Category Archives: Investment

Help Us Win A Contest!

We have entered a PayPal Developer’s Contest. First prize is $50,000 cash and $50,000 credit from PayPal. As you know, startups can ALWAYS use money like this and we need your help to get it.

To win, we need you to vote for our demo in the contest before 11:59 PM Friday night, March 5th. Sounds easy, right? It is.

You need to have a PayPal account to participate. If you don’t have one, click here and you can set one up. Pick Personal. It is fast, easy and free.

Once you have your PayPal account, click here or on the screen shot below to be taken to the contest. The first screen will look like this:

Click on the VOTE NOW link to start. You will be prompted to login to PayPal. Honest, this won’t take very long…

Enter your account name and password and then click Log In. If this is your first visit to the PayPal Developers Network, they will automatically redirect your browser to a screen like this.

Please enter a screen name (usually in the format firstname.lastname), check the Java and Social networking boxes and click Submit. You will then be directed to the contest page (finally!) shown below.

Please enter our contest entry number D1039 in the search box in the top right corner and click Search.

You will see our video demo (entry) into the contest on a screen like this:

Please click on the Vote button in the top left corner and you are done!

Except, of course, if you really want to watch the video. If so, click on the Play icon in the middle of the screen.

Please send us your feedback on our (very short – we were only allowed 2 minutes) demo. We’d love to hear from you.

Thanks for your help!

Turning the tables upside down

Upside down house courtesy of Telegraph UK

In the scheme of things we’ve had an interesting week so far. Some downer moments followed by some great highs. Sometimes you just have to turn the tables upside down, you have to create the momentum, the mindset and the attitude shift to make things work in your favour. Learn the lessons from the setbacks and focus on what you can turn into key wins.

Daryl has just come back from a great Ebay/PayPal conference in San Francisco where he managed to make HUGE inroads with the right people that will help FundRazr greatly, solve many of our problems and create a potentially brilliant partnership…… that’s all I’m saying for now. On top of that he wrote up a mind dump of all the critical areas we need to focus on and get done, which was luckily the same as the one floating around in my head and I’ve now prioritised so we can become more effective. It’s still daunting but then so many entrepreneurs feel the same way.

The testing this week has been invaluable – thanks to Zeenat, Vincent and Jamie, Troe, Chris, Nate and Dave! The same consistent feedback is coming through, the patterns are forming on what we need to tackle and improve straight off, and in addition some excellent ideas have been suggested – we’ll be prioritising those too.

Clearly one thing that is always on our minds is funding so that we can keep creating this kick ass application and change the game of fundraising and payments in the social network landscape. That’s why I got a great chuckle out of reading this from founder of OnStartups Dharmesh Shah, I particularly like no. 5:

10 Things An Angel Investor Will Never Say

1. I really want to support entrepreneurs — but just those that are going to make me money.

2. I dread having to explain your business idea to my spouse (who can veto any deal).

3. I don’t really have enough stake in your company to spam my network on your behalf.

4. I was lying when I said that some of my best friends were VCs.  Even VCs aren’t best friends with VCs.

5. I have no idea what the hell you’re talking about 50% of the time.  What’s a socially-semantic mobile platform for non-virtual currency mean?  (Oh, it’s an iPhone/Facebook payment app).

6. The other 50% of the time, you have no idea what you’re talking about.  Anti-dilution provisions in a termsheet are not about beer.

7. How the public market did last week does impact my decision making.

8. I like to invest in cool startups because it helps make up for high school.

9. I don’t understand what half the things in the funding agreement mean either, but I’m betting that most of them are to protect me, not you.

10. I really didn’t put the check in the mail the day I said I did.  I was golfing that day.  I sucked.

11. I’m in it to mostly have fun.  If I wanted to do unpleasant work, I’d have my own startup.

It’s come off the back of Venture Capitalists doing something similar

Great news on the investment front

I’m pleased to report that we have been approved as an Eligible Business Corporation (EBC) under the British Columbia Small Business Venture Capital Act. This allows us to arrange for generous tax credits for our investors who are BC residents. We are authorized for up to $2,000,000 of investment under this program.

To quote from the BC Investment Capital Program Guidelines:

Individuals who purchase shares of an EBC are eligible to receive a refundable tax credit equal to 30% of their investment amount, up to a maximum of $60,000 in credits per taxation year.

The program is also available under slightly different although still generous rules for BC corporations.

What does this mean in simple terms? Investors who live in BC and who buy shares of ConnectionPoint can get a substantial portion of their investment back within approximately one year i.e. after they file their tax returns for this year (2009). If investors move quickly, we may even be able to acquire tax credits for the 2008 tax year as there are very small amounts available to us from the program run last year.

In fact, we’ve had one investor already take advantage of this on Monday with a $150,000 investment that should give back a $45,000 tax refund in the next few months as their 2008 tax return is processed. This in no way affects the potential return on investment. What a great win for the investor and the company!

I’m very proud of how supportive our provincial government is of small startup software companies like mine.

If you are interested in taking advantage of this amazing program, please contact Daryl – 604.984.2466

Survival mode – running startups in tough times

Here is a quote from an article by Brent Holliday, a Venture Capitalist, published in the January issue of BC Business.

How does this sound? I want to start a business. It will not make a dollar of revenue for 24 months. It won’t be profitable for four years, at least. It has no assets whatsoever. In fact, the only asset it will have four years from now is a highly subjective thing called intellectual property. Here’s the good news: once I am up and running and my innovative product has caught on in the market, other larger competitors will buy me out with a stupidly huge valuation. Oh, one more thing. We will definitely need to raise more money after your money runs out.

