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Posts Tagged ‘GrowthOS’

Last Friday we released some information on our crowdfunding project, now officially named as Venture Bonsai.

Venture Bonsai is a tool for companies (start-ups and others alike) enabling them run a crowdfunding-style financing round successfully.

I’ve covered some of the challenges of the crowdfunding model in my recent blog articles (Part 1 and Part 2). Venture Bonsai is about to solve some of those, if not all, challenges.

The key benefits of using Venture Bonsai are

  • Demystification of the crowdfunding process, and a funding process in general
  • Offers tools and processes to follow the financial regulations
  • Offers tools for acquiring or creating the key documents such as Business Plan, Shareholders’ Agreement and Term Sheet
  • Offers a platform for Vendor Due Diligence (DD), including DD done by certified partners
  • Includes tools for company valuation
  • Includes a “Show Room” for your marketing material
  • Includes “Elevator Pitch on the Video”
  • Includes communication tools required during and after the financing round
  • Tools for escrow account and signature mechanisms

We already have the first companies lined up to use this tool in the piloting phase. Venture Bonsai is also utilizing this model for its own funding process. Please contact us if you’d like to use the upcoming pilot as well.

We’ll be on a roadshow for Venture Bonsai as follows: London March 1st & 2nd, Silicon Valley March 4th to 8th. Please contact us if you’d like to learn more (as an entrepreneur, as an private/angel investor or as a partner).

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Crowdfunding is gaining some momentum as a potential investment vehicle for startups. As the traditional Angel Investors and Venture Capitalists have become more careful on the early stage investments and number of investments has dropped dramatically, there is a need for new methods.

But how do you actually run a crowdfunding investment round? There are no tools currently available for this so it may seem like a lot of work. And it is. This means it’s just another challenge to be solved.

The issues you have to consider and solve when running a crowdfunding round (or any investment round):

  1. How do I find the potential investors?
  2. Which regulation applies and what can I actually do?
  3. How do I get the investors’ attention?
  4. How to deal with all the required documents?
  5. How can I negotiate all the terms with so many investors?
  6. What about company valuation?
  7. What is Due Diligence and why do I need it?
  8. How on earth do I get all the papers signed by a large number (say, 90) of investors all over Europe?
  9. How can I securely communicate with all those potential investors without answering the same questions over and over again?
  10. How to take advantage of a large number of investors, after I got them?

1. How Do I Find Potential Investors?

In most cases you need to find all the interested investors yourself! You can also use some of the crowdfunding initiatives, such as GrowthOS and Vestify, to find those people, but it can take some time before these are the quickest way. You can also consider making a deal with a large bank and make a underwriting deal with them. In any case you have to keep in mind the regulative limits set by the financial authorities of your country, such as SEC, European Union and national laws.

2. Which Regulation Applies And What Can I Actually Do?

This depends where your company is based and where your investor candidates are. Regulation is largely unified with the European Union (excluding UK), USA has its own regulation as is the case with for example Japan and Australia. Due to the legal reasons and as I am not a lawyer, you should consult your lawyer if you are unsure about this.

3. How Do I Get the Investors’ Attention?

If your service or product is on the market and if you’re lucky, they’ll contact you. It’s always the best if you can get yourself and your offering visible so that the potential investors call you (and you don’t call them).

However, if you are really early stage company, or there is nothing in public yet, or if you just are not famous (yet) then you need other tools. One thing we are piloting next month is producing professional-grade “elevator pitches on video”. One of the videos is 100 seconds long and is meant to be public, including publishing it in Youtube. The other video is 5 minutes long and can contain “more confidential information”. The purpose of the videos is simply to get more attention of potential investors and get them in touch with you. We have developed a special “format” with pre-determined questions  related to startups and funding to speed up the process. Both shooting the ideo and editing it is done by the professionals, ensuring high quality and nice feeling.

You should, one way or another, have your own “Show Room” with all the videos, screencasts and other material you want to use for showing what you do.

4. How To Deal With All The Required Documents?

In order to raise money you need in minimum

  • Business Plan (with an excellent Executive Summary)
  • Share Issue Offer, including the Term Sheet
  • Shareholders’ Agreement

There are many guides on how to write a business plan so we don’t cover it here. Concerning the Offer and Term Sheet, you may want to take advantage of services such as The Funded (only for entrepreneurs) or consult your lawyer (again:-). Shareholders’ Agreement is discussed in the next chapter.

