Q&A: Funding, Grants and Pitching to VCs
For starters, the majority of banks won’t lend to startups. Your business will have to have been operating for at least three years and, have been profitable
Q): Dear Meyer, My business is now in growth mode and we need outside funding to allow us to reach our potential. Is a bank loan an option for us? And what do I need to know going in?
A): A bank loan can indeed be an option but there are a number of requirements that your business will need to meet first. For starters, the majority of banks won’t lend to startups. Your business will have to have been operating for at least three years and, have been profitable during those three years. Your tax records will have to be comprehensive and meticulously kept by a professional accounting firm.
These are just the basic requirements, whichever bank you go to will have more detailed obligations that will have to be fulfilled before they will lend to you.
If your business meets the above requirements you should begin drawing on a line of credit as soon as possible. The reason is that the longer and more extensive your credit history, the more funding options that open up for you down the road.
When you begin the loan process and throughout your future bank dealings, it’s extremely important for you to be completely honest and upfront with your banker. The more information and documentation that you share, the less likely it will be that you will end up with unforeseen complications.
Once you’ve established a successful relationship with a bank, it is to your advantage to do whatever you can to keep that relationship strong. You will have learned by then how difficult the process of getting a loan can be and the incentive to not have to do it all over again will therefore have become obvious to you.
The utilization of bank credit can end up being the difference maker that takes your business to the next level and it is something that every business should take seriously.
Meyer Eichler serves as Senior Vice President of Signature Bank, a full-service commercial bank with 23 private client offices throughout the New York metropolitan area. Meyer is a CHYE mentor and offers guidance on all matters pertaining to funding and operating your business.
Q: A friend informed that there are government business grants available, especially for new businesses. How do I get more information?
A: In most cases, city, state and federal government does not provide grants for starting and expanding a business.
Government grants are funded by your tax dollars and therefore require very stringent compliance and reporting measures to ensure the money is well spent. As you can imagine, grants are not given away indiscriminately.
Grants from the federal government are only available to non-commercial organizations, such as non-profits and educational institutions in areas such as, medicine, education, scientific research, and technology development. The federal government also provides grants to state and local governments to assist them with economic development.
Some business grants are available through state and local programs, non-profit organizations and other groups. For example, some states provide grants for expanding child care centers and creating energy efficient technology. These grants are not necessarily free money, and usually require the recipient to match funds or combine the grant with other forms of financing, such as a loan. The amount of the grant money available varies with each business and each grantor.
If you are not one of these specialized businesses, both federal and state government agencies provide financial assistance programs that helps small business owners obtain low interest loans and venture capital financing from commercial lenders.
If you want your Pitch deck to get noticed and potentially garner you an in-person meeting, there are some things it absolutely must get right.
Q: I’m preparing to pitch my new app to Venture Capital firms; what are some things I should pay attention to in my presentation?
A: Getting attention and funding from VC firms is all about the first impression. VC people see dozens of pitches a week and your’s needs to really stand out for it to get noticed. The first contact a VC will have with your company and product is through a Pitch deck, which is a power-point presentation that they receive via email. If you want your Pitch deck to get noticed and potentially garner you an in-person meeting, there are some things it absolutely must get right.
It all starts with design. Your Pitch deck has to be visually attractive and formatted properly. All the information it contains gets lost if the person reading it has a negative reaction to your company because of bad design.
Then comes the story. You have to clearly and succinctly lay out to the reader what problem your product is going to solve and why there is a market for it. This is by far the most important part of your pitch; if you can’t convince a VC that a need and a market exists for your product, it’s game over.
Finally, there is the background info and detail. You must include a preliminary marketing strategy and a breakdown of your costs vs. revenue to date. This information is here to assure potential investors that you are a capable business person who has a good handle on what is going on inside the company. Short bios of all the founders, shareholders, and key employees of the company should also be included.
Sending in a Pitch deck is only the first step in this process but it might just be the most important one. Give it the care and attention it deserves and with Hashem’s help, you’ll be well on your way to making your business a success.
Michoel Ogince is a venture capitalist and startup entrepreneur with extensive experience in media technology.Michoel uses his expertise to advise on business planning, revenue models, attracting VC funding, and marketing strategy. Michoel is a Mentor at CHYE to schedule a meeting with him log on to CHYE.info