The Startup Journey - powered by Precursa

EPISODE 13

Send Me An Angel (Investor) and Show Me the (Grant) Money

Figuring out all of the startup investment options can be a game of alphabet soup, and understanding when one option is available to you and right for you can be daunting. In this episode, we break down what types of investments exist out there, common vehicles for those investments, and when you can consider availing yourself of each type. And then we talk about the often overlooked option, and the one that doesn’t impact your cap table or cost you interest: grants!

In today’s episode, Cynthia explores the reality of building a startup and keeping a lot of balls in the air all at once. Additionally, she discusses the pitch deck, the proforma, and how it all comes together in your conversations with investors and live pitching.

Your journey as a startup founder is a unique one. You will have to teach yourself how to keep the big picture alive and well in your brain, but while making sure all the individual pieces are being executed on. In other words, you’re not dropping any balls. At some point, you’ll want to be able to hand pieces off to others in your team, but until then you’ll be the one keeping an eye on everything. Investors will want to see that you have the talents and capabilities to handle such responsibility. Keeping an eye on all these things is half of your job.

The other half is raising money and understanding how to talk about what you’re doing. This includes building your pitch deck and proforma, putting all the pieces together from analysis, and understanding the available market. You will have to relay this information, along with the nitty gritty details, to potential investors. Understanding your market begins with understanding your users and how many of them there are in the world and in your target area. Not only will this understanding increase customer retention, but it will help you to better forecast based on new information and what you already know. Additionally, you must first understand realistic expenses and the realistic market. This information makes up much of your proforma and will be what you relay to potential investors.

Ultimately, it’s up to you as the founder and CEO to understand the ins and outs of your business. You must be able to handle objections, which usually look like questions during a pitch. This is a little bit different for women than for men. To recap, before building your pitch: practice makes pitch perfect, get a 90-second version and finally, practice objection handling with a growth mindset. Practice as much as you can.

There are so many grants available that often never get utilized because people don’t put in the work to find them. For example, many state or city economic development offices have funds designated specifically for new businesses to create jobs in an area. There are also grants for female founders, restaurant owners, and minorities just to name a few. Look at the advantages you have that will help you qualify for specific grants.

Be sure to like, share, and subscribe to Precursa: The Startup Journey on your favorite podcasting platform and tune in for the next episode!

Email us at startup@precursa.com with any questions or comments. Check out our website (https://www.precursa.com) for more information on getting your startup rolling.

Straight to you from Denver, Colorado, this is Precursa: The Startup Journey. We share the ins and outs of building a tech startup from inception to launch to revenue and beyond. If you’ve ever wondered what building a startup from scratch really looks like, you’re in the right place. With full transparency and honesty, we reveal it all about Precursa on our ride from idea to exit: the wins, the lessons learned, and the unexpected twists and turns.

Hello everybody. Welcome back. This is Precursa: The Startup Journey. We are having our own startup journey building Precursa, and we are laying all that out for you as a way of showing you what it really looks like from the inside out, and also inspiring you and giving you some data and information and helping you understand how you really do this whole thing. So, today I want to talk more about different investment vehicles, different investment options. What do they mean? I’m not going to get too deep into defining some of the terms that I’m going to use, but as much as I can, I want to lay out for you: what are the different investment vehicles, different investors, who you might get involved with? What are the X, the usual type of expectations of those different types of investors? When is it appropriate for your company? Like what are they going to be looking for? How do you know what kind of investors you are looking for at any given time? And then I want to talk about grants because grants are like so often overlooked, and they are a wonderful source of money, cash infusion into your company that usually doesn’t involve giving up equity. It usually doesn’t, you know, they’re not loans, you know, it’s money that if you qualify and you’re chosen for the money, they just give it to you and say, we hope that you’re successful. And so if all of the money that we raised for our startup could be grants, we would love that because the more of your company that you get to keep the better. So, and why is that? Right? Like, I could hear someone saying, you keep saying that keeping more of my company is better. Why is that? Well, besides the obvious one, which is, let’s say you’re building a company, your intention is to sell it, or your intention is to build it as a, you know, a legacy business and take distributions off of the profits or whatever. The more of the company you own, obviously the more money that you’re going to make in any of those scenarios. Right? But there’s actually another reason why I’m always harping on keep as much of the equity in your company as you possibly can. And that reason is because as long as you and people who are co-founders, or people who are friendly to you and get your vision, have at least 51% of the company, depending on how your operating agreement is written and your buy-sell agreement is written obviously. But as long as you keep a controlling interest in your company, then you can never be hostile taken over, right? I don’t know if that’s really a word or phrase, but in the case where you get a lot of investors who end up with a lot of equity, a lot of the shares in your company, there does come a point where they can bring in their own people and basically oust you out of the company that you built. Now, there may be scenarios where that’s actually the right thing and it should happen. So for example, if you’re building a company and like I’m thinking of an example with a FinTech company where the team will is really good at building the initial technology, getting the initial contracts on board, doing the initial selling, but to take that company from 20 million to a billion dollar company probably is going to require a different skill set in a shorter period of time than what the management team for that company really has. So in that case, getting investors on board who have experts and they can bring in a management team, and maybe you all get like advisory roles or, you know, and your paid for that, or maybe they just buy you out altogether. I mean, that might be more beneficial depending on your situation, but you want the choice. And if you’ve given up 65% of the equity in your company to get your funding, you won’t have that choice anymore. So that’s really the reason why, you know, other than, you know, if you sell for a hundred million dollars and you still own 60% of your company, that’s a lot different payout than if you only own 5% of your company, but beyond that control and the ability to make decisions and execute on your vision really doesn’t become a choice for you at a certain point. So when I say that, because I say it a lot, I’m probably going to continue to say it a lot, keep as much equity in your company as you can. Those are the two big reasons why I’m saying it. And actually the second one is more important than the first.

