Funding: Plan B

I allowed myself some time to be dejected after being rejected for a bank loan.

High Risk, Small Business--Yep That's Me!

High Risk, Small Business–Yep That’s Me!

My dream of creating a stylish base to extend the performance and looks of my popular product, the Stikitty, wouldn’t die though. I had heard of crowd funding at that time, but my eyes were set on angel financing.According to many experts, angel financing is perfect for high risk, small business entities that need funding but are too small for the venture capitalists and too risky for the banks. Yep, that sounded like me!

So what are angel investors? Think Shark Tank, but for the real world. These are typically wealthy individuals who like to invest in small companies, but are first and foremost business people. They’ll take a chance on you but want a return for their money–typically in the form of a percentage ownership, and they often want a return of 5-10 times their investment within 5 to 7 years.

In Austin, TX, where my company is headquartered we have several networks of angel investors. The advantage of a network is that entrepreneurs can pitch to several investors at one time.Before approaching any of the networks, I did my homework–literally. I took Kim Lavine’s Academy Course on “How to Raise Angel Financing.” I dusted off and refreshed my business plan, perfected my pitch sheet, and prepared my pitch presentation. Then I practiced, practiced, practiced.

The network I chose to pitch to had several phases of the funding process. I made it past the video pitch. Then the screening pitch and even the general pitch. My cat litter mat, the Stikitty, and I even made it to the final pitch phase with three other hopeful entrepreneurs.

I admit I felt a little ridiculous. Don’t get me wrong; I had a great story. The Stikitty was doing well with online sales and had been picked up by three of the top 6 US pet distributors and was in retail stores throughout the US. I had generated just over $50,000 in retail sales for 2012. And, I had a new idea that could be patent-protected.

However, I was up against three technology entrepreneurs; two had already raised hundreds of thousands of dollars in earlier rounds of funding and were asking for millions of dollars to continue their businesses. In a tech town like Austin, it’s hard to find an investor that gets excited about a cat litter mat over the latest tech gizmo or mobile app.

In the end, the angel network chose two of the tech entrepreneurs. They invited me to come back, though, when I generated more than $100,000 in sales and needed “real money.”

Did I have it in me for a Plan C?

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Where Does a Mompreneur Go When She Needs Funding?

What's a Mompreneur to Do When She Has a Great Idea and No Way to Fund It?

What’s a Mompreneur to Do When She Has a Great Idea and No Way to Fund It?

What’s a mompreneur to do when she has a great idea and no way to fund it?

If you’re like me, I started at the bank and asked for a SBA loan. I had just come off a good run in SkyMall where my Stikitty sold over 700 units. I made enough money to buy more inventory, but didn’t have enough to do any additional advertising.

And, I had a great idea for a new product. Something that would extend the performance and the appeal of the Stikitty. Better yet, it was something I could patent.

But I needed money.

I had tapped out my own funds, and those of my friends and family, with the launch of the Stikitty.

So I went to my business bank and applied for a small business loan, to be backed by the Small Business Administration. (Side note for mompreneurs: the SBA doesn’t actually loan money to entrepreneurs. They offer protection to the bank in case the entrepreneur defaults on the loan. It’s a way to make it less risky for banks to take a chance on entrepreneurs).

My banker was fantastic. He did everything he could to help me get the loan. Unfortunately, what he couldn’t do was create cash flow for me. Before banks will give you a loan, they want to see that you have enough cash flow to pay back the loan. Of course, if I’d had cash flow, I wouldn’t have needed the loan!

My sales from SkyMall were great, but I hadn’t started another run with them yet as I was building back up my inventory. Despite my proven potential, I didn’t have immediate cash flow.

Rejected, I went to Plan B.

Advice for Mompreneurs: Motivation to Launch Your Company

YoAdvice for Mompreneurs about Launching Your Companyu’ve done your market research, set your time and dollar budget, and are ready to launch your company.

So what are you waiting for?

It’s scary, isn’t it? All entrepreneurs have been where you are right now. Eager and excited to take the plunge; deathly afraid of failure. When writing my book, Think. Create. Sell., The Insider Secrets Your Best Friend Would Tell You About Entrepreneurship, I asked other entrepreneurs what advice they’d give their best friends about launching their companies.

Here are a few of the best responses; I hope they help you gain your motivation:

What would I tell my best friend if she were thinking of launching a product? I would first ask her three questions: Is there a need for your product? Is there a market for your product? Would you use your product? If she can answer “Yes” to all three, I would encourage her to move forward.

Kathy Baker
Founder
Vanity Fixes, Inc.
http://www.bralief.com

My best friend is also my pastry-chef, so she has heard all of this already, but what I would tell her about launching a product is: Go for it! Take every skill you have and figure out how it can help build your business, come up with an amazing, unique idea and get out there.

Mari Luangrath
Founder
Foiled Cupcakes
http://www.foiledcupcakes.com

5 Things to Do Before Launching Your Company

[tweetmeme]So you’ve decided mompreneurship is for you. You’ve found an idea that solves a real problem and you’ve vetted it with more than just yourself. You’re ready to launch your company, right?

Not quite yet.

Having a winning idea is a great start but there are other things to consider. I’ve chosen five tips from my favorite mompreneurs on what to do before launching your company.

1. Set a time limit and then forget it.

Upfront, determine how much time you’re comfortable taking to see if you can make your idea work. This time might be a period away your career or changes in your schedule that impact your kids. Is it six months? A year? Once you have set a comfortable time limit, put that worry aside and get down to business.

2. Define a Go / No Go budget and stick to it.

Calculate how much of your own money you’re able to invest in giving your idea a go. Even if you get outside financing, investors or the bank will expect you to use a portion of your own money. When you’ve reached your budget limit, take a critical look at what you have learned. Make the hard decision about whether or not to continue. You may even decide you need to change course and push your idea in another direction.

3. Embrace the business plan.

No, you won’t be able to answer all of the questions in the business plan at the start and some of the sections will make you quake in fear. But do it–even if you’re not going to show it to any one or raise funding right away. The business plan will help you solidify your ideas and guide you in finding important answers. Remember that the business plan should be a living document. Continue to nurture it as your company grows and changes. It’ll keep you focused and you’ll be that much farther ahead if you do decide to go for funding.

4. Find a sounding board who is not your best friend or your mother.

Objective advice is critical when starting and building your own company. You don’t need yes people around you; you need people who will ask you the tough questions. My favorite small business organization, SCORE, has experienced mentors and valuable resources for startups and most of their services are free.

5. Hire an accountant.

Small business accountants are great resources. They will help you organize your finances and often have large networks of professionals who can help you launch and grow. If you’re not comfortable hiring an accountant just yet, at least get a good accounting software program. There are many costs associated with a startup and you’ll want a solid record of what you’ve spent (and earned!) right from the start.

In the next post, I’m sharing my real-time journey on launching a new product with, “Why Would Anyone in the World Want My New Product?”