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The Funding Coach at Four Colors of Money
43 minutes | Aug 14, 2018
S01 EP13 Season One Wrap Up: Six Follow Up Interviews
In this episode I've got a series of short interviews with all six of the entrepreneurs that I interviewed during the course of Season One. The idea here is to give you an update on how they're doing with their own funding challenges. Max Tubman of BFD Systems decided to keep bootstrapping for now. Amanda O'Brien of Eighteen Twenty managed to secure a loan after a buyout of her business partner. Ben Nussbaum of Floor wants to recruit more students when he returns to school in the fall. Chuck Donnelly of Rockstep Solutions is close to a term sheet from an angel investment group. Margo Walsh's son has joined MaineWorks and is cleaning up Quickbooks ahead of seeking funding. And Joe Walsh is working with a consultant to get a grant for his new product business. I finish with four observations: stuff happens to mess up funding plans; funding pivots happen, sometimes little, sometimes big, sometimes planned; preparation is essential to funding; and outside help can make a huge difference in getting funding. Links and Resources Original, extended interviews (it's recommended to listen to these first): Max Tubman, BFD Systems Amanda O’Brien, Eighteen Twenty Ben Nussbaum, Floor Chuck Donnelly, Rockstep Solutions Margo Walsh, MaineWorks Joe Walsh, Green Clean Maine 25 Online Business Loan Companies To Consider - BFD Systems - privately I suggested Fundera as the place to start CEI Wicked Fast Microloan - Eighteen Twenty Y Combinator - Floor Maine Community Foundation - MaineWorks Maine Technology Institute - Green Clean Maine Transcript Don: In this episode I've got a series of short interviews with all six of the entrepreneurs that I interviewed during the course of Season 1. The idea here is to give you an update on how they're doing with their own funding challenges. In some cases it's been quite some time since I spoke with them first. And so there'll be a lot of progress. And in other cases I've talked to them relatively recently and so we're more talking about what we're going to continue to do after the end of Season 1. It of course will be extremely helpful for you if you've heard the original interviews first before you listen to this episode. But if you've done that and you're anxious to hear how these companies are doing with their challenges, listen on and I hope you enjoy all these interviews. I'll be back at the end of all six of these update interviews to give some final thoughts on Season 1. Max Tubman, BFD Systems Don: Max Tubman of BFD Systems, welcome back to the funding coach. Max: Excellent, thank you very much for having me back. Don: We talked about four months ago and you were trying to figure out how to fund the next stage of growth for your industrial drone company. And you had a bootstrapping option, you talked to debt providers, you had potential investors talking to you. Can you bring us up to date on to what's transpired in those four months. Max: Yeah absolutely. So we're still doing the bootstrapping method for now. And we still do have a couple of different investors who are orbiting and watching what we're doing. But for right now none of the investment deals that came forward really seemed worth it at this point. So we did have a really excellent first half of the year. So we were able to maintain the bootstrapping metric for now. Don: That's great! Max: Yeah. Yeah. So that's really good. And I did look into some banking options but a lot of the stuff at the bank we're seeing was, you know, you haven't been in business for 18 months yet. So they're very reluctant to do, you know, loans or lines of credit. So if it was a real necessity that, we probably would've figured it out. But, same time, you know, we just keep getting big orders. So that's been able to allow us to kind of maintain our own for now. Don: Well that's terrific. And as I recall with these big orders you require people to put a down payment on,
24 minutes | Aug 7, 2018
S01 EP 12 Balancing The Dream Vs. Funding Strings
In this episode I talk about how sometimes there’s a conflict between fulfilling your entrepreneurial dream, and the strings attached to funding. First I talk about the different components of the dream, which vary from founder to founder: impact goals, revenue goals, the day-to-day experience, income, and wealth. Next I step through how funding is sometimes critical to fulfilling some of those dream elements. Then I spell out the “strings attached” to both debt and equity funding, including personal financial responsibility, decreased operational freedom, and problems from bad investors and bad bankers. There’s no magic bullet, but clear thinking and standard entrepreneurial judgment in the face of uncertainty will help you figure out what’s right for you now. Links and Resources Green Clean Maine Interview "Three Ways Growth Eats Cash" The Equity Fork In The Road [meme] Transcript In this episode I want to follow on to one of the important points that came out of the rather extensive interview with Joe Walsh of Green Clean Maine. And this is the conflict that sometimes happens between, on the one hand, trying to make sure that your entrepreneurial dream actually happens and then on the other hand, some of the things that come along with funding that are not quite so attractive. And how do you sort through dream vs. funding "strings attached" if you will. So to begin with I want to unpack what some entrepreneurs think of as their entrepreneurial dream, because it is different for different entrepreneurs of course. So a couple of categories of what comprises the entrepreneurial dream. One of them is trying to have more impact. Both Margo Walsh and Joe Walsh (who are not related by the way) have businesses that create impact on their customers. In the case of MaineWorks, Margo Walsh's company, they're giving good jobs for people either coming out of prisons or coming out of opioid addiction programs. In the case of Joe Walsh and Green Clean Maine it is decreasing the environmental impact on cleaning products, as well as something he's found out about along the way - having a great positive impact on his employees by giving them great opportunities. So part of fulfilling the dream and in an impact business is increasing that over a larger geography often. Also there are some financial metrics of the dream. You heard Joe Walsh talk about how he wanted initially to be a one million dollar in revenue company and now he's shifted his goal higher to trying to achieve $5 million in revenue from his services business. Now that may seem to be a bit of an abstract goal, but there are good things that are associated with increasing your company size. So let me just run through a couple of those. First of all sometimes it can be more fun to have a larger company. Joe talked about how he looked forward to being able to have a larger high performance team that he was working with, and that's something that can be supported with a larger company. Also his current employees would have more career opportunities and thus be an even more attractive place for them to work. In some businesses having scale gives you an opportunity to do more marketing and sales things that you haven't been able to do in the past because you just weren't big enough. As one example, I saw a recent thread about how Facebook ads, which have become a huge part of online marketing - in fact of marketing as a whole - they really have more effectiveness if you're doing lots of them. That is to say you're spending lots more money on them rather than doing just a little bit at a time. And another part of having more fun with a larger company is if you really love product creation, having a larger company allows you to sell more products and create more products in your product line. So that's part of what comes with scale: fun of being in a larger company. Then of course on the financial side you can have more current income.
