Lately there’s been a surge in the number of Internet startup’s and entrepreneurs willing to experiment more vividly with their ideas. Everyday I read about startup’s, meet like-minded entrepreneurs, and focus on my own startup. Over the period of time I’ve learnt that for a startup to hold promise and succeed, it must foremost address three issues.
1. Is the idea of the product or service what people want? If people want it, only then you have a market audience.
2. Is it lucrative? The main objective of any startup should be to turn profitable, remain profitable, and grow.
3. Sure you have a great team, but how will you sustain the financial requirements? If you have a great technical team but no investors, then how will you fund your startup? Initial funding may not be required by every startup, but its still an essential component for solidifying your startup’s infrastructure.
I have come across several startup’s with rocking ideas, a great product, and a solid technical team, but eventually they fail to make it to the mainstream. More than often, this is due to the lack of a robust financial plan (and an exit strategy as well). According to some estimates, more than half of the startup’s either close-down or go bankrupt within the first three years of their operations. Financial planning and funding are very important factors, yet mostly overlooked, which can often make or break a startup.
I was reading the “Guide to Micro Seed Funding” (by Dan Veltri), and realized that micro funding is gradually gaining momentum among technology startups. Dan writes:
Micro seed funding provides groups of young entrepreneurs with just enough starting capital to live and work full-time on their products for a few months. During this time, the company founders are under pressure to develop their product as fast as possible, because at the end of the program they present a demo to a room full of angel investors and venture capitalists who, if impressed, can provide them with a next round of financing and get them one step closer to success.
From what I can assert, there are only a handful of such micro funding firms as of now, like: Y Combinator (bootcamps in Boston and SF Bay Area), Seedcamp (bootcamp in London), and TechStars (bootcamp in Boulder). These micro funding firms provide the startup just enough capital to get the idea off the ground in exchange for some initial equity (2-10%) in the startup. Seedcamp and TechStars are new entrants, but YC is reputed with their investment in startups like Reddit, Wufoo, Scribd etc.
I don’t think there’s a micro funding model currently in India or Australia. It should be though, because its a brilliant investment strategy. Why pump millions of dollars and go bust, when it can be done in small iterations with a higher chance of success? In India, there’s proto.in which is basically a event for startups to showcase their goodies to VC’s. But if anyone knows of micro funding camps in Oz, then please let me know. And while I’m on the Oz scene, here’s a comment I read at YC Startup News:
The key difference between the US and AU is the real stigma attached to failure is AUS compared to the US. This is one are I really admire about the idea behind US entrepreneurship, “you fail to success”. In AUS once you fail you are written off – such is the backwards conservative nature of business (lack of understanding, avoidance of risk. Fear rules.)
I don’t quite agree on that, as I see a lot of passion among techies down-under, but they do lack peer collaboration. Never the less, there are so many Internet startup’s emerging out of Australia, but few being truely global.