Seth Godin’s recent post entitled "Q: How can we get our company funded" echoed through my skull cap as if the host monkey all whacked out on Ebola was banging a gong next to my medula oblongata. A couple of key points were raised.
- Most companies aren’t appropriate for VC money. Even though a lot of Web 2.0 companies are thinking that they’re entreprenuerial and going to scale and make money in their sleep…they wont. So the new cool way to look at those is to call them "bootstrapping companies"..very tough and cool. Since most of these companies are just "one project after the next"…they’re more of the work to get paid type to me.
- This really hit home. "The alternative (which might work for you as well) is not to fund the business. It’s to fund the project. That’s how they fund movies. You don’t get a piece of the studio. You get a piece of Rocky XIV." WOW. This is my world and accidentally what I’m doing now. After 2 years of trying to get a mediocre business model with zero focus and a seat of the pants operational structure…we’re now getting up front funding and have a revenue model to pay back our "investors". It’s key to understand that most larger organizations don’t give a rats about getting equity in your little venture. It’s more a nuisance than anything. Just imagine how much time and effort a medium to large sized business would have to put into an equity investment…with SARBOX???? Now, we simply sign an agreement that is a rev share. Done. Nice. Clean. No distractiions. Either do it or don’t. I think companies like Central Desktop, a fantastically clean and wonderful on demand collaboration software could make use of this model. Find a serious pain point in a segment. Have a marquee customer who really feels the pain fund the development of a vertical version of their great software. Launch to the bigger piece of that vertical…then let Geoffrey Moore’s principles take over and start knockin’ ’em down.