42 minutes | Jul 31, 2018
S01 EP 11 Funding Pivot To Be Not So Small: Joe Walsh, Green Clean Maine
I interview Joe Walsh, founder and CEO of Green Clean Maine which provides environmentally friendly home cleaning services. After a decade with just a small grant in startup funding and lots of bootstrapping along the way, the company is in the top 5% of companies in the US. Now he has two big ideas for growth: a unique line of green cleaning products, and geographic expansion through acquisition. Joe and I covered a lot of territory, including: How do you figure out "what's next" when you hit your original business goal? How can the way you think about capital constrain your vision of what's possible? How do you think about equity and control issues when you like the autonomy earned over 10+ years of being an owner/operator? How can an advisory board help you understand if equity is right for you? Links and Resources Green Clean Maine web site The Sunrise Guide - where Joe worked and had his "aha" moment Libra Future Fund - grants for Maine entrepreneurs under 30 years old Maine Technology Institute - find other similar US resources at SSTI.org Goldman Sachs 10,000 Small Businesses program SBA Loans for Acquisitions Jay Friedlander at College of the Atlantic CEI Ventures is a "triple bottom line" VC: investment returns + community impact + environmental impact The Bootstrap to Funding Pivot Playbook Advisory Boards - post forthcoming Transcript Don: Joe Walsh of Green Clean Maine, welcome to The Funding Coach! Joe: Thanks for having me on, Don. Don: So we've known each other I think for a couple of years now. Could you start off for the audience just to give a little bit of background of what you were doing prior to starting Green Clean Maine? Joe: Yeah absolutely. I am originally from Rhode Island and I was living and working in Rhode Island, working at the University of Rhode Island actually, but really knew that I wanted to get in to sustainable business. I was really fascinated with the idea of working in that place where a profitable business can create environmental benefit. So that kind of intersection of environmental benefit and profitability is something I was super interested it. And so I moved to Maine to actually take a job with The Sunrise Guide, which at the time didn't exist yet as a startup. And it's an environmental living lifestyle publication that's published in Portland. And in order to be in the publication you have to have environmental benefits in some way, whether you're a nonprofit or a business. So I was selling advertising, I was helping really kind of start that business. I was the first full time employee. Don: I didn't know that. I know Heather reasonably well. You and she both went through the Top Gun program back when I was running that. That's so interesting. So then how did you get from Sunrise Guide over to Green Clean Maine? Joe: Well that's... I got the idea just sort of, it was one of those "aha moments." I was you know slogging away selling advertising and working very closely with Heather on that. We were actually in the Maine Center for Entrepreneurial Development when it was over at SMCC and that's where I used to work... Don: Before my day. Joe: Before your day. I used to work over there. The publication was broken down into different categories like home and garden, and travel, and transportation, food and dining ,and we had these different categories. And one of the categories was home and garden, and in that category was cleaning services. We were trying to find environmentally friendly cleaning services to advertise in our guide and we couldn't find any. When I finally got through to an environmentally friendly cleaning service, they said: oh my gosh I can't imagine advertising, I have so many customers I'm totally overwhelmed. I couldn't imagine taking more business. You know I have to turn off my phone. I have so many people calling me and I... Don: Well that'll tell you there's a big opportunity!