5. How Can I Negotiate All The Terms With So Many Investors?

The thing is, you don’t (negotiate with all of them). You must have such versions of the key documents such as the Shareholders’ Agreement that it is acceptable for all the parties without further negotiation. It’s “take it or leave it” kind of thing. An if it is not acceptable by the investors, they may “leave it”.

Luckily there are number of initiatives taking place in this field. There are for example already few “Standardized Shareholder’s Agreement” templated downloadable for free. You can always customize these with your own lawyer, but the key thing to keep in mind is that it has to be acceptable by both the investors and yourself.

Next week: Challenges 6 through 10!

PS. I’ll be in London and the Bay Area early March, please contact me if you’d like to discuss crowdfunding (as an entrepreneur or as an investor)

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Yesterday I tweeted about a simple question.

So far I’ve received 15+ excellent comments.

Initially and based on discussions with some fellow (active) entrepreneurs I was of an opinion that we are mainly missing the people (entrepreneurs) to make the idea into action.

This line of thought was justified as we all know there are more ideas than what we can implement. Many of the ideas should, honestly, never be implemented. And many of them are just copycats, yet another facebook-youtube-socialmedia clone which is a pity. Even after these taken away there are many more great ideas than people to implement them. In this light it seems almost funny how desperately (still) some people value just the idea (or an idea in PowerPoint slides).

On the other hand many people, again initially, were of an opinion that you can actually find money if you have a really good idea. The money just may not come from your home country, in this case Finland. There is no real Venture Capitalists left in Finland, and the angel investor community is not very large nor truly active, yet. Luckily at least Veraventure is doing good work to get this changed.

I made earlier a little poll which says many (academic) people skip entrepreneurship as they either don’t have a business idea nor a team.

This week a Finnish business magazine Kauppalehti Optio published a cover story of 80 young people born in the 80’s, the people who are our future and who are going to take over. Guess how many of those persons were entrepreneurs? One. There is hope that some of those classified as “students” still could become entrepreneurs…

The responses to my tweet mainly said, however, that we are missing money and financing. There were also good comments about timing and luck, no matter how good the idea is. For example our idea of mobile carpool service (year 2002) was given no serious attention in the Finnish VC community (luckily the angel investors in Finland, Italy and The Netherlands trusted us) but this year two young students won Venture Cup with the idea of mobile carpool. So it’s also about timing, seven years later. See also a briefing to the subject here. As a side note I would say that if Nokia really would like to “think different”, they should use this Ecolane technology to enter mobile carpool business before Google or Apple do. Disclaimer: I’m a shareholder in both of the companies mentioned.

One thing what I’ve been wondering – if having not enough entrepreneurs is NOT the problem – why as there so little active serial entrepreneurs? I mean those who have tried at least once, possibly succeeded and become a driving force of another start-up with all that experience? Many of those people seem to be now in a more convenient “advisor” role. As one of the active entrepreneurs I respect, Marko Parkkinen, said this week: “After failing in the recent start-up, I was at one point almost desperate enough to become an employee, but luckily I run out of battery in my mobile phone before I said ‘Yes'”.

As one active entrepreneur friend of mine said, “At the first stage of ‘making it big’ the lack of true entrepreneurs makes the start-up market very small. Money matters only after a start-up has started its journey – if there was all the money available, but no real motivation to make ‘my/our company big’, I doubt there would be much success.”

However, I do belive that funding is a key element in building new success stories. Early this year  we start building a new initiative code named “GrowthOS“.

“GrowthOS is an ecosystem for entrepreneurs to build online presence enabling them to receive funding from one or more private investors as well as facilitate all the activities before and after the investment has taken place. Extensive use of web-enabled communication, reputation building and other tools offer a unique platform for private investors to follow, communicate with, invest in as well as follow or participate the development of those startups they mostly believe in.”

If you are interested in the GrowthOS ecosystem (it’s going to be Europe-wide), feel free to contact me.

But coming back to the main question: “Which one of the following is the most critical and the least supplied resource: ideas, entrepreneurs or money?”

What do YOU think?

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