What is the Angel /Venture Capital funding  catch-22? Well, startups need venture capital to start, but venture capitalists and angel investors only fund companies which already have traction (i.e., sales). This is one big reason why no one is funding you.

Part 1: The Bad News

Before Embarking on a Campaign to Raise Venture Capital Funding, You Should Look at Yourself Objectively and Honestly to Determine if You Even Qualify. Most People Don’t Stop to Do This.

Since the vast majority of venture capital hunters don’t qualify, you will, in most cases, end up wasting 6 to 12 months of your life writing a business plan which will never be read and doing “dog & pony” shows for audiences who are at best only mildly curious or at worst engaged in “brainsucking” you for ideas.

Who Qualifies for Venture Capital Today?

Industry “stars” qualify for venture capital. This means someone who has already taken a start-up from zero to 50 million in sales or better. So if you’re counted amongst the stars in your industry, you stand a good chance of attracting venture capital provided your current deal has the following elements:

* at least 2 other senior executives with experience in building wildly successful companies,
* a proprietary technology in a sector currently considered hot by the venture capital industry,
* a top-notch technical team,
* a target market at least one billion dollars in size,
* a minimum of one year of rising sales to blue chip customers.

If you don’t meet the above criteria venture capital funding won’t happen.

The Three Dirty Little Secrets About Raising Outside Capital

* First, chasing outside capital is by far the most unpleasant and drawn-out ordealexperienced by entrepreneurs. It always seems to take forever. (For this reason, veteran entrepreneurs try to avoid raising outside capital at all costs.)

* Second, based on the fact that your typical early stage venture capital firm invests in only one company out of every 500 business plans it reviews, your odds of succeeding are only 1:500. (If you are pursuing angel investors your odds improve to maybe 1:200, although no one knows the numbers for certain.)

* Third, in about 50% of instances where an early stage company actually succeeds in raising venture capital, the founder is fired within the first year and kisses most of his or her stock good-bye.
“If you ask a VC what value they add, and you get
them after a few drinks, they’ll say, ‘We replace the CEO’ “,
he said. And that, he indicated, does not vary
with the economic climate.

So your odds of being a successful venture capital-backed founder/CEO are actually only 1:1000.

The Funding Problem

Here’s what typically happens when a company needs to chase outside capital in order to commence or expand operations. After about 6 months one of three things occurs:

1. The lucky 1 in 500 finds investors.

2. Most die on the vine. In many cases, the wannabe entrepreneur simply abandons the project and moves on to something else. (As the joke goes, “That’s why God created ‘jobs’ “.)

3. A savvy and tenacious tiny minority of entrepreneurs finally gets mad at having wasted so much time. Then it begins to figure out a creative way around the funding problem by focusing on creating cashflow with the resources and opportunities at hand, instead of continuing the futile quest for outside capital.

Don’t waste money on these resources: Lesson: put very little faith in these services and never pay up-front fees.

* Matching Services: We’ll match your project with one of our many accredited angel investors. Call now! Operators are standing by! Just $199 to register.

* Business Plan Services: We’ll write a business plan for you which will attract funding. Only $999.

* Finders: I can help you raise money for a fee…and, by the way, I require a retainer up-front.

* Money-Raising Bootcamps: Attend our weekend bootcamp for $1,195, and you’ll discover that it’s not what you know but who you know that counts when it comes to raising money.

* Online Business Plan Repositories: Post your b-plan on our site for 6 months. Only $59.

* Venture Capital Directories: VC’s are waiting to fund you! For just $49 you can buy our CD directory with 12,952,734 venture capital firms listed on it. (How these can sell in the age of Internet search engines is beyond me. PT Barnum was correct about a sucker being “born every minute”.)
in a nutshell, most of these middle-man services don’t work in 99% of instances. This is also why they won’t tell you the Three Dirty Little Secrets of Raising Capital.

Part 2: The Good News

Real Entrepreneurship is About Cashflow Creation

It’s all about positive cashflow. If you can make it happen, you get respect and investors to fund you so that you can make even more.

Repeat three times daily until the delusion goes away:

With cashflow I’m a somebody; without it I’m a nobody.
With cashflow I’m a somebody; without it I’m a nobody.
With cashflow I’m a somebody; without it I’m a nobody.

Fact: Successful entrepreneurs invest the same level of time and energy into creating cashflow during the first year that wannabes invest in polishing their business plans and offering them to complete strangers.

The Solution

Once you have cashflow life becomes much simpler. Cashflow not only enables you to pay your bills but it places your company into the “stream of opportunities” that established businesses enjoy. Cashflow also earns you respect and gives you the ability to say, “No thanks!”, to those notoriously outrageous offers made by venture capitalists and private investors.

Cashflow = Respect from Investors

* Cashflow–any cashflow–earns respect from investors, lenders, customers, suppliers, and even your Aunt Mabel. Cashflow attracts equity capital from investors.

* Cashflow will place you in a stronger bargaining position with potential investors since it will allow you to walk away from a bad deal. Pre-deal cashflow equals power. Power for you.

* Cashflow will give your company a higher valuation which in turn will allow you to hold onto more of your equity if a deal is done.

If you are truly committed to building your business then do everything you can today to achieve this goal.

Don’t kid yourself.

So ask yourself, in 3 months from now do I want to:

* still be polishing my business plan and chasing investors with nothing to show for my efforts, or
* do I want to have an operating company with positive cashflow?

The decision is yours.