31 minutes | Jul 24, 2018
S01 EP 10 Balancing Profit And Impact
Following on to the interview of Margo Walsh, MaineWorks founder, I talk about Imposter Syndrome for entrepreneurs, and the balance of profit and impact both for founders and for investors. First, I observe that many entrepreneurs feel some version of Imposter Syndrome - in Margo's words, they had "no business starting their business." But so did I, and so do many other founders, and yet we persisted and sometimes innovated because of our naïveté. Then I talked extensively about balancing the pursuit of profit with changing the world. The challenge can affect both founders and investors. Angel investors historically mixed impact with profit on a deal by deal basis, but more recently angel investment groups are far more profit focused. Institutional investors have been talking about impact investing for a decade - not a long time. Selective tax credits can occasionally help impactful projects. And B Corporations are a new useful vehicle for founders that want to sidestep the Delaware C Corporation's legal necessity to maximize shareholder value above all else. Links and Resources Interview with Margo Walsh, MaineWorks MaineWorks web site Imposter Syndrome on Wikipedia: "a psychological pattern in which an individual doubts their accomplishments, and has a persistent internalized fear of being exposed as a "fraud"." Impact Investing related Reference to the 2007 conference that coined the phrase "impact investing" is in this Forbes article Global Impact Investing Network – focuses on largest, institutional impact investors but leads with research on the field Case Foundation Short Guide to Impact Investing B Corporations - home, Top 10% ("Best For The World") list 2018 Revenue Sharing posts: Revenue Financing Innovation Opens Flexible Funding Options The Next Step For Investors: Revenue Based Financing Book Review Revenue Based Financing: 5 Different Options, Marketing Confusion "Impossible" song excerpt is from Lea Salonga & Cast in Roger and Hammerstein's Cinderella Transcript In this episode I'm following on to the interview that I had with Margo Walsh of MaineWorks. As you may recall if you heard that interview, MaineWorks is a company that helps both people coming out of opioid addiction programs as well as coming out of prison, helping them to find good jobs in industrial construction as well as landscaping. There are two things that I want to follow up with. First of all I want to build on this phrase that Margo said in passing: "I really had no business opening a business." And I want to extend that to the notion of how many entrepreneurs feel some version of something called Impostor Syndrome. And then I want to dive deep into the world of interconnecting impact investors on the one hand and B Corporations on the other hand, which then relates to a really broad issue of: how do you as an entrepreneur think about both making money as well as changing the world, something that's near and dear to a lot of entrepreneurs hearts. But first... Margot had said "I had no business starting this business." And that reminded me of something I've heard discussed in other contexts called the Imposter Syndrome. Of course I look that up in Wikipedia to get my facts straight... And it turned out in the late '70s a pair of psychologists came up with this diagnosis because they observed some women, especially in corporations, felt like their accomplishments which were considerable were coming from a place where they didn't feel qualified to be doing what they were doing. And so they had this overwhelming fear that they were going to be exposed as frauds. Now I don't want to get into the deep psychological, but simply extend that as a metaphor, if you will, to the feeling that a lot of entrepreneurs experience. Which is to say that they've started a business that they really didn't know a lot about at the beginning, and along the way they are achieving some success but they feel l...
32 minutes | Jul 17, 2018
S1 EP 09 Funding Pivot For A B Corporation: Margo Walsh, MaineWorks
In this episode I interview Margo Walsh, founder and CEO of MaineWorks – a company that has combined the pursuit of revenue with the pursuit of making the world a better place. They’ve been around for a while, and they’ve received lots of awards as a business. Now, Margo is trying to figure out how to grow beyond their Maine footprint. We talk about friends and family loans and bootstrapping; B Corporations; impact investors; and my restrictions since I'm not a registered broker/dealer. Links and Resources MaineWorks B Corporations - home, Top 10% ("Best For The World") list 2018 Impact Investing related Global Impact Investing Network – focuses on largest, institutional impact investors but leads with research on the field Case Foundation Short Guide to Impact Investing SEC Broker/Dealer regulations My consulting contract has this caveat since I'm not a broker/dealer: Activities Not Performed Due To SEC Broker/Dealer Regulations Client acknowledges that Consultant is not a broker/dealer registered with the Securities and Exchange Commission, and therefore is not able to perform the following activities: Finding investors for Client, even in a "consultant" capacity; Engaging in, or finding investors for, venture capital or "angel" financings, including private placements; Acting as a "placement agent" for Client’s private placements of securities; Solicitation, negotiation, or execution of financing transaction(s). Further, Client acknowledges that payment to Consultant is restricted by SEC regulations. Compensation for Consultant services related to any potential financing transaction cannot depend upon, nor be related to, the outcome or size of the transaction or deal. No trailing commissions or any other transaction-related compensation is allowed. Transcript Don: Margo Walsh of MaineWorks, welcome to The Funding Coach! Margo: Pleasure to be here. Thank you Don. Don: So let's start off with just a little bit about your background. What were you doing prior to starting MaineWorks? Margo: When I graduated from college, Don, I went into college and MBA recruiting within the banking world. And started at Bankers Trust, which is a bank that was merged into Deutsche Bank over the years. And from Bankers Trust then went to Goldman Sachs where I worked in the investment banking division in college and MBA level recruiting. So my connection to this world has always been in my ability as a connector of people. I find it really easy to meet many many people and then decide very quickly who belongs where. So in 2011 out of my own personal recovery story, and recently divorced, I really... and a son at home who has a disability that I needed be home to parent very intentionally... I started a company and thought, I could find work for an underserved population that I was working with at the Cumberland County Jail. So that's how I started MaineWorks. And it was out of a moment where I didn't really have time to pursue all of the social employment models that existed. I just wanted to start a temp agency 'cause I knew you could actually impact your... It was quite a good economic outcome. If you manage your expenses well you could do quite well as a staffing company. Don: So now we're in 2018. What does MeanWorks look like now in terms of its services, clients, revenue, that sort of thing. Margo: So it's kind of the dream revenue trajectory because in 2012, which was my first real year - 2011 we incorporated actually although I'd started casting around getting my business plan together with the help of SCORE by the way which is outstanding. Don: Absolutely! Margo: Wonderful really. And I met you which was wonderful,just to kind of run ideas and that kind of thing. So in 2012 was our first real year on paper, and our income in that year was $250,000 and then our income in 2017 was $2.5 million. Don: Wow! Ten fold growth. That's terrific. Margo: Thank you.
