Start-up Funding Explained, Part 1

Over the course of writing at Black Web 2.0 we have met so many smart and talented web entrepreneurs.  Many of whom have been looking for or considering some type of funding. We thought it would be helpful to publish a series of articles that may help clarify the funding process and various aspects of seeking funding.  You should know we are far from experts on this topic which is why we solicited help from an expert.  Robert Greene over at Syncom Venture Partners was kind enough to take time out of his busy schedule to help with developing content for this series.  Here’s a little info on Syncom if you are unfamiliar with them:

Syncom is the leading venture capital firm primarily focused on early to mid-stage investments in underserved segments of the media and communications industry. Syncom pioneered this investment strategy beginning in 1977 and has been involved in the creation of many of the most successful and visible African American- and Hispanic-owned media and communications companies over the last 30 years. A number of Syncom-led media and communications companies representing in excess of $10 billion in enterprise value have gone public or been acquired by major companies. These include: BET, Radio One, XM Satellite Radio, Z-Spanish Radio Network, Buenavision Cable, District Cablevision, El Dorado Communications, and Puebelo Broadcasting.

The “Start-up Funding Explained” series will be posted on Mondays and there are 5 parts in this series that you can look forward to seeing every week.   Here’s this weeks:

The Venture Capital Process:

Founders Capital

• The more of this type of capital used to start your business the better off you will be in the long run.
• Founders invest to fund the dream.
• Greatest risk involved

Friends & Family

• These are people not necessarily looking for an economic return they generally just want to help.
• Typically have some personal connection with the Founder.

Angel Investors

• More than likely these are investors who have made money before investing.
• They invest because they want to get in early on a business that is likely to have high growth.
• Generally looking for a significant return.

Venture Capital

• These investors understand the risk involved.
• Generally they know the sector the business plays in.
• Are only interested in start-ups that have some institutional value.

Expansion Capital

• These investors see the trajectory of the start-up.
• Start-ups who fall in this category are profitable and have resources and assets to secure the investment amount that is being sought.
• Used to expand an already profitable company.
• This type of investment is the least risky of all types listed above.

Common Misconceptions:

• Grants exist that will help you fund our company that you don’t have to repay.
• If you simply have an idea that it is worth funding.

Steps to take before looking for funding:

• Very clearly map out your business.  Don’t over look gathering primary market research.
• Build an experienced management team.  Experience should be related to your core business or include comparable experience outside of your industry.

More information on start-up funding and wealth creation can be found at the Marathon Club.