Are you in?

I encourage you to read the article because he has lots of interesting commentary on the process of starting up and financing a small technology company. The main thing that I take from his comments is that, in comparison to many technology startups, ConnectionPoint (FundRazr’s parent company) is in very good shape both from our approach to this startup phase and from the basic characteristics of our target market and our solution. We are building the business such that we should have our first dollar of revenue by July this year, as opposed to the 24 months out he quotes in his article. We also should be profitable with the next 18 months, not the four years that is typical for many other startups.

We also have an advantage that startups in previous years did not have of generous support from the Ministry of Small Business, Technology and Economic Development in the form of EBC Tax Credits. These tax credits provide an immediate 30% rebate of an investor’s qualified investment in our company for residents of BC. What a way to reduce the risk of an investment in a startup!

We are lucky to live in a province with such supportive venture capital investment policies…

When we get through this, think of the stories we’ll tell!

Raising money right now is a bit “challenging” and not for anyone lacking conviction. When we have our exciting “exit” in a few years, we will be able to look back and say “We raised money in the darkest days of the financial nuclear winter”.

Sounds like a badge of honor to me…  

Surprise! VC Funding Fell Off a Cliff in Q4

Stacey Higginbotham | Friday, January 23, 2009 | 9:01 PM PT | 12 comments   

As expected, the venture industry is seeing the fallout from the economic crisis, with fourth-quarter investments dropping to a total of $5.4 billion invested in 818 companies, according to a report from PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters. That’s a 33 percent plunge from the $8.09 billion invested in 1,051 companies in the fourth quarter of 2007.

With the exception of a few industries, these fourth-quarter numbers show a sharp pullback by VCs between the third and fourth quarters of 2008. Indeed, VCs are nursing their growing portfolios of later-stage companies that are unable to exit through a public sale or an initial public offering — and waiting for the economic fallout to subside.

Read the rest of the original article here

 

Venture Funding 4Q 2008

Venture Funding 4Q 2008

Facebook opts out

 We received some great news today. Facebook has elected to postpone their electronic payment system indefinitely. See this link for details.

This is obviously important to us as it removes one major potential competitor from our arena. However, many industry observers still see the need for a payments platform. See this link for one opinion on the topic.

While Facebook would not have directly competed with us, their entry and offerings would have confused our market. We don’t want to provide a full payment platform like they would, just a specialized payment engine. This announcement gives us maneuvering room and, in some ways, confirms our opportunity.

I’m feeling very good about this!

How big is too big?

Angel investors and venture capitalists are very attracted to businesses that have large addressable markets. They want their investments to help the company capture a significant share of the market opportunity. It is very important that the potential market size is big enough that the company can achieve a market share position (and therefore valuation) that justifies the investment. However, it is also important that the company achieve a reasonable share of this market (20-30%) to help stave off competition.

Everyone wants “big” but how big is too big? Entrepreneurs sometimes fall into a trap where they take a look at the entire “huge stretch ” market worldwide and then make a claim that if they can just achieve 1% penetration, they can make billions. Apparently professional investors cringe when they hear the 1% number because it means to them that the company has not honestly evaluated their market and the challenges they will face in getting to 1% of “huge”.

I’m in a bit (or two) of a quandry. Natalie and I have been researching the potential size of our market in just North America and we are frankly stunned at what we have discovered. If the statistics from the Canadian and American government agencies are correct, the total spend on club registration fees per year is in excess of $60 billion. This was just for the top sports where we have a strong value proposition. It is our best estimate that a significant number of these clubs (and their members) would find our service attractive.

However, if we quote this number as our addressable target market, I’m sure we are going to get some rolling eyes. Even the 1% approach brings a huge number to the table. One of the quandries is that if we quote a much smaller number, we aren’t hitting the ‘dominant player” level and the investors may fear our market share is subject to risk of being gobbled up by larger competitors before they can cash out their investment.

We’ve taken a look at what other similar services (although not direct competitors) in the market have achieved in new members, etc. By applying similar metrics we estimate at a minimum we can acquire 20,000 clubs and 400,000 members in three years. This would give us annual gross profit from just the spread on the money we process of over $4M. Our hope is that the other three revenue streams would also contribute significantly to our total. Not a bad size business for a three year old given we would be very nicely profitable at that point…

However, the other quandry is that our best estimates of the number of clubs and members we can acquire are probably very, very conservative. It is very possible that we could achieve 10X those numbers in the same period or perhaps within an extra year. Do we bring that up or go with the conservative number? I’m a fan of under-commit and over-deliver but I’m also NOT a fan of giving away too much equity in the beginning because we don’t have the strength of our convictions on the market size. Estimate too low and we give away the farm. Estimate too high and we’ll suffer a “down round” and hurt our early stage investors.

Damn the torpedos – full speed ahead! For now, we’ll use the very conservative estimates for our Friends & Family investment round. After that, I think our approach will be to try to validate the number of clubs and members that we can directly acquire through more hands-on market research. As the research results come in, we’ll use them to adjust our expected growth and therefore valuation prior to going out for the Angel/VC Expansion round. It means that the F&F will probably get a better return i.e. I’ll give away more equity than I should have to in the early stages but that we’ll get the story “fixed” before we have to give away more in the Expansion round.

Feedback on this topic would be greatly appreciated….