28 minutes | Jul 10, 2018
S01 EP 08 Crossing The Funding Chasm
In this follow-on to the interview with Chuck Donnelly of Rockstep Solutions, I talk about the funding chasm between Seed and Series A funding. But first, I dive a bit deeper into some of the issues surrounding grant funding, specifically the US federal and state grants designed to encourage technology development by young and small companies. And I also touch upon the importance of regular communications to potential investors during the extended fundraising period. The funding chasm is not unusual. I talk about some of the operational challenges of evolving the business from early seed stage to Series A stage. And I also talk about the specific funding vehicle: do you use a seed funding mechanism like convertible notes or Series Seed equity? Or do you lean towards more complex Series A preferred shares? The conclusion, for companies in the Funding Chasm, is that leaning towards Series A is going to be a preferred solution for investors, even if it's more expensive for the company in terms of legal expenses. Links and Resources Small Business Innovation Research - federal agency set-asides to fund technology research and development. $Billions a year. SBIR Funding [Infographic] State Science and Technology Institute - a central organization (kind of a trade organization) for US state organizations involved in TBED (yeah, another acronym): Technology Based Economic Development. In other words, growing a state economy by funding and encouraging technology development. The list of members isn't organized by state, so you'll have to do a bit of digging to find relevant resources for you (note to self: project for the future!). Dilution Happens 4 Investor Communications Templates What Is A Seed Round and Is That What You're Looking For? Scaling Business Processes Investment Structure: Convertible Notes vs. Equity Series Seed documents, and similar (but I think different) docs from Cooley Go SAFE from Y Combinator Transcript In this episode I'm following on to the interview that I did with Chuck Donnelly, who is both founder and CEO of Rockstep Solutions. Rockstep Solutions, you may recall, is providing software as a service to biomedical labs that are doing research, especially on mice. I want to talk about just three things. I could talk about a lot of different topics after talking with Chuck. But the three issues I want to focus on here are going to be: first, what is it like to have grants as a funding source. And I want to dig in just a little bit deeper into some of the things that Chuck pointed out about his own experience. Second, I want to just touch on the importance of having regular communications with potential investors. And then finally, talk a bit about what you might think of as the funding chasm between seed funding - seed equity funding - and Series A equity funding. But first let's talk about grants now. It's easy to say oh yeah it's free money but of course it isn't. And here I'm going to be focusing especially on here in the U.S. the federal and state grants that are used primarily for technology research and development. If you want to learn more about those kinds of grants here's two web sites you go to, and of course I'll include these links in our show notes. First of all, SBIR.gov. That is for the SBIR federal program. And then there is a trade association of state organizations that provide similar kinds of funding. And that is at SSTI.org. So here are a couple things to think about if you're considering these types of grants for funding the early stages of technology development at your company. First of all, grant providers think about projects as opposed to companies. And you're of course thinking about the long term funding of your company, and the long term technology and product development for your company. But most of these organizations think of the world in terms of projects. So a project has a beginning, middle, and an end.
16 minutes | Jul 3, 2018
S01 EP 07 How To Fund Growth After Federal Grants: Chuck Donnelly, Rockstep Solutions
I interview Chuck Donnelly, founder and CEO of Rockstep Solutions. Rockstep is a great example of a disruptive startup that landed technology development grants very early on from both federal and state sources. That's not the kind of seed funding you typically hear about. Now however he needs a chunk of equity to support the marketing and sales effort needed to penetrate the corporate marketplace, which tends to be characterized by long sales cycles. Links and Resources Minimum Viable Product - my joke was I had an unviable minimum product SBIR - Small Business Innovation Research - definition, infographic with stats Jackson Laboratory National Institutes of Health SBIR Maine Technology Institute Convertible Notes - definition, video Pivot - a major Silicon Valley phrase What Is A Seed Round, and Is That What You're Looking For? Crossing The Chasm - a classic book for technology and innovative companies Transcript Don: Chuck Donnelly of Rockstep Solutions, welcome to The Funding Coach. Chuck: Hey thanks. Great to be here. Don: Well so Chuck you and I have known each other for some time now, but for the audience, can you give just a little bit of background on yourself and how Rockstep Solutions got started? Chuck: Sure yeah. Excited to have the conversation about this. My degree is in computer science. So I graduated from San Francisco State University way back before... I dont even want to talk about how long ago it was, but back in the 80s. Don: Long time ago. Yup. Chuck: From there I moved over to UC Berkeley and joined a group called the space astrophysics group there at UC Berkeley. And so while I was at UC Berkeley I got into a number really really cool projects around computer science. Including space... working on the space shuttle, working on spaceflight systems software that actually ran in space, controlling instrumentation in space. Really really cool software that actually ran right on