If you've just joined us, Oddpodz is a new online community for creative doers and problem solvers. Founder and branding expert Karen Post, who writes a regular column for fastcompany.com, brings you the play by play of a startup brand.
Funding — finding fuel for young brands
It’s been a year and a half since Oddpodz was born. We started with scribbles on a white paper napkin, and that evolved into an actual business plan. Our accomplishments for July included launching a modest ecommerce site in order to market our branded soft goods, and beginning a fan database. In September we published "Openeyez," our first weekly e-zine. In January we debuted a bare bones social network and an online content destination. Then in June we enhanced our site presence with new features and improved navigation. We are now ready for traffic and ready to build a premiere brand.
That’s the good news
We’ve accomplished a lot with a little. Oh yes, we’ve made some mistakes and learned plenty of lessons. But fortunately, we also received significant support and had big fun too.
The "other" news: we need more funding
Fundraising is never an easy task, but is especially difficult when you are a startup. Finding funding will test your resilience and grade your stamina. Raising capital is both emotionally painful and a great business high. Fundraising is a critical skill to master because it forces a startup to perfect their brand story and be accountable.
Oddpodz completed a $650,000 round of initial funding. The majority of our initial investor group came from the standard "friends and family" category. While it’s true that some capital came from outside sources (for example, from strangers the principals met on airplanes), the majority of the investments were made because the investors knew and believed in the founders.
The second round of funding is different. The target audience is mostly strangers. While the management of a startup is always the key factor to an investor, the clarity, the company business model, and the category distinction become key identifiers.
Stress on steroids
The most challenging part of fundraising is the time it requires at a period when both manpower and time are extremely scarce. What makes it even harder is the need of a startup to keep moving forward, which translates to spending money that you don’t have.
We felt like we were hitting a wall. Were we talking to the wrong investors? Did our pitch need tweaking? Maybe both. We stepped back and invited some new fundraising minds to take a look. It cost us some cash and about 50 hours (both of which we didn’t have to spare), but it was necessary.
Working with these veteran fundraisers, we gained insights and made our adjustments. Startups are constantly evolving organisms; that’s one of the great aspects of being one. You need to be flexible and open to moving quickly when new market insights are gained. Our result is a much clearer, investor-friendly business plan. With our new and improved plan in hand we are on a mission to raise another $600,000.
On your journey to build your company you will meet many prospective investors. Keep a spreadsheet of all of them to note any related investments they have made, track who else knows them, and log your contact history. Conduct ongoing homework on investor prospects. One great tool to keep the daily pulse of people and companies in the news is a Google Alert to start. Another site to check out is The Funded, which invites entrepreneurs to post comments on funding sources. You’ll find information ranging from gracious compliments to dreadful integrity flaws about most of the active funding sources.
Timing is a big part of deal funding. Sometimes an investor will pass on your opportunity because they are involved in another time-consuming deal or because you are at a stage that is too early for them. Just stay in touch without being a pest. Be resilient! I know it is easier said than done. It’s hard to not take it personally when you feel that a stranger is saying your baby is ugly.
A few investors have dinged us (that’s startup talk for rejected). Some investors will never invest in you; often it is simply not a good fit. In new categories it’s likely they just don’t understand your space. Unless there is a solid reason, an investor should not be kicked to the curb due to lack of their immediate acceptance. Oddpodz believes there are still possible matches for our company as we hit future milestones of production and fundraising.
Case-in-point is Golden Seeds. Golden Seeds is an early stage angel investor group for women-led ventures and is funded by accredited women investors. We applied with Golden Seeds very early on in the game. In their ding note they stated that our revenues were not yet large enough. So we thanked them for their time and have stayed in touch. Every time Oddpodz sends out an investor update, receives publicity, or hits another goal, we copy them along with a handful of other investor prospects.
Golden Seeds is unique because, regardless of whether they fund you, their mission is to help entrepreneurs and investors succeed. Beyond reviewing and funding deals, they offer programs, advice, and tools to connect funds to promising ideas. Since Oddpodz had applied months earlier we received several of their newsletters and communications on their initiatives, one of which was hosting a summer fundraising workshop in Manhattan for women entrepreneurs. Since we had just updated our fundraising materials, this looked like an ideally timed event. A huge plus was the opportunity to personally meet with some of the Golden Seed angels and other female startup CEOs.
The event proved very worthwhile. Founder Stephanie Hanbury-Brown and managing partners Paula Bruno and Nancy Harrison (all of whom have impressive funding and business backgrounds) kicked it off. The coolest thing was the non-intimidating and authentically supportive environment of twenty other five-star women business owners.
As a start, the CEOs introduced themselves and their diverse businesses, which I found fascinating. One company, The Amber Chand Collection, markets global gifts for peace and understanding. Their gift products are handmade by women in challenged areas of the world. Another memorable participant was a Greek specialty food company called Taste of Crete. Talk about entrepreneurial energy and passion, it was intense!
After the introductions, the Golden Seeds leadership team lead a session covering the basics of fundraising. They explained that a winning pitch should have:
- A product that solves a real problem.
- A product that is scaleable.
- An excellent business model and execution plan.
- A billion dollar market opportunity.
- A strong management team.
- Exit strategies.
The Golden Seeds leadership team stressed the importance of these communication principles:
- Respect the time of your audience.
- Technical expertise should not be required to follow your pitch.
- Use correct grammar.
- Format with clarity of thought.
- Think about how the order and flow of the presentation relates to the desired outcome.
- Provide factual support to assertions.
- Sources should be referenced and identified.
- ADA: Always Define Acronyms.
- Listen to questions, repeat or paraphrase, then answer.
This session closed with three examples of investor turn-offs, or how not to use funding:
- Big salaries for management.
- Using new funding to pay off old debt.
- Too much product development. Plan and know the shipping point for the requirements of your market.
Next, the art and science of company valuation was discussed, then the business owners practiced with a cap sheet / valuation exercise.
For the final segment we practiced the pitch for our startups. The goal of your startup pitch presentation is to get from the screening process to the due diligence stage. Accomplish this by focusing your pitch to convey your business as serving a compelling need in the marketplace, and that you personally are worthy of their investment.
Key points of "The Perfect Pitch" include:
- Communicate honesty, integrity, and trustworthiness: Maintain eye contact, answer questions directly, and never fudge the truth.
- Be someone people can work with: Don’t be long-winded or argumentative. Show a light sense of humor.
- Be open: Recognize your strengths and weaknesses.
- Know your stuff: Do your homework; keep track of competitors; numbers, numbers, and numbers.
- Craft your pitch in several versions: 5 minutes — The elevator; 10 minutes — Meetings with skeptics; 20 minutes — Angel groups; 20 minutes — Invitational meetings.
In closing, use of the infamous PowerPoint presentation was discussed. This is a powerful tool that can aid your success if produced properly, according to these guidelines:
- Keep it simple.
- Don’t over-word each page.
- Graphics are to support you, not replace your presence.
- Always bring handouts.
I wish that building a brand was merely about passion and ideas. But the reality is, significant funding is the fuel needed to take your dreams to the marketplace. Golden Seeds is one great resource to help get you there. There is a lot of money out there for the right ideas, so until investor deposits clear at the bank, don’t lighten up your fundraising intensity. Believe! Keep pitching! Stay tough!
Meanwhile, I’ve got to focus on our mission at Oddpodz. I’m confident there will be great success to report next month on specific strategies to build the brand of a global network for creatives — Oddpodz. It certainly provides a rich resource of ideas to help you build your brands too.
Till then, Brand On!