05:05

So, okay. The other question that I got this week, somebody said to me, you know, this is a podcast about the startup journey, but you talk a lot about investing this. Isn’t an investing podcast. Like why do you talk about that so much? Here’s why we talk about it: as a potential founder or as a startup founder, a lot, a lot, a lot of your job is going to be raising money, finding money, talking to investors, investor relationships. Like this is a huge piece. You might think you’re building a tech company and you’re going to run a tech company. Running a tech company, looks like interfacing with investors, finding new investors, knowing when you need to raise the next round, having a really good CFO who can say, Hey, we’ve got eight months and we need to raise another million and a half. Go do that. Like, this is your role, a big part of your role as the founder. And that’s why part of the challenge of being a startup founder is being able to wear lots of hats all at the same time, and like we talked about last time, juggle a lot of things all at once and do it well enough to get you to a place where you can hire people to take some of those things off of your plate. So investing, getting investors, talking to investors, pitching your company, talking about what you’re doing. You’re probably also going to be the face of your company. So when we’re talking about investment and when we’re talking about pitching, and we’re talking about how you talk about your company, that matters for public relations too. If your PR person gets a bunch of earned media spots in the news for you or magazine articles or whatever it is, and you can’t talk about what you’re doing intelligently, it’s not going to go very far. That’s not going to go well for you. It’s not going to go well for your company and your PR person’s probably going to be ticked because you’re burning bridges with all their media people, right? So we talk about investing because investing is about pitching; it’s about investor relationships. It’s about talking about your company to continue the flow of investment dollars, new customers, new clients, you know, new sales. And that’s a huge part of your role. So I hope that answers that question. I realize, especially recently, and the other reason why we’re talking about a lot right now, this is what we’re doing. I mean, this is insight into Precursa’s journey. We really thought we had financing sort of solved and that wasn’t really a problem. Like we’ve talked about several times, things change, you know, shit happens. I mean, I don’t like to swear all that much, but I mean, actually I swear a lot. I just don’t like to do it on the podcast, but things change, right? Like we, the situation changed. The scenario changed and we are adapting. And so part of adapting right now in Precursa’s journey is we are very, very focused on raising money. So right now we’re working through, you know, the founders will end up putting in about a hundred thousand dollars. We are doing short-term loans of about another hundred thousand dollars, which should get us through July and August to keep us on track while we are finalizing the proforma, finalizing the pitch deck so that we can go after the half a million that we really need in order to get us that, that nine to 12 month runway, right, which means $500,000, you know, paying back the hundred thousand and short-term loans to kind of bridge that until that funding closes. But that $500,000 gets us almost to a year post-launch, I mean, really, really close to a year worth of runway. And that’s because, you know, not only will we have revenue during that time, which will continue to refill some of the coffers. So it’s not just all the money’s going out, nothing’s coming in. But we’ve also gotten really refined about what do we actually have to spend in order to bring in more users. And in order to have all of the pieces we manage the way we need them to like SEO and social media and content strategy and marketing strategy and development and creating new content for the platform, you know, course and curriculum creation, right? Like all those pieces have to come together in order to keep adding value for people in the platform. So we’re also talking about a lot because this is where we are in our journey.

