Many technical people are uncertain about where to go to raise seed capital when they are at an early stage where they still need to prove the technology, develop the product, and get substantiation from the marketplace. Let's examine some options and a workable model.
Whom you go to depends on the likelihood of getting funding at an attractive valuation. You should also consider how much help you can get in raising future funding and in running the business. Most venture capitalists (VCs) claim they provide seed funding. Maybe so, but unless a very large business can be built on the idea, pursuing top-tier VCs is usually a low-yield exercise. An association with a top-tier VC, if you can get it, can be very desirable. You'll find that landlords are willing to sign a long-term lease without a personal guarantee, recruits are more willing to join the team, and customers and suppliers are more willing to give you the benefit of the doubt. Raising the next round of funding with a VC on board can be binary-very easy if you have their unwavering support, impossible if you don't. The difficulties of working with a VC are highly dependent on the individual you work with and can be mitigated by careful reference checking. But given their goals to achieve bigger financial results faster, the downside is that you will likely be swayed toward spending more to ramp up faster than if you were on your own.
More people are nowadays turning to private investors (angels) for seed funding before the VC round of funding. Given today's heated stock market for high-tech stocks, there are plenty of wealthy individuals acting as angels out there. Because this is not their main business, angels are less likely to drive a hard bargain and will give you more leeway in running the business than a VC would. By the same token, they may offer less help in running the company. So you will want to think through the help you would need at this early stage and choose your backers accordingly. For sure you want angels with impeccable reputations, which will be a very important factor when raising subsequent funding from VCs.
In order to get a VC interested, you want to focus your initial efforts on substantiating the technology and on persuading several influential customers to say good things about your product concept. Obviously it would be nice to have the team put together and have a polished business plan in hand, although nowadays you can find VCs who are willing to invest in companies still in very early stages of development. A reputable angel with some high-tech business experience may be all you need initially. The fun begins once you have VCs on board-you better be prepared to move, fast.
For seed funding, it is especially important to take money only from people who have a high level of confidence in you and who are true believers in your business model. Because the first investor commands a lot of respect on the board, you would want to make sure the amount of funding is adequate to reach the promised goals to reinforce the initial blind faith. Without a supportive board, life can be very unpleasant in the uncertainties of a start-up business.
Q: How should I deal with a new hire who demands regular eye examinations and also additional compensation for working with lasers?
A: The American National Standard for Safe Use of Lasers ANSI Z136 states that "Medical surveillance shall be required for Class 3b and Class 4 laser systems" and that "for both incidental and laser personnel, required examinations shall be performed prior to participation in laser work. Following any suspected laser injury, the pertinent required examination will be repeated." But "Periodic examinations are not required." For your own protection, you'll want to provide a laser-safe environment and make eye examinations a part of your exit procedure when an employee leaves.
I am unable to discover any labor law requiring special compensation for working with lasers. This may very well be the convention at a company this individual worked for. This conflict presents an opportunity for you two to rationally work things out to develop a better working relationship. (Thanks to Bob Weiner of Weiner Associates ([email protected]) for this advice. Also visit http://radsafe.berkeley.edu:5016/lasersafety.html.)
