Just to chime in.....
Our company primarly deals with startup companies and we have seen the
following path taken by most people who don't already have
contacts/reputation to secure funding from just the business plan:
It used to be that the entrepeneurs would provide their own funding to
get a
prototype or 'working prototype'. During this time that company secures
relationships with clients and takes their feedback and what their
industry
is doing and refines their business model. Quickly, they pick up angel
funding, which is personal funding from wealthy individuals to refine
their
service/product/business model. At this point, thru clients/angels/your
own
initiative, you gain discussion time with VC firms that specialize in
early
funding. If you're able to get this, then expansion/hypergrowth begins
and
a few months down the line, you look for 2nd round funding to continue
your
growth. (of course, every 'round', you give up more equity for $$)
What we've seen is the initial seed money needed by the entrepeneurs is
becoming larger and that the angels and VC firms are coming in earlier
in
the process than before (ie the idea of Internet Incubators).
Obviously,
the more that you have before you start the equity dance with an angel
or VC
firm, the better equity model for the entrepeneur can be established.
How much the company is worth at the time of evaulation to fund you or
not
determines the equity that you give away. If your company is worth
$100,000
and an angel funds you $50,000, they can take a bigger slice than if
your
company is worth $10,000,000 and a VC/angel funds you $1,000,000 for a
round.
Typically, the success of dot-com type of startup is this: (very very
basic)
Success = Management + Money + Technology
However, the technology component should be viewed slightly differently.
Technology, by itself, can generally never bring you success, but it can
bring you failure if not handled properly. The management and money
tend to
be more important in determining success factor (even if your technology
is
mediocre, if you're other factors are good, you can still be
successful....the flip isn't true though....if your technology is great,
but
your other factors are not, you will not achieve very much).
Apologies for the long message.
/kso
Kuldip Oberoi
Synapta
http://www.synapta.com
1129 San Antonio Road
Palo Alto, CA 94303
ph: 650.962.7287
fx: 650.967.3701
[email protected]