09:43

And this is the thing that’s top of mind. Development’s happening. Like I get together with the developers once or twice a week. I’m not writing any code right now, although that’s probably going to change in the next month, but you know, development’s happening and there, it’s just it’s happening. There’s nothing really interesting going on there because we, we understand our architecture, we’re working through some of the pieces related to data. You know, now we’re at the point where we’re starting to think about the algorithm, the initial MVP algorithm behind the feedback and the AI and the machine learning mechanism that essentially is, I’m going to say it this way, and it’s not really true, but essentially it’s replacing the value that I bring in a one-on-one coaching or consulting relationship. Right? So we are essentially setting up an algorithm to, as a baseline for what makes an idea good or not, what metrics can we look at? And, and we’re putting all the objective stuff into the initial algorithm, and then using machine learning for me to do reviews on things and say, actually, I would tweak that like this. And actually I would tweak that like this, with real data. So the algorithm and the machine actually gets smarter about what kind of feedback they give. Right. So that’s really fascinating, but we’re just starting to get into that. So I would imagine in the next few weeks, we are going to talk more about how do you develop something like that and is AI really as hard as it sounds, the short answer is yes. The long answer is not if you have good developers. And so I’m sure we’ll talk more about that. But right now what’s right in front of us is we’ve got until the end of August with bridge financing to get half a million dollars into the company. And so that’s what we’re focused on. That’s what we’re thinking about. And so naturally that’s, we would be talking about on the podcast. So I want to talk a little bit, we two episodes ago, I think it was back in episode 10, we talked about friends and family investors, and I dove real deep into that and when that’s important. And so if you still have questions about what his friends and family really mean, and when am I doing that? And I don’t know any rich people, go back and listen to episode 10, that’s going to answer all those questions. Today, I want to dig more into angel investors versus VC investors versus PE investors. What are all these different vehicles and what do they mean? And when are they appropriate for your company? Because I want you to be able to understand when you’re talking to investors, when you’re building a pitch deck, when you’re putting together terms for the money that you’re trying to raise, I want you to be able to speak intelligently about that. And I want you to have some context for some of the questions that you’re going to get asked by investors. So angel investors, these can sometimes be people who will fall into a friends and family round, or what’s called a pre-seed round or even a seed round. These are usually individuals. Okay? So they’re not people who are part of like an institutional investment, you know, institutional meaning a group of people get together, pool all of their money and decide what they want to invest in, and all of those people do it as one company investing in a thing. And then the operating agreement of the company that they built to invest in your startup is what dictates who gets what out of the percentages, right? That’s institutional investing. Okay. When you talk about VC, which is venture capital, typically they’re an institutional investor. They’re not individuals investing in your company. PE or private equity, definitely institutional investing. And those are usually a much bigger rates, much higher levels of investing, right? Angel investors are typically individuals, but they’re usually what I’m going to call more professional investors. So it’s one-step above friends and family where it’s not just people who believe in you and they like what you’re doing, but they’re stepping in and they’re saying, I’ve gotten to know you. I think that you’re on the right track. I like what you’re doing. I’m a professional investor. A lot of them do invest in VC funds, or they are part of PE firms or other funds, but they do this as a one-off in their own name or in their own company, not with a group of other investors. And you may have, so we talk about friends and family is usually like early money, pre-seed seed money. This is like any money that you’re getting before traction, usually before you can show, I have users. I have, I am making revenue based on what I’ve done so far with traction, here’s what my proforma now looks like. Here’s what our roadmap looks like. What, you know, understanding how easy is it, like when you get to the point where you can actually point to, okay, it costs us $120 to get a client. And the lifetime value of that customer, that client is typically $250. Well then it’s costing you 50% of the lifetime value of that average customer to get that customer to sign on the dotted line. That’s a whole different level of being able to provide proof to an investor that they can objectively measure and decide for themselves whether or not they like those numbers. Right? So what we’re talking about, typically with friends and family, usually with angel investors, whether we’re talking about a seed round or pre-seed or friends and family money or whatever that is, that’s usually all before traction, before you’ve launched.

