Do venture capital firms or private equity funds offer debt financing for startups?

The direct answer to your question is NO, VC and PE funds do not provide debt financing for any companies. Their entire business model is based on investing in companies that can potentially offer very high returns. For venture capital, this is typically ten times the invested capital, and those returns can only be achieved through equity appreciation, not debt service. Read more

Series Seed or Convertible Note? Which one is more founder friendly? Which one do investors prefer?

There is not a definitive answer to this, because a good lawyer can write terms into either one to make one or the other preferable to one or the other party.

That said, the primary entrepreneur-friendly reason for doing a Convertible Note(and the reason that no serious investor under regular circumstances will therefore do an uncapped note) is: Read more

The Smartest Entrepreneurs Bootstrap Their Startup

Image via niaje.com and www.yec.co

Image via niaje.com and www.yec.co

There is so much written these days about how to attract investors that most entrepreneurs “assume” they need funding, and don’t even consider a plan for “bootstrapping,” or self-financing their startup. Yet, according to many sources, over 90 percent of all businesses are started and grown with no equity financing, and many others would have been better off without it.

According to the book, “Small Business, Big Vision,” by self-made entrepreneurs Adam and Matthew Toren, it’s really a question of need versus want. We all want to have our vision realized sooner rather than later, but it can be a big mistake to bring in investors rather than patiently building your business at a slow, steady pace (organic growth). Read more

Martin Zwilling , Founder and CEO, Startup Professionals
December 15th, 2013

8 Key Questions To Expect In Investor Due Diligence

Image via LeadChangeGroup.com

Image via LeadChangeGroup.com

If you really want to impress a startup founder as a potential employee, or you want to be a smart investor, you need to know the right questions to ask. These are the questions that get past the hype of a founder “vision to change the world,” and into the realm of real business strengths, weaknesses, and current health.

Some founders try to deflect these questions by talking incessantly, so you often need to be calm, patient, and persistent to get the answers. My advice to founders out there is to not volunteer too much, but be open and honest in the face of direct questions like the following: Read more

Martin Zwilling , Founder and CEO, Startup Professionals
December 8th, 2013

Where do I find serious non-tech local investors?

The problem with this scenario is that you are describing an oxymoron, and wondering why you can’t find a hot ice cube, or a tall hole, or a submarine that can land at ATL. You write:

“Where can I find intelligent and serious investors who aren’t looking for a cash cow, but are willing to use their funds to contribute to an emerging market and make a lot of people happy?” Read more

Up-to-date Investors Want Social Proof from Startups

I just read Social Proof Is the New Currency on the Social Media Today blog. Author Daniel Lay writes: 

Whether you like Mark Zuckerberg’s mug or not, the social web is here to stay, and businesses that can integrate social proof into their marketing efforts seamlessly will join this new “socially rich” class. We mean richness in fans and followers, not number of zeroes in your bank account. Social proof is the new currency of credibility.

I don’t agree completely — I think a fat bank account is a really good thing too — but I do think it summarizes an important truth: All startups looking for investment need to deal with what that post is calling social proof. To me, the underlying reality is that startups and their founders are traceable on social media. There are footprints to track, or — far worse — no footprints. 

Take it to the pitch moment, say a startup pitching a group of angel investors, which is a scene I see often. Startup founders will be judged by their social media footprint. The startups themselves, as businesses, will be judged by their social media footprints, alias social proof. A founder basing projections on social media marketing will look good if she has thousands of Facebook likes and Twitter followers, bad if she has none or only a few. The social proof, or lack of it, is evidence. Up-to-date investors understand that.  

Social proof can’t be manufactured from one day to the next. It takes time to create a credible footprint. It’s one of the first activities to start as you get rolling. Somebody among the founders should have a stream established from a few years back; and the company itself should have a stream that is at least a few months old, with credible updates, and something to show for itself. 

Tim Berry , Founder, Palo Alto Software
December 3rd, 2013