‘Dating games’ help startups find funding

By Tomás Moya and Boseok Park / NM News Port

Inside the auditorium at UNM’s Science and Technology park, some 15 local entrepreneurs gathered in October to pitch their ideas in 90 seconds each.
Business coach Susan R. Cornelius helped them practice and practice until they got it right.

“Get comfortable,” she said. “If you are afraid to go to something because it’s kind of scary, then you need to put yourself in it.”

Workshops like this “Investor Dating Game” are occurring more frequently in Albuquerque’s budding creative economy. Ultimately, the goal for entrepreneurs is to find that all important element: money.

Investor ‘dating games’

“It has become clear to me that there is a strong effort going on… to have a very vital startup community,” Cornelius said. “What I have a passion for is great companies who’ve got their basics in place.”

Cornelius, the founder of Accelerate2Solutions, organized “The Pitch: The Investor Dating Game” to prepare new entrepreneurs for the all-important pitch process.

Her “pupils” first had to share their pitch with one other person, then two others, then a larger group until finally two were chosen to present in front of the entire audience.

One of those pitchers was Aaron Estrada, who is working on a plan to rent out software for short periods of time.

“My company is called Metapipe.io,” Estrada said. “It does virtualized high end work stations in the cloud.”

Estrada says he came to the workshop looking for some extra help with his pitch.

“A lot of this stuff I’ve seen online, but I have not done a workshop on it directly,” Estrada said.

Soon, he said, he will be looking for funding.

“My company is relatively new, we’re not funded yet…but when I start going shopping for funding, we will probably do that by word of mouth,” Estrada said. “I have a pretty good network via my partners.”

Cornelius says New Mexico is a great technology business state, but is ready to boom further if entrepreneurs can master the essentials such as who their investors are and why anybody should care about their product.

Saurabh Ahluwalia, an assistant professor of finance at the UNM Anderson School of Management, said workshops like Cornelius’ are promising new events.

“These investor dating games or workshops are a fun thing to do,” Ahluwalia said. “You go and talk about your idea for a few minutes and can get good feedback about your idea and hopefully catch attention of a serious investor.”

While these workshops and “dating games” may not yield money at every event, they are teaching essential skills to entrepreneurs. These skills can be developed even further through local accelerators and incubators. And often that’s where early investing begins.

Accelerators

Albuquerque has seen an increase in accelerator and incubator programs available to entrepreneurs, including ABQ ID and CNM’s IGNITE Community Accelerator.

“They [incubators] solicit companies for their program,” Ahluwalia said. “The selected startups are given rigorous training on how to develop their ideas and pitches etc. The startups ‘graduate’ in about three months, which means they give a presentation to serious investors and hope to secure funding for their company.”

The STEMulus Center at Central New Mexico Community College began its third round of its 12-week IGNITE Community Accelerator program Sept. 18.

Much like the investor dating game, but 12 weeks long and much more in depth, the program contains instruction from business professors who teach people how to define a problem to be solved for their target consumers. They also teach how to create revenue.

Tom Darling, a professor in CNM’s business administration program for the past nine years, has been an instructor in the accelerator since its beginning in 2014.

“We are committed to taking somebody who has an idea or small company and helping them figure out how to find the target customer, tell a story and how to make revenue,” Darling said. “Our tagline is ‘move your business forward faster.’”

These entrepreneurs or startup teams receive 30 hours of coaching, sometimes putting in up to three to five hours a week. The coaches are usually entrepreneurs in the community who specialize in the same business as the company they are coaching.

“Just like raising kids, we do everything we can to show them the way, give them the tools and connections they need,” Darling said. “But then the company themselves have to get it done.”

Ahluwalia said getting accepted into these programs can be very helpful for a business.

“Definitely if you can get into one of these successful incubators, you are getting ahead of the field,” he said. “At the same time, less than two percent of companies that apply actually get accepted into elite incubators.”

Crowdfunding

Another way startups are finding initial money is through the increasingly popular “crowdfunding.”
Crowdfunding is the process of raising money via the Internet through many different donors using websites such as Kickstarter, Indiegogo and Crowdfunder.

These websites allow the company to set up a public campaign for accepting donations from essentially anyone that likes the idea and wants to help. The campaign is usually limited to a maximum number of days, such as 90, and requires a fee.

