If you are one of many Eastsiders burning the midnight oil working on the “next big thing,” it’s quite possible you are hung up on one major question: What’s next?
Following Startup Weekends in Kirkland and Bellevue, where teams developed a business idea and pitched to a panel of judges, there was a lot of chatter from teams about what to do next. For some, funding was the next puzzle to solve. For others, it was the business plan, creating a website and app, or reorganizing a team.
Startup Weekend is a good place to start, organizer John Sechrest says, but it’s certainly not the last stop before hitting it big. “I see Startup Weekend as something you do over and over again, like a game of pick-up basketball, until you have a team and a project that lights fire and takes off,” says Sechrest, who also founded the Seattle Angel Conference.
Sechrest says entrepreneurs should look into programs such as Microsoft-sponsored Founder Institute and Google-affiliated Startup Next that help give “idea guys” leadership and team-building skills needed to launch coherent companies.
“You need between two and four people on a team to make a good, strong business come out of most business ideas,” Sechrest says. “Think of Startup Weekend as the first set of dates that the team has to make before they get married. A business is a hard thing to do. It takes a mutual commitment to make it work. Startup Weekend and Startup Next are small steps that let you test out if you have something.”
And if Startup Weekend left a bad taste in your mouth? Examine why it went badly. Sechrest suggests breaking the experience into sections: Did the team not work well together? Was it a bad idea? Is the market ready for what you’re pitching? “Then, what would be the change you make to make it better the next round?” he says.
Timing incorporation isn’t an exact science, so Sechrest suggests a team of founders wait until it agrees on a mission and goals before making the relationship official. He says one early goal could be to build enough team coherence and market momentum to be attractive to a startup accelerator program. Application processes can be highly competitive, but once accepted, the time and effort are worth the access to mentors, education, and funding opportunities.
Obtaining money for a business can be a mess. Different steps of acquiring capital — bootstrapping, friends and family, angel investing, venture capital — have disclosure requirements to make sure young companies are in compliance with the law.
Crowdfunding is more complicated than throwing a page on Kickstarter and watching the money roll in. Depression-era federal law dictates that only accredited investors — those with a net worth of $1 million or a $200,000 income in each of the past two years — can purchase securities of a company outside the stock market, but startups often fail to report these exchanges to the Securities and Exchange Commission, or they accept funding from non-accredited investors anyway.
“Most companies don’t comply with the law. To do it correctly requires a lot of legal and accounting expense,” says Davis Wright Tremaine startup attorney Joe Wallin.
“If you lose investor money, you can be sued personally because there’s no corporate shield on securities offerings. If you’re concerned about your personal assets, you need to make sure you do it correctly.”
Life is somewhat easier for entrepreneurs in Washington, where a crowdfunding bill that passed in March legalized small equity investments by non-accredited investors. “This model allows you to raise up to $1 million (each year) from accredited and non-accredited investors without spending (tens of thousands of dollars) to do so,” says Wallin, who helped draft the bill. Non-accredited investors can donate up to $2,000 or 5 percent of their annual income or net worth in a year.
Taking a business from idea to funding can be daunting, but experts agree that doing due diligence as an entrepreneur is integral to the company’s long-term success.