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Creating a startup is about loving it: money won’t come instantly. If that's the type of gratification you're looking for, then don’t pursue a company in tech. Try opening a pizza shop or a franchise.
That is the first piece of advice partners at LA’s top accelerators told their audience Thursday at Silicon Beach Fest’s Meet the Accelerators panel. Those representing the accelerators were quick to explain how they choose companies and what types they are looking for, but the most detailed tips they had to give centered around the one thing that makes the startup world go round: funding.
Howard Marks of Start Engine, Jeff Solomon of Amplify, William Hsu of MuckerLab and Sam Teller of Launchpad LA said that most accelerators are now raising funds continuously, for present and future ventures, and many become stakeholders in their companies. Natalie Jarvey of LA Business Journal moderated discussion which touched on these important points:
Raising the funds
- Entrepreneurs should not raise Series A funding unless they know their business will work in the long run.
- Companies that have long-term success are those that continue to seek funding and don’t just stop at Series A funding.
- Do companies at accelerators have an exit strategy? No. Accelerators continue collaboration throughout the company’s success and, most of the time, accelerators are stakeholders.
- A lot of businesses require investments before they can grow. If you want to create a large and lasting company, then use venture capital investors.
- In order to receive future funding from venture capitalists you must show serious traction and significant milestones.
How to budget and how to spend
- If a company is running low on money after Series A funding, they should conserve their resources and grind it out. (The grind gives the most memorable moments to an entrepreneur.)
- Although it might be tempting, do not spend Series A funding until you are in “growth mode” and have received some traction.
- Be conservative with costs, but also be realistic: 90 percent of entrepreneurs underestimate the cost of consumers’ needs and of acquiring consumers.
- Here’s a catch 22 for entrepreneurs: “Should you spend on customer needs or employee needs?” Work on your traction by funding your company to meet your consumers’ needs. In other words, you should first see if the dog likes the food!