The campaign spells out the company’s potential product or project and sets a fundraising goal. The company will usually provide rewards to those who donate to their ideas.

“It’s an excellent idea,” Ahluwalia said. “I look at crowdfunding as the democratization of innovation. Now we have this alternative source where people instead of venture capitalists are deciding what things they want to see in the future.”

There are some downsides, too, according to Ahluwalia.

“Crowdfunding tends to be limited. The average amount of funds raised successfully through crowdfunding is less than $10,000. The other negative is that you do not have somebody experienced guiding you.”

One local company, SunPort, which created a small cube that plugs into an electrical outlet to provide solar power, had a successful experience using Kickstarter.

The SunPort had a funding period of 30 days between July and August this year. Its goal was to raise $75,000. Instead they reached their goal a week early with a total of 1,676 backers and $120,599 raised.

The pledges ranged from $2 to $1,499, with most backers coming at $49 or more. The most expensive pledge of $1,499 included lunch for two with the SunPort team, a tour of their facilities in Albuquerque, and an overnight stay at a hotel in Santa Fe.

The company provided a lot of information on its Kickstarter page for prospective donors including information on solar energy, how their product works, other companies supporting the product, and videos/pictures of how to use the solar plug-in device.

Crowdsourcing is becoming increasingly popular around the country and here in New Mexico.

As of November in the Albuquerque area, 210 projects on Kickstarter have been successfully funded and 570 are currently in progress of seeking funding.

ACCION New Mexico

Another recourse for startups seeking initial access to capital is to take out a loan. While banks might be an option for loans, there are other lending alternatives, too. Thousands have turned to ACCION New Mexico because of its low barriers and favorable terms.

Funded in Albuquerque in 1994, ACCION is a nonprofit organization that gives startups — especially minority and women-owned businesses — access to business credit. The group also provides training to aspiring entrepreneurs.

The company offers loans of up to $1 million for entrepreneurs seeking to start or expand a small business. In New Mexico, they have distributed more than 5,759 loans totaling more than $43.8 million to an estimated 3,514 small businesses.

Lynzie Rowland, a development and communications associate at ACCION, said the company truly cares about its customers.

“We deeply value our relationships with our clients, and are invested in their success,” Rowland said. “The revenue accrued by each dollar lent is reinvested into helping another entrepreneur in the future.”

Rowland said each application is assigned to a loan officer for personalized service. Depending on the amount requested, the officer may be able to approve immediately or will request information for further review.

Rowland said ACCION has five main factors it considers when reviewing loan applications.

“Character, capacity, capital, collateral, and conditions. The loan size requested will influence how much collateral, credit, and cash flow we require to be approved.”

In 2014 alone, 87 percent of the small business loans issued by ACCION went to low-income, minority or women entrepreneurs.

“We make loans to anyone who qualifies, but strive to reach these groups specifically,” Rowland said. “These groups have historically lacked access to capital, and a truly level economic playing field requires that all participants in the economy have avenues for financing.”

In addition to learning about credit, cash flow and collateral during the loan process, ACCION offers workshops, networking opportunities and other training programs to its clients.

Ahluwalia said that it can be difficult for startups to find financing, especially loans. He recommends looking into banks that participate in the U.S. SBA (Small Business Administration) program. Most big banks, such as Wells Fargo, will have these types of loans.

“If you go to an SBA approved bank, one of the reasons the bank would be willing to give you a SBA approved loan is because 80 to 90 percent of that loan is guaranteed by SBA. Hence, in case of a default the bank can recover most of its capital,” Ahluwalia said.

Beyond Initial Funding

When entrepreneurs first start out with an idea, it can be difficult to find funding — and any kind of funding is the right kind of funding. But as companies find their footing, more advanced options become available.

“As a startup starts becoming successful and is primed to enter a rapid growth stage,” Ahluwalia said, “professional investors such as venture capitalists step in and help the startups navigate the rapid growth stage.”

In hugely successful cases, Ahluwalia said, the last big step is going public, selling shares via an initial public offering.

Entrepreneur coach Cornelius said New Mexico is a promising place for startups and some may be the next big thing.

“I think the entrepreneurs in New Mexico — as a whole — are coming up with some of the most exciting ideas I’ve ever seen,” Cornelius said. “I think that there is just a tremendous amount going on (in New Mexico), people just don’t know about it.”