Entrepreneurship is hard. Most everything about building a new company is a heavy lift.
Are there shout-from-the-mountain-tops moments? Most certainly. When the first prototype works as designed. When the first customer contract is signed. When a talent critical hire says yes and joins the team. And when the company receives the funding it needs to move the business through the next set of milestones.
Market validation. Talented teams. Innovative products. All critical success factors — but not make-or-break in the same way capital is to a startup company. Capital (or the lack of it) can force a go/no-go decision like no other factor in a young firm’s critical path.
In the startup world, the sources of those funds are angel investors and venture capitalists. Every entrepreneur has to learn who and where these people are and how and when they choose to invest. Likely, there isn’t a true entrepreneur in existence that doesn’t realize access to capital is the critical path.
Successful entrepreneurs develop business plans and test market validation with a constant eye on how much capital they need to accomplish their next set of goals. If they can’t make the business more investable and attractive to those with more capital to place, the most creative ideas from the best teams can be over in a blink.
However, figuring out the timing of when and how to fund a business is an art. When to fund is not driven by the balances in the corporate accounts. It is driven equally by the competitive environment of the market and by where the company is in the development of a product to meet validated market needs.
It is surprising to me how dismissive founding teams can sometimes be of competition — both competitors that exist and from competitors who are in the wings. For a new product (and thereby a new company) to gain traction, there must be a market gap, and, as the old adage goes, empty spaces are made for filling.
A startup’s strategy for commercialization to create a solution and then sell that solution into the gap drives the timeline of when to seek capital. Growth and investment is a positive as long as organizationally an entrepreneur is prepared to onboard and support customers and deliver the product they expect when they expect it.
Early on, when the company is at its lowest point in value and at its riskiest, capital is the hardest to raise. Capital sources include those who are willing to take out-sized risk, family and friends of the investor or state funds that are ecosystem-driven. As the company matures and approaches financial break-even, different investors enter the area — venture capitalists, institutions, and even banks.
This is why is so important in Oklahoma to have a continuum capital that starts with the TBFP concept fund and progresses through all of the stages of startup development. This has been a year like no other, but we cannot waiver from what we have proven works.
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 support from the Oklahoma Center for the Advancement of Science and Technology and is an integral part of Oklahoma’s Innovation Model. Contact Meacham at [email protected].