Maya Brooks takes an in-depth look at seed funding at Jersey Shore Women in Tech – NJ Tech Weekly
Brooks’ presentation was packed with in-depth information attendees needed to know about securing funding for startups, and it led to a lively question-and-answer period.
Brooks was introduced by Jenna Gaudio, who, along with Alison Lamano and Brittany Jacobs, organizes this group, which welcomes participation from everyone, not just women. The full video of this event is available here.
The ins and outs of venture capital
At the start of her speech, Brooks discussed the ins and outs of venture capital, explaining what women should know about it. For example, she said, “Venture capitalists are people who use money in the venture capital fund to invest in companies in exchange for equity. So every time they invest, they get a share of the equity fund. Out of 10 companies they invest in, they are looking for a big payout of one. “They could invest in 10 startups, one of the ones they want to be a billion dollar company, and all the others that they don’t care about,” she said.
A startup can be contacted by a venture capitalist, but Brooks urged women to step up that interaction. “If somebody has a title like ‘venture capital analyst’ or something like that, he has no decision-making power in the business.” She advised making sure you are in contact with a managing partner at the firm, someone who makes decisions.
Brooks spent time discussing how venture capitalists and their investors make money, so meeting attendees can understand exactly how they operate. She also discussed the pros and cons of withdrawing institutional money from venture capital firms.
Regarding the pros, she said, “You’re going to make money, and you’re going to get it fast. You will be able to evolve quickly and you will be able to invest this money ”in your business. If your VC is doing well with the companies in its portfolio, it should be available for follow-up funding, “so you can go back for the next round and the next round, and they can act as mentors as well. , connecting you to resources. Being funded by a venture capitalist is “a signal to the market that you have something,” that your business is worth it, she said.
Among the downsides, it is “notoriously difficult to obtain venture capital. Anyone who has ever tried to do this will tell you it takes months, they’ve met hundreds of people, they got seven “no’s”. Yes, it is a tiring process. It’s a sales process. … Many founders decide that it is not worth it for them to do this for six months. I’d rather spend six months creating products, finding co-founders, or doing something else with that time. So, this might not be the right solution for everyone.
She added that founders must give up their company’s capital – and control. Some venture capitalists prohibit founders from doing certain things. They can, for example, block a merger or acquisition “because they want you to hold on for the long term”. Also, she said, there are potential consequences for founders not using capital to reach milestones, as the goal of venture capital is to allow the business to grow.
How to avoid taking funds early in a startup’s life
Continuing his speech, Brooks outlined a few options founders can use to avoid taking funds too early in their journey. “A lot of people get stuck in an endless loop, where they say, ‘Okay, I need the funding to build the product, but I also need the traction to get the funding. she noted. “They continue to turn in this circle”,
She presented a number of ways out of the loop, including crowdfunding. “Crowdfunding is a great option for pre-product startups, if you have a product or an idea, and you want to know if other people aren’t there, or if you need 10,000. , 15,000 to put something on the market or get your MVP [minimum viable product] of the ground. … Not only does this allow you to pre-sell your product and service, but it also allows you to have a marketing campaign to gain customers, ”she said.
“There’s also equity crowdfunding, which takes a bit more of a sophisticated business to do, but equity crowdfunding platforms are available,” Brooks noted.
“A second option for funding free products is seed, and it might make it look like we’re just taking our money and putting it into a startup. This is how many people start. Some people find jobs and others start selling other types of items to start the business. “
Another way is “good old fashioned presales.” If you’re on the product side and you have a physical product or a retail consumer good, something that you want to bring to market… presales are a way to get people on the waiting list, d ‘get people to pre-buy. “
If you start a software as a service (SaaS) business that will sell to other companies, startups can come up with strategic partnerships and put together letters of intent to buy from potential customers, Brooks suggested.
Finally, startups have used credit and credit cards to fund their startups. “I put this option last and I’m not going to spend a lot of time on it, because I don’t want to encourage you to go into debt to finance your startup. This is generally not a good idea. The amount of personal capital that you usually need to put in place to get this type of debt financing is usually not beneficial.
Responding to a question from the public about what happens if there is too much demand for a product during presales or crowdfunding, and the startup cannot fulfill its orders, Brooks noted that transparency is the key. key.
“As long as you’re transparent about what you’re building and when someone can expect something from you, people don’t usually feel upset about it. “So if you talk about a situation where you have preorders, then you get way too many, and you are not able to fill them, say, for a year, for example, then” put the data that notes that “We come to a platform”, but will be delayed.