Forums: Discussions for entrepreneurs and small business.

Hi,

 

I was wondering if someone could help me. I am wondering if someone who has experience with raising money from VC’s and what I should be watching out for.

 

I have a very awesome dream to create a whole new retail concept store. I have been basically trying to plan everything myself however I am now to the point where I need to hire people in the area’s of legal, marketing, architects, programming, and accounting to help refine the concept and take my ideas and help develop the branding, put numbers to the plan, and get everything laid out on paper correctly so the plans are well developed.

 

The marketing people have told me they wanted around 90,000 to develop the plans and the branding and the store design/layout in pure paper and rendered drawings and to do the marketing.

 

The local accounting people that I know have all told me that my project is beyond their ability to do and that they would have to hire people to help research how to best structure and quoting me a price of 50,000 just to help financially figure it out. (It’s defiantly not rocket science) Two other accounts simply turned it away saying to go to the University to help figure it out. However I really don’t want my idea running around the university and then they agreed with me but offered no help or direction to turn.

 

I haven’t bothered contacting any architects because I am sure that they will tell me it’s going to cost as much to have it laid out and designed and my own building is going to be necessary for my retail concept store.

 

The retail design people that I know had told me that it will take upwards of 10 to 15 million properly design and layout my store. However until I get professional help there is no way to determine anything because it next to impossible to figure out even the amount of floor space needed. And it`s definatly not something you can go and just rent a place and start.

 

While I am attempting to make all the perfect logical steps to being able to get a working concept and all the paper need to help put the perfect numbers to present to more VC’s to build out my retail concept.  

 

How should I move forward? I can’t personally come up with the money to just fork over for a bunch of plans and pieces of paper and have no possible way of paying it back. I am looking at upwards of $400,000 in professional / planning fees. With no way of paying anything back until my vision is built and income is rolling in.

 

I would personally like to structure it so that I still retain control of my company and I have the ability to possibly purchase out the VC’s.

 

 

 

 

However on the flip side I am also looking to take my retail store concept and branding ability and launch it on the Stock market in time as company. Being that my goal is to chain my store. (no franchises, but all as one company.. So buying them out may not be possible or it may not matter)

 

What Should I be personally doing to protect myself? The business may require a lot of money to get up and going correctly but the idea isn’t overly complicated and it’s certainly not rocket science.

 

I simply don’t understand how I should go about moving forward. I’m just plain stuck..

dblclik,

First of all, you are not alone. Many entrepreneurs have been where you are.

It`s difficult to give you a specific answer but here are some general comments to consider:

1 The professional VC community (those companies who invest other peoples money for a fee) because of their structure do and must seek out deals that show the potential for big returns. For the amount you may ultimately need - it likely means they will own a substantial percentage of the company when all is said and done.  The question you may want to examine is this:

Would you prefer to own 100% of a company valued at $10 million or 10% of a company valued at $100 million. Obviously, the net dollar amount is identical, so it`s a matter of individual choice.

2. Equity capital is "expensive".  The longer you wait and the more "progress" you make between capital rounds - the better. Your valuation will be higher and therefore you will need to sell less of the company to acquire the funds you need.

Given what you have told me so far, it seems like you might be best served with a capital strategy that involves 2 or more funding rounds - especially since it sounds like real property may be part of the ultimate business situation.

3. As for protecting your self - that is something you will want to address early on.  We`ve all heard the horror stories by people who have had their good idea "adopted" by someone else - and it does happen. However, most investors won`t have the passion and dedication that you have to "make it happen".

I don`t mean that you shouldn`t take steps to protect yourself and your idea - just wanted to give you a different perspective.

4. As the saying goes "you can`t eat the elephant all at once, you have to take a bite at a time".  Here are a few "bites" you might want to consider as next.

• Identify your intellectual property and develop a plan for it. You don`t have to have a patentable idea to have intellectual property.
• Determine a next stage for your idea and what it will take to get there. For example: Formation stage: ( an established business entity ready to acquire some initial "seed" capital)
• Documents/ materials needed
• People resources (team)
• Information/data /research
• etc

I hope this helps. If you have specific questions, let me know.

Robert

 

PS: Although I don`t know the exact scope of work - the $50,000 figure seems to be a bit "over the top". 

 

 

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Home of the Scalable Business Plan and QuikStart Capital Programs
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dblclik,

I think it might be a good idea to start looking for a co-founder, for two reasons:

First, if you can find one or two people with complementary skills who can and will buy into your vision, you could do away with a substantial portion of  the early stage planning costs.

Secondly, from what I`ve read (and I`ve REALLY read a lot), VCs and Angels tend to prefer funding a 2-3 team to an individual founder, especially if the individual founder doesn`t have any prior startup hit.

But finding someone who can buy into your vision, and who`s ready to endure that roller-coaster life of a startup (especially at the scale you`re describing) can be a very difficult thing. You want to take your time move cautiously.

If you can spare 10-minutes, have a look at this great essay: How To Fund A Startup (http://www.paulgraham.com/startupfunding.html), a true masterpiece written by Paul Graham (founded Viaweb which got acquired by Yahoo, now runs YCombinator, a new kind of venture firm that funds early-stage tech startups).

All the best.

==
George Appiah

It sounds like there’s still a lot of uncertainty involved in your strategy. This is the worst-case scenario if you intend to approach VCs or any other type of formal funding resources, as you need to create a certain sense of competence and security to spark their interest.

VCs are confronted with ideas for the next big thing every day; so don’t expect them to open up just because you are convinced of the potential of your venture. Do first things first. Incorporate your business, develop a viable strategic business plan and retain a professional strategic advisor who can assist you with the tweaking of your strategy.

In the process you will realize that your vision becomes even clearer, key information is validated (or not), and capital requirements and financial upside potential can be quantified properly. These are the prerequisites for any successful pitch to investors.

Please feel free to contact me if you want to share your business plan/project outline and I will be glad to take a look in order to be able to give you a few more pointers.




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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
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