Working Capital (Debt) Financing For Entrepreneurs: Heather Onstott, Director Of Small Business, LaunchCapital (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you charge entrepreneurs a fee for mentoring them?

Heather: No. We don’t charge for entrepreneurs to be mentored. We do struggle. Just like everyone, we have limited bandwidth, so we highly encourage people to get involved with multiple mentors, even if you only get 30 minutes with some of the top people in your industry or who really understand the business model that you’re trying to execute.

Who was it who said, “I’d rather eat the crumbs off of a rich man’s table than feast with a fool?” [in Romanian folklore, Arkirie the very wise said to his nephew, Nadan, “My son, it is better to carry stones with the wise than to feast with a fool.”]

I think the idea behind that is, often times, even if you only get 30 minutes with the top guy in your field, it’s better than four hours with somebody who has no idea what he’s talking about.

So, I think it’s an entrepreneur’s responsibility to go out and gather as much information from as many different, solid sources as possible.

When I was back in banking, we used to say that the whole purpose of a business plan was to talk yourself out of going into business for yourself.

Really, the business plan forces you to think through every single detail of how you will execute your idea, and I think that when you run into a problem, if you run into it, I can guarantee you that the investors are going to hit it.

They’ve seen 17, 000 of your business models. So, being able to seek out that mentor who has been there and done that and says, “Here’s how I overcame that, but you know what, mine is not the only way. There’re four other ways to do it, too. Have you talked to so-and-so? She did it differently.” That’s what makes it a competitive landscape and not just one person, right?

Irina: Exactly. Many entrepreneurs who are just starting out think they are very special and there’s nothing like what they have.

Heather: It’s true. But I think, too, in some ways, you have to have that bubble of disbelief. What is it when you walk into a movie theater? They call it the suspension of disbelief.

I think, as an entrepreneur, you have to have that in order to get your idea going. But it’s only when you’re able to firm up and go, “OK, this is what I have. Here are the weaknesses that I see. Who can I talk to who can help me bolster that and strengthen that fortress?”

Those entrepreneurs who are willing to risk their ideas, to risk their babies and listen, are the ones who, typically, do far better than the ones who hold them to themselves.

Irina: Do you look at the size of the market when you do your funding?

Heather: Absolutely. The venture guys are much more sensitive to this than I am. For the venture guys, that’s probably among the first two pieces of due diligence that we conduct.

We have our analyst take a look and say, “What does this market look like? How big is it? How hard is it to get to?” Those kinds of things, and who else is already in the space? Those are the first two things we look at.

From my standpoint, on the small business side, it is important to me how big the market is, but I also understand that I’m looking at a far different scale.

So, when I open up a coffee shop, I’m not really interested if there’re a million people within a five-mile radius. The reality is most people walk down streets to their coffee shops, so I need to know more about what’s in that vicinity and how often people come through that area. So, [it’s] more foot traffic than market size. It’s a bit of a different view or angle, but yes, market size is very much something we look at.

Irina: Do you know what size of the market your analyst would find acceptable?

Heather: That’s a good question. It really is case specific. I wish I could give you an easy, out-of-the-box answer, but the reality is that the size for a company that develops iPhone applications is going to be a very different market size from a manufacturer that manufactures medical device cases for jaw surgery.

This segment is part 4 in the series : Working Capital (Debt) Financing For Entrepreneurs: Heather Onstott, Director Of Small Business, LaunchCapital
1 2 3 4 5 6 7 8