computer systems that we designed. I also worked on a radio astronomy projects in the search for extraterrestrial intelligence. Don: So can you fast forward to your time here in Maine? Chuck: Absolutely yes. But with that background in this space astrophysics group I decided that I wanted to move to Maine and the only way to actually make that really work and start a science career was to try to figure out how to get into the Jackson Laboratory. So I took classes in molecular biology, cellular signal transduction, molecular genetics, so all of that kind of stuff to help me get into the Jackson Laboratory. And I was hired on and I became the director of computational sciences at Jax. And when I started there it was just me in that group. And I grew that group to a group of about 20 people that included statisticians, computer scientists, biologists, all working together in a collaborative team to basically use computers to solve massive scientific problems. Don: So you so you went to Jackson labs and you basically did a little bit of a startup inside Jackson labs. Which in turn is one of the largest sources of genetically engineered mice for scientific experiments in the world. Tucked away in Bar Harbor Maine. Chuck: Yes exactly. And that's right. Yeah, it was a it was kind of like doing a startup. They had had a group like this before and they needed some... some software, some people that understood technology and science, and that was really the bridge that I provided. And so I grew that group and managed to get funding from the National Institutes of Health to develop informatics systems - bioinformatic systems - and worked in all kinds of really cool research areas including cancer genomics, and general lab informatics, and just all kinds of disease areas. Mostly as a director leading the group. Some, in my early days there actually doing some of the software development and algorithm development. So that's my background that got me to where, you know,
26 minutes | Jun 26, 2018
S01 EP 06 How To Spend Your Summer Vacation Funding Customer Discovery
I follow up the interview with Ben Nussbaum of Floor with a fuller discussion of business plan competitions and customer discovery. Ben won the Bates College Bobcat Ventures competition. I talk about the eight different types of business pitch and plan competitions. I also touch on some basic issues when you're thinking about entering such a competition. Ben is using his prize money to further his customer discovery. I talk about the general process of customer discovery, which seed investors will want to understand before they invest. I finish by recommending that Ben consider a "plan B" of applying to an accelerator if his customer discovery doesn't lead to investors initially. Links and Resources Startup Competitions Calendar - Plan Your Pitch Path - includes details on the eight types of business pitch and plan competitions Business Plan Competitions for College Students Customer Development from Steve Blank, similar to Lean Startup from Eric Ries Lean Startup book Startup Owners Manual book A $50,000 Cup of Coffee Sponsor: Branding Compass, use coupon code thefundingcoach to save $10 on any plan! Business Model Canvas Transcript In this episode I'm following up on an interview I did with Ben Nussbaum who is a junior at Bates College, who just won the Bobcat Venture Challenge with his new business concept called Floor. The basic premise of Floor is that there's a problem for lots of online consumer brands who have products that really require consumers to touch, to see, to feel the products before they actually buy. And so he's taking an idea that actually has started with some early startup companies. But the notion is to have essentially a virtual store that's rented out to a whole bunch of different brands in a relatively small total space, but a place that has lots of foot traffic. So you're giving the online brands an opportunity to communicate with consumers the value of their products up close and personal. So that's the basic notion. First I want to talk about business pitch competitions which are a major source of early stage funding for companies. And then I want to spend a little bit on a particular point that I pushed Ben on, which is trying to be open in the process of customer discovery to finding out what people's problems are, even if those problems are coming from a source that maybe you hadn't originally thought about. And then finally just talk a little bit more about the customer discovery process that Ben is embarking on, and how important that is early on in the development of a company - taking an idea and trying to turn it into a company - and how that relates to the process of trying to get longer term equity funding or other kinds of funding for business. So let's start with the world of business plan competitions and business pitch competitions. I personally started to get acquainted with that world back in 2010. I had just decided that I wanted to spend essentially the rest of my career helping entrepreneurs. And I thought: what's the best way to try to do this? I talked to the University of Southern Maine and they had had a business plan competition running for a number of years, but it was on hiatus for a year. And so I raised my hand and volunteered to manage it - maybe get paid if I was able to raise enough corporate sponsorship money. And as I often do when I get interested in something, I quickly dove deep into the world of business plan competitions and found there was, in fact, a very wide world in the university realm. It's kind of an interesting story. Back in the early 80s a couple of MBA students at the University of Texas business school looked with a bit of jealousy at their law school friends, who had something call Moot Court. And they said, well, we want something that's also going to simulate the real world. So we're going to do a competition that we'll call Moot Corp. So that was the beginnings of the world of student busine...
