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A start-up’s biggest obstacle: funding

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By Scott Meacham
Copyright © 2014, The Oklahoma Publishing Company

I write a lot about access to capital. The obvious reason is that it takes money to start a business. But there’s a second really important aspect to the challenge of raising capital — fundraising really weighs down entrepreneurs.

Three-fourths of the companies responding to our 2014 client survey said that access to capital is their most critical issue. They also tell us that’s why many of them first make contact with i2E.

Entrepreneurs know that thanks to the state Legislature, OCAST, some federal investment, the SeedStep Angel network, and other groups, we’ve stitched together a continuum of capital that is an Oklahoma entrepreneur’s most likely access to seed-stage funding.

After capital, entrepreneurs name business model development as their second most critical issue.

Business model development is sort of MBA-speak for figuring out how to turn a break-through technology into products or services that customers will buy.

When a startup company is able to figure this out and then bring their concept to the marketplace, the company can attract early adopters — customers who are willing to test prototypes and possibly even write checks, if not immediately then at least when the prototype pans out.

Until they do, however, chasing capital is a resource drain and many would say a waste of time.

Investors don’t take serious notice until entrepreneurs and companies have revved up customer interest. Even angel investors, who are arguably more ready and willing than most to take on the risk of early stage deals, want to see realistic evidence of revenue potential before they sign on.

Our surveyed clients make the connection. They ranked business model development as the most helpful service they received from i2E (91 percent). Access to capital was No. 2 at 81 percent. So while capital is No. 1 on entrepreneurs’ minds, they understand that their No. 2 concern, creating a viable business model that most effectively addresses their prospective market, is No. 1.

That’s the benefit of having an inclusive statewide model that prepares our entrepreneurs to compete for the limited capital that is available.

When entrepreneurs, like graduate Roll-2-Roll, exit programs like the Oklahoma Proof of Concept Center, with a prototype and business plan based on direct market feedback, they remove risk and improve their odds at raising capital.

Having a defined path and process helps entrepreneurs focus on achieving the milestones that make startups attractive and makes capital raising more efficient.

Until there are more resources, raising seed capital is always going to be a challenge in Oklahoma, but it doesn’t have to be back-breaking work.

Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_Comments@i2E.org.

Click here to read the article at newsok.com

 

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