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lunedì 13 giugno 2011

Cruss cross methods to comply with funding companies:

This is from a real case, of many:
Step one, invented marvelous product.

Step 2, done prototyping "lab" ones to test, on family money, friend free work, stolen materials, junkyard, whatever you see fit.

Step 3, found some ANGELS (family members, friends) that put some little savings into the incorporation papers and became partners, since they helped anyway and beleive in the product.

Until here all is fine!

Here is where the shit hits the fan:

Step 4, hanging around like crazy to demonstrate the potential to clients and venture funds (banks don't even open you the door)

Clients pretend you have already sterted production and somebody elese already bought your product first so they can trust you, Venture capitals require that you are revenue ready, that is you didn't started production but clients already signed some orders trusting your lab prototypes.

End of the games, here is where most fresh ventures die!

Solutions :pack what you have and go hit them hard and often, how???

Step 5 Find some clients that would sign you PRO FORMA contracts conditioning the purchase on your machine performing as promised.

Find some distributors that would sign you the same.

WARNING, a pro forma contract becomes a full contract the second they placed the first order.

NOW you are SEMI revenue ready. You need to start production first, but still no money.

Step 6 Go to the investors and show them your business plan, teaser, term sheet and the rest, than show them your contracts, and tell them you don't want their money NOW, all you want from them is a commitment that they would fund you IRREVOCABLE if you start production, that is also a pro forma, it is conditioned.

But you still don't have the little money you need for the first units so you become revenue ready....

Step 7 Now you take all the proforma to another Angel - Broker - Bank, and keep nagging them untill one says YES, sell 1% of your company for the minimum necessary to "ignite the mechanism", say 100 I.O.U. (Invented money) showing them you sell later to the investors 20%, but not for 2000 I.O.U. that would be same price per %, since you have them already promised you they will buy 20% for 100.000 I.O.U., that raises the price of 1% from 100 to 500, in no time (a few months), high risk, high and fast return.

Step 8 The moment you sold 1% for 100 I.O.U, your proforma conditional venture capital loses the conditional pro forma status, you complyied, thus they MUST, by contract, fund you. Meanwhile make as manny untis as you can and sell them to anybody you can (forget your pro forma contractors for a moment)

That makes you: revenue ready and with comerical product on the market.

Step 9 Voila, now your proforma contractors must buy from you since you fulfilled their condition too, and that's bringing you some more orders, so when finally the Venture Capitals arrive (it takes time) you have market, orders and some delievered orders in your portofolio.

Step 10 Now you are in busines and must perform to buy back your shares from the investor in due time (or sell with him all the pack to another company/buyer, etc)

Warning, in between step 1 and step 10 there might pass even 10 years, it depends on how hard and often you knock at the doors, how many doors per day, how often you loose faith and give up for a while, etc.

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