By Carol Tice
There's a new niche emerging in the world of venture capital. Known as "super angels," they're smaller-scale VC firms that invest in amounts beyond that of a typical angel fund, but below that of most venture funds. Example of funds in the super-angel arena are First Round Capital, Floodgate Capital, and the ARC Angel Fund. Some call them "very-early-stage VC."
Why are super-angel funds being created? Because advances in technology have made it pretty easy to ramp up many businesses without a big capital investment. Increasingly, many companies just don't need a VC to drop $30 million on them in order to get their product or service out of the prototype phase and into production. In fact, many VCs are skeptical if the founders don't have a few happy customers before they come seeking VC money to expand.
With the Wall Street Journal featuring successful startups that launched for under $150, the days of getting mega-millions on the strength of a sketchy business proposal and a dream are gone. How can you bootstrap your business and attract investor interest with your thriftiness...or maybe make it to profitability without needing investors at all? Here are some tips:
Get a mentor. Go to a SCORE office, ask an old college professor...but whatever you do, find an experienced business leader to look over your business plan before you launch. You can save the most money at this stage, realizing your idea doesn't have a market. Once you're underway, your mentor can help you stay on track. Mistakes and detours in the business plan can cost a bundle.
Go virtual. Increasingly, when I interview startup CEOs, I discover they're in Maine, and their CTO is in Arizona, and the marketing person is in Canada, and so on. Virtual-team software such as Basecamp and Campfire make it easy to manage projects with a team that's all working from the comfort of their own homes, which saves you money on renting an office.
Find volunteers. Instead of hiring a design firm or a Webmaster, you can tap a college digital-design class for ideas. Or hold a contest, collect hundreds of ideas, and only pay the winner.
Outsource. Taking virtual teams one step further, don't hire full-time employees unless you really need the worker on an ongoing basis. Find part-time workers, or workers willing to be called in for occasional work during peak times. Next-generation temp agencies let you hire workers for even just a few hours.
DIY legal. New online sites such as mycorporation.com or DIY books from legal publisher Nolo.com make it easier for you to incorporate or make other needed legal moves without paying a bundle.
Use free tools. On my Daily Dose blog for Entrepreneur, I've had a running feature about free online tools for small businesses. There's so many great resources, I could easily write about several tools a week! From Freshbooks for billing to Outright for bookkeeping, every business function can be served by a simple program that's got a free version, or a free trial.
Get terms. If you're in retail, negotiate 90-day terms with your vendors if at all possible. Then, you can get the merchandise, and hopefully sell it in time to pay your vendor with customers' money instead of your own. That's how all the big retail chains do it. They call this the "virtuous cash cycle." See what you can do to get into this zone.
Collect your bills. When you're a startup, you can't afford deadbeats. Stop extending credit, use shorter terms for your customers, offer discounts for cash up front...whatever keeps your accounts receivable from piling up.
Manage your cash. One of the biggest pitfalls new entrepreneurs have is they don't know what's going on with their money. Learn to do ratio analysis to track your cash-flow trends and improve your cash cycle. That'll keep more money in your pocket.
Use social media. If you've got the time, you can be your own social-media marketing guru, getting the word out about your company for free on Facebook, LinkedIn, Twitter, et al. Too busy? Hire an intern or find a college student who needs a marketing project for class -- teens know this stuff.
Photo via Flickr user Matt McGee
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