28 minutes | Jun 19, 2018
S01 EP 05 He Won A College Competition Prize, Now What? Ben Nussbaum, Floor
I interview Ben Nussbaum, who recently won his college pitch competition – Bobcat Ventures at Bates College – for his second startup idea, a new physical retail concept for online brands called Floor. You may have seen pictures of pitch competition winners holding those big checks, and wondered… what are they going to do now? This episode will give you a glimpse into one college entrepreneur’s plans. Links and Resources Bobcat Ventures at Bates College Bates article about Ben Nussbaum and Bobcat Ventures Our massive list of Business Plan Competitions for College Students Crunchbase - leading free source of information on venture capital funding Y Combinator - best known technology accelerator Customer Development from Steve Blank, similar to Lean Startup from Eric Ries Flowfold Sponsor: Branding Compass, use coupon code thefundingcoach to save $10 on any plan! Transcript In this episode I interview Ben Nussbaum, who recently won his college pitch competition, Bobcat Ventures, at Bates College for his second startup idea - a new physical retail concept for online brands called Floor. You may have seen pictures of pitch competition winners before holding those big checks and wondered, well, what are they going to do now? This episode will give you a glimpse into one college entrepreneur's plans. I hope you enjoy the interview. Don: Ben Nussbaum of Floor, welcome to The Funding Coach. Ben: Thanks for having me here Don. Don: So let's start off with just a bit of background. Can you tell the audience a bit about yourself and how you came up with the idea for the company? Ben: Sure. So a little background on myself. I'm currently a junior at Bates College in Lewiston Maine and I have been involved with the Bobcat Ventures program at Bates College, which is really a student run... All students involved competing to raise a little bit of seed money through the final competition every March. It's an annual competition. So leading up to that competition annually we have many students - this year we had 14 different teams. Every Saturday we would go through a different segment of the startup process. We would have someone talk about legal, or working through your ideas, what customers should I should I talk to, how many customers should I talk to. So that is really a two semester long process. Last year I was actually working on something in the certified e-commerce space and it didn't really working out. It went from more of a technical play to an insurance play. But just being involved in that process the whole time was definitely beneficial. So this year I wanted to do something less technical, something that I thought I had more of a grasp on upfront. I have a general interest in the real estate market and I read a lot online and kind of see some of the trends that are going on. And I realized that there was a lot of literature on the death of traditional retail. I didn't really believe that - I believe that there's more of a transition taking place. And really just through a discovery process I ended up figuring out, or what I believed, you know, has some potential to say hey, you know, why don't we target experience based retail for some apparel brands. Smaller footprint locations in downtown areas. And that's really how the idea kind of developed. And that was really the end of 2017, and then I really, from there, have been working toward that final pitch competition in March. Don: Got it. Ben: Which was great. Don: So you've gone through the process a couple of times now and you won this year as a junior. So congratulations on that! Ben: Thank you. Thank you. Don: Yeah! So now that you've gone from conceptualizing an opportunity in an area of interest to putting together a business model and a pitch and you've won, what do you think the next steps are to try to turn this idea into something that's real? Ben: Right. So what I learned from last year was,
22 minutes | Jun 10, 2018
S01 EP 04 Rhubarb Wine, Cash Flow Forecasts and CDFIs
This episode follows on the interview with Eighteen Twenty. I talk extensively about the need for cash flow forecasts, and how you can make one easily with free help! I also talk about my wine crowdfunding research in some detail, the hidden challenge of applying to pitch competitions, and an important lender option all small businesses should know about: CDFIs. Links and Resources A Beginner's Cash Flow Forecast: Microsoft's Excel Template SCORE, SBDC, Women's Business Centers Kickstarter Success Varies By Type of Business Indiegogo Top 17 Equity Crowdfunding Sites Greenlight Maine Season Two Gorham Savings Bank Launchpad CEI (Coastal Enterprises) CDFIs - complete listing Short Term Vs. Long Term Business Loans: Think About Renting Money When Is A Podcast "General Solicitation"? brandingcompass.com, use thefundingcoach code to get $10 off any license Transcript In this episode I want to follow on to the interview that I did with Eighteen Twenty rhubarb wine. I've known Amanda O'Brien for a couple of years now. I talked to her after she'd had a very successful first full season of opening the doors, selling wine, running out of wine in three to four months, and she needed to plan for the next season. After that interview, which I hope you listen to in the last session, I then sat down with both Amanda and her partner Pete at their tasting room in Portland Maine. It was Amanda's night to serve customers. So as the customers started to come in and drink the craft small batch specialty rhubarb wines and ciders that they had made to kind of tide them through until the next season, I sat down with Pete and we talked numbers as well as his own perspective on what he wanted to see the business do going forward. Pete's got a very strong technical background. I'd say he was a little bit on the conservative side, which is fine - everybody has to be comfortable with where the business is going. So I learned a lot about how the business had been funded up until that point in this session. What I want to do is walk through the steps of what I learned and the steps towards figuring out how much the company is going to need in order to successfully get into the second season of Eighteen Twenty rhubarb wine. But then I also want to walk through some of the different options that the company ought to be thinking about, and figure out which of those options they ought to be focusing on going forward. To begin with, we needed to figure out how much money the company is going to need. Now I should say that because the rhubarb plants grow particularly well in Maine, I kind of bought into the vision that Amanda and Pete have had that rhubarb could be a huge part of the economic future of Maine. Because we can grow lots of rhubarb and we have lots of tourists who will drink wine made here. In any case, I sat down with Pete and learned a few things about the way the business had been funded. Not surprisingly, he took out a Discover line of credit loan. I think it is about $35,000 in order to get the business launched. And he used his own personal credit to secure the loan because of course the business didn't have any credit rating. That line of credit is now being paid down at just under $1,000 a month. In addition there were several personal loans that both Pete and Amanda took out. So they've put in significant funds into the business so far. And finally there was a $5,000 loan from a friend of theirs that was going to start needing to be paid off in June. Now June is an unfortunate timing for them because that's when the new crop of rhubarb comes in. And cash has to go out to pay for not only the rhubarb but soon after that things like bottling. So the business has been funded to date with a fair amount of debt. And they need to figure out going forward what are their funding options. And of course first, they have to figure out how much money are they actually going to need i...