15:15

Before you have something in the marketplace before you have something to show for some real data against what you’re trying to do and what you’re building. So like I said, angel investors, a lot of times will come to you through friends and family, which is why it’s really important to have a ton of conversations. You need to get really good, remember we talked about the 90 second pitch, right? The elevator pitch. We are still refining ours for Precursa. I don’t have it for you yet. As soon as I have it, I’ll give it to you. But the more you talk about what you’re doing, the more it’s going to spark for people, you need to be… I know somebody you should talk to, you should talk to this person. And the more of those conversations you have, the more likely you are to find the money that you need from people who can get behind what you’re doing. Now, the big difference between friends and family and angel investors is with friends and family, it’s a lot easier to sell them on a SAFE, which is a simple agreement for future equity, which means you’re giving us money, and at some point we’re going to establish a value, but we don’t want to do that too early. We don’t want to try and value our company too early, because then we’re going to give away more than we should for the money that we’re getting. So a SAFE gives us the ability to say, we are making an agreement with you that when we have to establish a formal valuation, your money will go into that formal valuation, and we will give you a discount on the purchase of that equity. So let me give you an example. For round numbers, let’s say that you’re putting into a startup a hundred thousand dollars and in a SAFE, and a year later, there’s a valuation event. Whether that’s we’ve brought in new investors in VC and they require a valuation or whatever that is. And the value of the company at that time is $1 million. For your hundred thousand dollars, you would then get 10% of the company, plus an extra percentage based on the discount that we gave you for getting in early, without a known valuation. So let’s say we said a hundred thousand dollars with a 20% discount. That means that your a hundred thousand dollars in that million dollar valuation would actually get you $120,000 worth of stock. So instead of getting 10%, you now got 12% because you got a 20% discount. So you got more for the same money. Okay. The benefit of a SAFE to a startup is like I said, you’re not setting a value earlier than you should, right? Setting value too early will cause you to give away more equity in your company. And for the reasons we already talked about, we definitely want to avoid doing that. We want it to be a fair value for the money that was put in. The benefit to somebody in your life doing this is, they are, first of all, telling you, I trust you, I’m on the ride. I’m putting in this money because I believe in you. And so it’s sort of like a more friendly agreement, but they also have the ability to potentially get more for their money because they’re willing to wait for an actual equity event. Now, sometimes it works the other way, but usually you set like a valuation cap, which tells you up to this point, you know, so you’re limited to 10% plus that 20% discount. If it’s less than that, you might get a little bit less than that. But if it’s less than that valuation cap, you actually might get more in equity. I mean, there’s lots of different ways to do this, but the goal is to keep it simple. It’s right there in the name, simple agreement for future equity. You want it to be simple so that you can get that infusion of capital and deal with the true terms when you have a valuation event that can actually show you what that money was really worth to your company, okay. Angel investors may or may not be willing to do a SAFE. And the only reason why is because they are a more, usually a more savvy investor, usually like a, like I said before, a professional investor, they may or may not be comfortable with a SAFE as a vehicle because they may just want a little bit more definition. If that’s the case, usually what you’ll get is a convertible note. It’s almost exactly the same as a SAFE, there may or may not be interest that you’re paying on whatever money that they loaned you in the meantime, where you’re only paying the interest, you’re not paying like a loan payment, you know, principal plus interest before the time that you get evaluation and they may require like a lower valuation cap, right? So that they’re guaranteed that their money isn’t going to be worth less than a certain amount. So let’s take the, let’s say you have an angel investor. They want to do a convertible note of a hundred thousand dollars. And everyone’s expecting that your evaluation is going to come in somewhere between one and $2 million at the point that you’re going to set value your investor’s probably going to want to make sure that their investment isn’t worth any less than 8% of your company. They’re not gonna want to be 5% if you come in at $2 million. They’re going to want more than that, and so usually you’re going to hone in and say, okay, for that, we’re going to guarantee you at least 8% with a discount.

