever. They wanna see that you're confident and that you're actually going to move forward if they give you money. And when they ask you where you got your initial start-up money, tell them.

It's best to show exactly and specifically what you're spending their money on. "Development" in your business plan isn't good enough. Are you guys doing the coding yourselves or outsourcing? Is a rented/leased space really necessary (you mentioned you're both in school, so how much time would be spent in this space anyway)?

Also, and this is the biggest obstacle, how you plan on making a profit once you're done making your product. Ok, apps done, you tell your friends, family, RS, and other forums. Now what? Especially with apps, there's so many free ones out there. You release one for 99 cents, and a bigger, better, app group could just make a better version of your idea and release it for the same price, or even for free.

So have all your shit together before approaching an investor. Not trying to discourage you.. but it'll save you a lot of grief and embarassment.. ask me how I know..

I think you're better off getting a line of credit from a bank and use that instead (for $5-8K). Less grief/embarassment/rejection and more time & effort into the actual product.

Unless of course, you need the AI's connections to help you along, then thats a different story alltogether.

explain..!

Last year I was really set on this new idea I had.. rather not say what, as I'm still currently working on it. A few months later, I pulled a lot of strings to have a meeting with investors.. and I blew it. Probably the worst 20 minutes of my life :facepalm: It probably didn't help that I was only 21 either. :okay:

Long story short, I was too focused in overbuilding my own product that I didn't have a solid enough business plan. They were impressed that I got so far on my own time and money, not to mention with school and work. They were interested in what I had, but wanted more information regarding the long-term finance/business/marketing end. Also another few little fix-ups specific to my business, but that's pretty much the gist. They will poke at you from every angle possible, so be prepared. Of course, maybe you have a life changing idea which is so good, that investors will just throw money at you and not ask any questions. That was not my case lol.

Present your idea to family members or friends and ask them for their opinion. Put yourself in the investor's shoes. Would you invest in your own product? I don't know why I didn't go through these steps. Probably too caught up in my own head.

You learn from your mistakes, and I managed to get a few personal contacts, which I guess in a way kind of made it all worth it..

I suggest you look into BCIC first.

BCIC

For $5-8K....just get your support from friends & family..

If you have a truly great product & business, you don't want to give up your equity for a few grands

If you have an viable, good but nothing special product & business, these investors aren't going to be interested in a few thousand dollars investment....it is not worth their time

Shoot me a PM if you want some help.

To the OP:

I've worked in venture capital and my advice to you is DON'T DO IT. Avoid getting outside capital for as long as you can and bootstrap that shit. Angel investors and venture capital companies help you when you need to scale and scale quickly.

For $5-8k, if you really want to get money, do a friends and family round first and offer up shares in your company. Most angels will not invest in your company if you have not done a F&F round. You're also unproven and have no experience. The value people bring to a firm is in execution ability - anyone can come up with an idea.

NDAs are largely a waste of time and any self respecting VC will not sign an NDA. It's stupid and makes you look silly, so skip that.

Based on what you've said, I think you need to do more research. Application development is going to run you more than $5-8k regardless of the platform you're looking at. With the mobile app goldrush happening, hourly rates for good programmers are through the roof. You also need to consider your infrastructure. Change the way things interact around you? Sounds like you need a server for the app to talk to in order to communicate. Take any programming budget you have and double the timelines and budget and that's closer to what it'll come to as your scope changes.

Also, why do you need to rent a space for the team to work together? Honestly, that's stupid and will see you burning through your capital. Use online collaboration tools and BOOTSTRAP. I cannot emphasize this enough. YOU MUST KEEP YOUR BURN RATE AS LOW AS POSSIBLE.

Here, I'll say it again YOU MUST KEEP YOUR BURN RATE AS LOW AS POSSIBLE

What you need to do:

- Write a one page business plan. If you can't succinctly describe your business model in one page. Forget it.
- Bootstrap a prototype. Don't know how to code an app? Learn or find someone who does.
- Get a userbase
- Grow.

You're wasting your time if you think people will invest in a product that a couple of university students are developing part-time in their spare time. If you aren't viewed as being committed 100%, why would they bother with you already knowing that 9/10 of their investments will fail.

Also, I'm sure you could find people who might be willing to throw money at you, but if they do, they'll rape you up the ass so badly with the share structure that if you idea hits, your position would have been diluted by so many rounds that you'll have no meaningful stake in the company.

Canadian Youth Business Foundation

Get the $15 thousand and get going on your app. Its an easy process. Go down to Business BC and you'll get the help needed to get the application in tip top shape.