11 minutes | Jun 10, 2018
S01 EP 03 How To Fund Season Two of Rhubarb Wine: Amanda O’Brien, Eighteen Twenty
Amanda O'Brien co-founded rhubarb wine innovator Eighteen Twenty with a mix of savings, personal debt and friends and family debt. They quickly sold out of their first season’s production. Now, they need to fund a much bigger season two production while sustaining their tasting room in Portland, Maine. Will Kickstarter make sense? Slow Money Maine? Equity? A new source of debt? And what does their cash flow forecast tell them about how much is needed? Amanda O’Brien grew up on Peak’s Island near Portland, Maine. She met her current business partner Pete when they were both working in marketing for radio. Pete was making wine from rhubarb, and Amanda was very pleasantly surprised with how good it was. They ended up starting the company and bringing Eighteen Twenty rhubarb wine to market in July 2017. The company has been funded by a combination of a personal loan, family and friends, small savings including retirement savings (an IRA), and ongoing out of pocket from the two founders. They both have families and other jobs. In their first season they sold out of their wine quickly, in 3 or 4 months, so they’d like to triple the production in year two. That means buying 10,000 pounds of rhubarb at $2/pound. They could also use some automation to reduce their personal labor cutting, cleaning and freezing the rhubarb, and maybe reduce their transportation costs of hauling 10,000 pounds of rhubarb. Perhaps hiring some help during rhubarb processing, and helping with the tasting room especially during production would also help. This interview is shortened on the public (iTunes+) version in order to protect the company's ability to raise funding, if needed, in a 506(b) offering. The full version is available to our Entrepreneurs Only members. Links and Resources Eighteen Twenty (Facebook) (Instagram) (Twitter) When Is A Podcast General Solicitation? Transcript In this episode I interview Amanda O'Brien, who cofounded dry rhubarb winemaker Eighteen Twenty. I started coaching Amanda way before the company got launched. But at this point the company's made it through their initial small run, sold out too soon, which is kind of a good problem. They battled to get their tasting room opened. Now they have to figure out how to fund the second season a dry rhubarb wine. Because of the nature of their funding challenges, I'm sorry, but I have to make some of the interview available just on our Entrepreneurs Only membership podcast. That's to protect Amanda in case she needs to raise equity soon, although she isn't raising money right now. In either case I hope you enjoy the interview. Don: Amanda O'Brien of Eighteen Twenty, welcome to The Funding Coach! Amanda: Thank you. Thanks for having me. Don: Well now you and I have known each other for some time but can you give a little background on yourself and then how Eighteen Twenty got started? Amanda: Of course. I grew up on Peaks Island off the coast of Portland, So I'm a Maine girl. I left there, and then returned home. And I have been heavy into marketing, specifically digital marketing, and putting together events and programming for around the past ten years or so. In that journey, I became friends with my now business partner Pete. We both worked in radio and had a lot of the same interests, and we're both pretty curious people. And he was making wine from rhubarb, and he was pretty excited about it. And anytime anyone hears wine from rhubarb, you have the same reaction of like, "oh yeah, that's... neat. But I don't want to try that." [laughs] And I ended up trying it at a party that we were both at, and it's great. It was already a really well balanced wine. And there was some grape involved. And so we just kind of were talking more about that, and it's like, if you could get this to just rhubarb I think that the market and Portland and Maine would love this as as an offering. So yeah. We drank some more wine and made some bad decisions and bro...