20:37

And so the terms get a little bit more complicated, but that is probably what a more savvy investor, someone who will qualify, who would fall into the realm of an angel investor is probably going to want. By the way, there’s nothing wrong with that. And a lot of angel investors will be willing to waive any interest payments until you’ve had a valuation event. And then the note converts into actual equity and you don’t have a loan anyway. So for all intents and purposes, a SAFE and a convertible note in this case are very, very similar. It’s just about, are you giving them any kind of guarantee on the amount early or not? Okay. So that’s what angel is. And typically those people are going to come in again before traction, but here’s the thing. If you get good investors before launch, before traction, usually once you’ve had some good moves and you’ve gotten some good traction, you can go back to those same investors and they will want to put in more. They will want to buy more of your company because they’re seeing that they’re going to get a good return. That’s ideal. One, it keeps your cap table, your capitalization table on your company from getting ridiculous, right? And what I mean by that is if you have a hundred people who have invested in your company to get you to the, you know, hundred million dollar mark or whatever your cap table is going to look crazy. You’re going to have a bunch of people that are going to have, you know, 1.76% and 2.85% and 10.36%. And it’s going to be every time you have to go raise another round, you’ve got a hundred people who you have to figure out the dilution for. Now, obviously there’s tools out there like Carta, and there’s a ton of them that will manage the cap table for you to make it simple. But that’s a pain in the butt. The fewer investors, the fewer equity owners, equity position holders you can have in your company, especially pre-IPO, or pre-sale, the easier your life is going to be. The easier your CFO’s life is going to be. So remember when you’re raising new money, go back to the investors you already have and make them an offer. Give them better terms than you’re putting on the open market. Not only for your cap table, but because you already have a relationship with them. And if they are willing to put in more, that’s a really good indicator to you that you’re still on the right track. You’re still moving in the right direction. You’ve still got the right people backing you. Okay? Now let’s talk about VC. When I say VC, I mean venture capital. Full on most, I mean 99 plus percent of all VC is institutional money, meaning a bunch of investors are getting together. They’re picking projects they want to invest in. Usually it starts with a lead investor, someone who says, okay, this company is looking to raise a half a million dollar round. We as a VC firm are considering, and based on what I’m seeing, I’m willing to lead the round, I’m committing 30,000 or 50,000 or whatever it is of the half a million that they’re trying to raise. And that person will then lead due diligence for the VC fund. They’ll be sort of the contact point and they will socialize it with other investors to help you get to the half a million that you’re trying to raise in that round. Now, what sometimes happens is you’ll get a VC firm and they’ll say, we’ve got investors who are willing to do half of your round. Go find the other half. Sometimes you can mobilize that money early. So they’ll say we’ll put in the 250,000, whether you raise the other 250 or not. And so you can get that money. You can realize it, you know, you sign all the agreements with them and you continue raising the other 250 while you’re spending the 250 that they gave you. Other times they will say, we are guaranteeing this 250,000 through these investors provided you find the other half of your raise somewhere else. There are benefits and drawbacks to both of these scenarios. The major drawback for investors, why more investors don’t do the first scenario, which is let you mobilize the capital right away before you’ve finished the raise or close the raise earlier, whatever. The reason they don’t always like to do that is because your success may be dependent on getting the full 500,000. If they don’t believe that the 250,000 does anything except buy you time to fail later and more expensively, then they may put limits on it and say, we’re only going to close this money when you have secured the entire round.

