Written by Kevin Volz.
Funding is often the biggest challenge in launching a startup company. Taking a great idea and turning it into a successful business requires capital. While some entrepreneurs are able to personally fund their startup for a period of time, most eventually turn to outside investors for financial support. Ohio Third Frontier provides entrepreneurs access to very early stage capital through the state’s network of privately managed funds and regional partners, including incubators and accelerators, along with direct loan funding. All of these resources are focused on preparing technology companies for success in attracting capital at each stage of their growth.
“There is capital available here in Ohio that’s just not available elsewhere,” said Mike Belsito, vice president of product at Movable, a company in Cleveland, Ohio, that develops both a SaaS (Software as a Service) platform and wearable devices that inspire groups to be active. “Programs like Ohio Third Frontier don’t exist in Silicon Valley. It’s important that people know about these programs and take advantage of them.” One of Movable’s investors is JumpStart, Inc., the northeast Ohio regional partner of Ohio Third Frontier. In 2013, Jumpstart invested $250,000 in the company to contribute to their seed round of funding.
Before his work with Movable, Belsito was an entrepreneur who started his own company in 2011, and raised close to $1 million in the process. After receiving question after question from his peers on how he accomplished this feat outside of Silicon Valley, Belsito decided to write a book called Startup Seed Funding For the Rest of Us. Belsito has three tips for entrepreneurs looking to crack the capital code:
- Build Something: There is a myth in the startup world that people invest in ideas. To Belsito, ideas are worthless without showcasing execution. Investors want to see that you have a great idea and can actually do something with it. Build at least a prototype of your product, whether it is hardware or software. This will show investors you’re more than just talk, and are committed to seeing your product come to life.
- Think Beyond Your Own Geography: This is a common challenge for entrepreneurs. At the seed stage, it is extremely important to talk to investors in your area. For later investments, don’t feel restricted by your city. Look outside your own backyard for funding – accepting capital from an investor in another city or state does not always mean that your business has to move. Always be deliberate about the types of investors you are willing to work with.
- Use Your Tools to Build Relationships: Social media platforms like Twitter, LinkedIn and AngelList are great places to build relationships with venture capitalists. Most of Belsito’s funding for his startup came from northeast Ohio, but he reached out to investors all over the country using social media. While these contacts may not have invested in Belsito’s company, they became people he could bounce new ideas off of free of charge. Connecting on social media allows you to walk into meetings with venture capitalists as friends rather than strangers.
“Fundraising takes time. Raising $1 million doesn’t happen in a week. In fact, most of the time it doesn’t even happen in a year,” said Belsito. “The capital process should be just as important to entrepreneurs as product development. It is nearly impossible to overestimate the amount of time needed to raise capital.”