24 minutes | Jun 10, 2018
S01 EP 02 Bootstrapping Tips, Convertible Notes, Legal Connectors for A Growing Drone Startup
Following up on the previous interview with Max Tubman of drone startup BFD Systems, I expand on observations and recommendations. The company used four classic bootstrapping techniques to launch. But it's quickly at the equity "fork in the road." Max has the almost universal perception that investors won't value his company sufficiently today. Convertible notes will help. But a cash cushion would be helpful to seize opportunities in his hot market. A funding pivot requires a change in mindset, not just a change in funding sources. I elaborated on my grandfather's legendary bootstrapping story, which has remarkable parallels to Max Tubman and BFD Systems. The company used several other classic bootstrapping techniques: services to products; monetizing years of industry experience and connections; using equipment from other business to launch a new business. Equity is a "fork in the road," which is why I always ask about long term goals. You need to make sure your interests are aligned with investors' interests. Convertible notes help bridge the gap that is always there between entrepreneurs' and investors' perception of company valuation, today and a year from now. They look like a good option for BFD Systems. Reflecting on the initial interview, I realized extra funding is always a good idea if you can raise it. Unexpected good things and bad things can both increase the demand for cash. Funding pivots also require a change in mindset, from needing cash to meet payroll, to needing cash in order to seize opportunities. Links and Resources BFD Systems GSM - my grandfather's company, now run by my cousins, tells his bootstrapping story. The Equity Fork In The Road Are You Ready For Equity Investment Investment Structure: Convertible Notes vs. Equity How Much Should I Raise? Include a Cushion If You Can The Bootstrap To Funding Pivot Playbook Transcript In this episode I'm following up on the interview I did with Max Tubman of BFD Systems. He's a young entrepreneur in Philadelphia who has had an explosive first year in the industrial drone marketplace. He was able to bootstrap things from the beginning and now he's got to figure out how to fund his future growth because he really has a tiger by the tail. In this episode I'm going to first share some observations I made about the bootstrapping story that has brought him so far. So if you're a bootstrapping entrepreneur or you're thinking about that as an initial path to going after a very large market hopefully the story will resonate with you. And then he's thinking about equity. And so I want to elaborate a little bit on a few points that I brought up in the original interview and finish with just some observations. As often happens in these short initial coaching sessions I reflected on things afterwords and I have some follow on thoughts that I think also would be relevant to everybody who's in a situation where, my goodness, things are going great! Let me start with a couple observations about the way Max started his business, which is in fact a classic bootstrapping story. Which is to say: don't start your company until you have a customer order in hand. As I think I said in the interview, my grandfather started his industrial roofing business also in Philadelphia. In his case he was right after World War II. He was selling industrial roofing components for another company, and he observed, as lots of good opportunistic entrepreneurs do, a gap in the marketplace. In this case there were lots of parts going out to roofing jobs in Lancaster Pennsylvania, which is probably about an hour and a half west of Philadelphia - maybe longer back then. And he saw that these were going to roofing service companies in Philadelphia because there were in fact no roofing companies there in Lancaster. And so he said "there's an opportunity here!". But he didn't have a lot of money, and so he first got a customer contract to go m...
27 minutes | Jun 10, 2018
S01 EP01 How To Fund A Growing Drone Startup: Max Tubman, BFD Systems
Max Tubman is co-founder of BFD Systems, an industrial drone company in Philadelphia. The company bootstrapped a very successful, profitable first year. Now he needs to figure out how to fund improvements in manufacturing and marketing which he estimates will run $160,000. Should he pursue more bootstrapping through big customer deposits? Raise equity now, or later when his valuation is much higher? He ends up with two new ideas: convertible notes, and connecting to investors through the right lawyer. The company used classic bootstrapping to launch: a customer order in hand even before they formed their LLC. This is how Don Gooding's grandfather launched his business, also from Philadelphia. With less than $10,000 in cash, Max and his business partner have generated revenue of $900,000 in the first nine months, and a profit. To scale up the manufacturing process and drive down production costs he needs about $150,000 in tooling. He also wants to attend a few more trade shows, and build two drones to demonstrate their systems at the trade shows. He may be able to get a large customer to provide a deposit large enough to solve some of the funding problems. He's concerned about his company valuation rising quickly in the next year, so he doesn't want to sell equity too soon. Links and Resources BFD Systems Investment Structure: Convertible Notes vs. Equity Philly Tech Guide Transcript Don: Max Tubman of BFD Systems, welcome to The Funding Coach! Max: Thanks for having me. Don: Let's start off with a little bit of background on yourself. What were you doing before you started BFD Systems? Max: Yes so in the past I've done a lot of kind of freelance contractor work in the drone or UAV space before starting BFD Systems. I was the director of operations for a composite material company based in South Korea. And that company made carbon fiber components for manned and unmanned aerial vehicles. And it was in this role I got to go around and meet a lot of different customers and I just noticed that there was a large gap in the market for people who wanted a turnkey solution for heavy lift unmanned aerial vehicles. And that's kind of how I ended up starting BFD. After leaving the other company. Don: Well that's kind of interesting. Just on a personal note my grandfather was in Philadelphia right after World War II. He was selling industrial roofing components for another company saw a gap in the market and built his industrial roofing company out in Lancaster Pennsylvania and that's still being run by my cousins. It's a great way to get started in a business. So let's talk about the company now. What are your products or services, who are your customers and how far along are you in terms of those products as well as revenue and customers. Max: So we started about 9 months ago and really we kind of hit the ground running. We had customers lined up before we even got the LLC set up. So really the way that we worked in the beginning was definitely bootstrapping method where we had a customer who put down a deposit. We had already the design of the aircraft that we were going to make and we kind of just went from that one and started building the business from that first sale actually. In the first year or first nine months rather we were making two or three different types of aircraft that were kind of constantly being updated or upgraded and improved upon as far as the aircraft itself. And then also like the workflow. So we're doing the manufacturing and whatnot as well so that both of those things have been improving which I've kind of been calling Phase 1. And now in 2018 we've got a lot of those systems kind of hashed out and we're scaling our production. So right now we only make about four or five systems a month and in the next phase I'll say we're trying to do something closer to 10 to 20 units a month. And we have the customer base but really one of our issues now is just ...
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