25:22

If they feel like it’s a bigger risk at the lower value. If like, for example, with Precursa; 250,000 in this raise actually gets us about six or seven months down the road, which gives us plenty of time to raise another 250,000 or 300,000, if we decide we want to go after a little bit more, if we do have to do a second round, that’s a lower risk for a VC firm, right. Now, we’re not at the phase because we don’t have traction where a VC firm is actually considering investing in us. And we’re not even pitching them right now. But if we were, and that 250,000 was enough to get us over a hump or whatever, they might be willing to say, okay, we’ve got 250. We’re willing to close it and let you keep the round open and use our money and keep raising. So there’s benefits and drawbacks to you as a founder for both of those things, there’s benefits and drawbacks to investors for both of those options. I just want you to be aware of how that may work, depending on who you’re talking to. When do VC firms get involved? Like I said, they want to see traction. They want to see revenue. They want to see users. They want to see that all the things that you’ve said about the benefits and the problem you’re solving and who you’re solving it for, they want to see that you understand what you’re saying, that you have some proof for what you’re saying and that what they’re getting in for is scale. Okay. Now this is one of the big drawbacks of VC and PE, private equity, which we can talk about in a minute, which is a little different. They typically want to see a 10 X return in five years on their money. Some companies, some VCs want to see a 15 or a 20 X return on their money in five to seven years. That means you have to be prepared and you have to get into a mental head space where you are ready to be pushed for dramatic growth over a very short period of time, because in order to take VC money, that’s what you’re committing to. Now, that doesn’t mean that VCs always see that kind of a return. If they did, holy cow, that, I mean, there’d be so many people wanting to invest in VC. They’re not any better at picking. You know, we’ve talked about this before, but they’re not any better at picking generally than about 10% of the time, right? So you could invest your money into the stock market and do better over a short period of time, or even over a long period of time, unless you have, you know, magic in picking companies. So far, we’ve proven investors fall prey to the same issues that the rest of us lay people do in that sometimes they invest in things because of FOMO, fear of missing out. Sometimes they invest in things because they just feel like they know the industry really well. It doesn’t mean they’re right. That’s why they need such a huge return on their money. Because the one that that does well has to make up for the nine or the 11 or the 14, that didn’t, depending on the statistic. I’ve heard anything from one out of 10 are successful, to one out of 12 are successful, to one out of 15 are successful. You as the company who makes it has to make up for everything they lost in those other companies. Plus make it worth them having put the money in, in the first place anywhere. Right? So expect that when you talk to VC, they’re looking for dramatic growth. They’re looking for scale, because they want a big return on their money and they want it in a short period of time, and they’re waiting for one of you to make up for all the other ones they invested in that didn’t deliver on that. Now that said, they usually are getting better terms than your angels or your friends and family, because they’re taking a risk, right? They are risking you being able to grow and scale. And the risk there is not the same risk as investing pre-traction, but it is the risk that you can’t handle scale. You can’t handle growth. And because they have that risk that you can’t handle that, and so they’re not going to get the return they need in order to make up all their numbers and make it worth it, they’re usually going to try and take more of your company. This is where whoever is your lead off investor can make a huge difference in how good or bad the terms are with your VC deal. How they socialize your company, and what you have going and who you’re working with, et cetera, that will also make a big difference. So there are good firms out there. There are bad firms out there. There are firms that will do really good terms. And that like pro-entrepreneur, there are VCs that are all about their own money all the time.

30:04

Usually VCs are going to want some say in the company. So in addition to getting an equity stake, usually they’re going to want somebody to be an advisor, potentially they might want to put someone on your board of directors. This is because they want to know what’s going on real time with their investment as often as possible. Okay? So again, be prepared for, there’s a lot more details and a lot more pieces that a VC is going to expect and going to want from you in order to give you money. Again, this is why I think whoever invested in you in the first place, go back to them first, because they are probably going to have more of an appetite to see you continue to do well, rather than to force you to grow too fast, if that makes sense. Okay. So this brings us to PE or private equity. Private equity is typically the rounds that you’re getting when you’re getting into big money. This is usually VC will cover you, VC usually has a minimum of like, in some cases I’ve seen them do as little as 250,000, but usually they have a minimum of like half a million or 750,000. Sometimes they max out around two to 5 million, depending on who they have in their fund or how much money they have to mobilize. PE is who gets involved when you have big rounds. PE is usually post-series A. So series B, series C. I mean, I’ve seen people raising like series G and series H rounds. Usually PE gets involved when you need a lot of money, tens of millions or hundreds of millions of dollars is usually by PE firms. And it’s usually only if you are planning to go public. Now, some VC funds will require that you have an exit strategy that gets them out by going public, or by being sold. Sometimes in a VC, you can get them to invest with a promise to buy them out of their equity at their target range, right? So you’re saying, you’re investing and I as the founder am going to buy you out at the five-year mark for this amount, right? PE is all about setting you up for an IPO or setting you up to be sold. They are not interested in a legacy business. They are not interested in a lifestyle business. They are not going to put money into your thing so that you can raise your own salary. They want an exit, and they want a big one. And usually they have the contacts and connections to get you those exits and get you those big sales, because that’s what they’re interested in, and so they know all the people. So what you should be hearing out of this is if you are pre-launch, pre-traction, you’re not talking to PE firms. Now that doesn’t mean that somebody who invests with a PE firm or somebody who’s in a PE firm won’t be willing to be an angel investor for you, or may qualify as a friends and family person that you know, that’s totally possible. But you are not pitching at this point to VC firms and PE firms. They’re not interested in you, you’re too small potatoes for them. So that’s sort of the options. Now I want to talk about grants, because there’s so much grant money out there that’s available that never gets mobilized because not enough people do the work to find them. So let me give you some examples. First of all, your state office of economic development or your local city or county office of economic development, provided that you have registered your business in the state that you live and operate, et cetera. Often times states have a lot of money available, not as loans, but as grants to build jobs in the local community. For example, Precursa is incorporated and exists and operates in the state of Colorado. The office of economic development has specific grants for technology companies that bring new jobs or build new jobs in Colorado, where they will match 50% of the money that you raise or borrow from non-governmental sources. So for example, we’re raising a $500,000 round, which is going to be private investors. We will then go to the state of Colorado and apply for a $250,000 OEDIT grant – office of economic development, internet and technology, I think is what the, it stands for. That money is provided by the state essentially for free. There’s nothing to pay back. Now they have rules about how they divvy it out. And when you get payments, et cetera, et cetera, but it’s $250,000 that we don’t have to pay back and we don’t give up equity, and we get it because we did the work to raise the half a million. So that’s one example. There are tons of these out there. There’s a, what is the name of it? It’s like Cartier, or something like that. I can’t remember. There’s a grant out there for female founders where they will put in six figures, you know, low to mid six figures into a business as a grant. They’re giving that money away to female founders to encourage more female founders in building female wealth. That’s part of their mission, right? If you’re willing to do the work to find these grants, and if you’re willing to do the work to apply for them, either by putting together the story yourself and telling the story and applying for it yourself, or by hiring a grant writer. Okay. I have a very, very good friend of mine who is a brilliant grant writer, and I had just had dinner with her last night. And one of the things that we talked about is I said, I’m going to be applying for these grants. And she said, at lower dollar amounts, like sub a million dollars, they’re looking for the story. They want to know, who are you? Who are the people that you’re helping. Tell them the story. They don’t want it in a general way. What they want is not, I want to help entrepreneurs… So I want to help entrepreneurs build better companies that are more viable over a longer period of time so that they can realize a return on their investment and so that they can realize their purpose in the world. That’s like a general thing. What they want to hear is the story of Doug. And I don’t know if I’ve told Doug’s story, obviously that’s not his name, but the rest of the details are exactly as he told them to me. Doug sat across the table from me at lunch one day. And he told me how he had this idea for an app. He had just retired from corporate life. He convinced his wife, they should put a mortgage on their house of about $250,000 to get the initial capital they needed to start this business and get it going. He promised her it was going to work out in a certain period of time or whatever, and they would be able to pay off that mortgage on that house that they had already paid off once, right? Like they had a paid for house. And here we were four and a half years later, he was now about $500,000 in. He borrowed, you know, not only against their house, but he took some out of their retirement and all these other places that he borrowed money from out of their own lives to do this. He had zero traction, like he’d gotten five or 10 users at any given point in the platform using his app. So this was four and a half years, $500,000 of leveraged money in his life. He had just finished the divorce with his wife, in which he lost the house because she was tired of him taking more and more money and putting it into this thing that was never realizing the return that he promised that it would. And now as a retired person in his sixties, he’s thinking I may have to go back into corporate and get a job to climb out of this mess over the next five to seven years. Doug’s story is an illustration of, he didn’t have product market fit in the beginning. And he was coming to me to say, how do I find a market for the product I have so that I can climb out of this hole that I’m in. Doug’s story is the one that I am preventing. I’m preventing the mortgage on his house. I’m preventing the problems in his relationship and his marriage and losing his marriage. I’m preventing all of that with the company that I am building. And that story is prolific. It happens all the time, and why it’s a tragedy is because it’s preventable. Precursa is about preventing Doug’s story. That’s the story that grant people in the neighborhood of 70, you know, 50 to a hundred to $500,000. That’s the story they want to hear. Okay. So whether you are writing the grant proposals for these, or filling out the applications for these, or whether you hire someone to do that for you, understand you need to be able to tell the story in a visceral real way. Okay? So grants are out there. You’ll have to do some digging. There’s some great resources to start with.

39:15

If you’re a female founder, Amber grants are all about women, Hello Alice are all about women. And they, those two resources have tons of other links and resources and companies that they refer people to, or non-profits, they refer people to that do grants for female founders. But there’s… look for your industry. So if you’re in the pet tech industry, look for grants in pet tech industry, like go search for that. If you are in, you know, some other kind of industry, you’re in the restaurant industry, there are grants for starting restaurants. And by the way, those have grown post-COVID for retail, for restaurants, for physical locations, because of how much business owners have struggled and how many businesses we’ve lost in those sectors due to COVID. Okay. So look for those. Consider your industry. Consider things that would be considered, you know, putting you in a minority. Do you have a disability? Are you a woman? Are you a person of color? Like there are so many different areas where if you fall into a minority, are you a veteran? There’s so many grants out there for veterans starting businesses. Look at what things you have that play to advantages that you have and use those advantages and search for grants that are in those advantages. Now, typically, which is why it’s so weird, they call them, you know, disadvantaged groups grants, or disadvantaged group funding or whatever, you know, because it’s minority. Like if it puts you in the minority, typically you can find a grant for that. Okay. So look in your industry, look in your disadvantaged areas or your minority areas that apply to you, go find free money. Some of it will have some restrictions on it or some prerequisites on it. Like I was talking about with, through the state of Colorado. Others of it, they’ll just give you money $10,000, $50,000. And you might be trying like, so in Precursa’s case, we’re trying to raise half a million, but there are a lot of grants out there for 50,000, 10,000, 25,000 for female founded businesses. I’m applying for all of them because every 10, 25, $50,000 gets us that much closer to our goal and we don’t give up equity. So the tradeoff is I’m not giving up, but I am giving up my time. Now, most of the 10 or $25,000 grants typically take me between 15 and 30 minutes to complete. If it’s going to take me a lot longer than that, I may question whether or not it’s worth it and put it on the back burner and come back to it later, if I have extra time, because they may be asking for more than what the money is really worth me putting in as far as like time and effort. But for the most part, the questions are asking are right there in the deck. I go and grab it. I add some color, some context based on what they are trying to accomplish by providing this money. So if they’re trying to build jobs, I talk more about that. If they want to see more innovation in their industry, I talk more about that. I have all of those answers because I’m talking about it all the time, because I have my pitch down really well, because I know my purpose and I know my why. Go after this money. It’s free money. Not in terms of it doesn’t cost your time. It does cost your time to apply for it. You won’t always get the money, but when you do get it, it doesn’t cost you anything else after that, you don’t have to pay anybody back. You don’t have more investors on your cap table. There’s no interest. There’s no loan payments, that is done money. So go after this money, especially pre-traction because that money will help keep you alive and help keep you going and help keep you on the path to meeting your goals. Because once you have traction, the whole game changes and a lot more people are going to get invested, are going to get interested in what you’re doing, and a lot more investors are going to want to hear what you’re doing and be interested in giving you money. Okay. All right. So those are the topics I wanted to cover today. Please, please, please. If you have questions, if I say something that doesn’t make sense and you’re like, I want to understand what you just said, but I don’t yet. If you have something you want to tell us, if you are interested in, I don’t know, pitching me something, I don’t know. Send me an email: startup@precursa.com. Okay. Send me an email, send your questions, send your comments and your feedback. Send your pitches, whatever. I want to hear it in. As much as I can, I will address those things in future podcast episodes so that you are excited to keep up with us. You’re here every week and you’re getting value out of being here with us every week, and your startup is moving in the direction that you want it to move, which is also the direction that we want it to move, which is we want you to be fulfilling your purpose. We also want you to be growing yourself, growing your family, growing your community, creating wealth, and finding ways to use that wealth for the future betterment of your family and your community and the world at large. So thank you so much for joining us today. Make sure you subscribe on your favorite podcast provider so that you never miss an episode. If we’re not on your favorite podcast, provider, send me that email too, and I will get it added there. You know, there’s all these little ones that sometimes get syndicated from the bigger ones, but sometimes they don’t and I’m more than happy to go make sure that we are represented on all of your favorite podcasting platforms. Okay. So email me, startup@precursa.com, and we will make that happen. So as always happy entrepreneuring, and I will see you guys next time.

Thank you for listening to this episode of Precursa: The Startup Journey. If you have an idea for a startup and you want to explore the proven process of turning your idea into a viable business, check us out at precursa.com. Make sure to subscribe to this podcast wherever you listen to podcasts, so you never miss an episode. Until next time…

Cynthia Del'Aria

Cynthia Del'Aria is a serial entrepreneur and tech startup ninja, specializing in product-market fit and idea validation and helping new entrepreneurs reserve their time and money for the idea with the best shot at success. With two successful exits before 30, an active high-profit-margin SaaS in the commercial airline space, and two additional startups in the works, she knows what it takes to traverse the entrepreneur journey, the highs, and the challenges of turning a vision into a successful, viable business.

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Copyright © 2021 Precursa  |  All Rights Reserved  |  Site Created by Natalie Jark

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  • Denver, Colorado

  • startup@precursa.com

Copyright © 2021 Precursa  |  All Rights Reserved  |  Site Created by Natalie Jark

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