Building a company from scratch is hard. Which parts are hard? All of them!
Most importantly, you need to find customers and fund the business to keep the lights on. This is all while you simultaneously figure out your value proposition, develop proper pricing, engage in benefit-based messaging, and on and on and on. All of these things keep founders up at night (or they ought to be!).
My preferred method for funding startups (early on) is customer revenue—get those early customers/partners as soon as possible when you have a minimally viable product (MVP) to offer the marketplace. This validates the model, proves value and attracts investment … cha ching! Getting early customers can be easier in a service business than a product biz because of all the upfront work needed to get a product ready for distribution and sale.
So … what funding mechanisms are there when we don’t have the money to build the MVP? My old software company raised $3 million to build our product, which led to major revenue, which led to a $56 million sale in less than three years. We were both lucky and good.
Today, however, unless you are developing proprietary AI, machine-learning engines or novel bio-pharma, it is really hard to get outside funding. When your new company is really risky—meaning that you don’t have a product built out and/or a customer to buy it yet—you should rely on the old fallback, the three f’s: friends, family and fools. They are the most forgiving to an unproven business, and the most likely to lend/invest in your startup without severe consequences (beyond, perhaps, an awkward Thanksgiving dinner).
In Nevada, we have a few angel investor groups, some programs through the Governor’s Office of Economic Development (like the Knowledge Fund, the Battle Born Venture fund, etc.), and conventional Small Business Administration bank loans. All of these can have strict guidelines, rules and requirements, including a need for collateral.
Various organizations help startups by mentoring and accelerating growth. These organizations can be for-profit or nonprofit, but most will want a small equity piece of your company once it starts gaining traction. Some charge to be part of their network, and others have money to actually invest. Convertible notes and SAFEs (simple agreements for future equity) are often the mechanisms in today’s investment climate to protect the investors and the founders. Do your research, and understand the fine print.
In Reno, we have a great recent addition to the startup ecosystem—a business accelerator called gener8tor. Gener8tor expanded to Reno in 2022 and is part of a national network that has shown that great companies can come from anywhere in America, including Reno—but we knew already knew that!
There has long been a stigma that to be innovative, your startup had to be located in the Silicon Valley, New York, Austin, Chicago, etc. But the folks at the gener8tor understand what many of us in mid-major cities have long known: Innovators are everywhere; we just need to find and nurture them.
Gener8tor had a huge success with, of all things, a kitty litter company! Yes, there is still innovation in kitty litter. PrettyLitter was bought by Mars Inc. and has Martha Stewart as its spokesperson.
Gener8tor has opened offices in many of the major and mid-major cities in the U.S., most which have colleges and universities in their ecosystem. It represents the triple helix model: government, universities and business all together for a successful startup ecosystem, one which incubates talent and nurtures business models while providing resources for success.
According to Jessica Halsey, gener8tor’s Reno accelerator managing director, they are relatively “industry agnostic,” which means they are more receptive to innovative consumer products and non-tech than the Silicon Valley bros, who don’t traditionally invest in or accelerate consumer-product companies or service-based businesses. But Gener8tor had a huge success with, of all things, a kitty litter company! Yes, there is still innovation in kitty litter. PrettyLitter was bought by Mars Inc. and has Martha Stewart as its spokesperson. Apparently, they are doing many things right.
Gener8tor’s model helps regional companies nationalize and accelerate growth, sales and market expansion; because they have offices in many cities, they have a built-in scaling mechanism throughout the U.S. and beyond. They have several specialized accelerator programs—by sector, by region and market by market.
Disclaimer: I am a volunteer for gener8tor and am mentoring a battery logistics startup out of Atlanta. I can help them gain some traction on the West Coast; those of us in Nevada about know rare-earth materials, battery technologies, EVs, drones, etc. On the flip side, a startup here in RN&R-land can get plugged in to the Midwest market or southeastern market relatively easily with gener8tors’ reach, reputation and network.
I asked Halsey to tell me about some of the local startups that excite her. She discussed UNR Prof. Melinda Yerka, a plant-breeding and plant-genetics expert and researcher, who has new technology that prevents cross-pollination of organic with non-organic seeds in farmers’ fields. This is a really big deal in agriculture, because companies like Monsanto have patented seeds. Winds carry seeds across fields, so farmers may not know these patented seeds are on their property—but if a farmer gets caught with a GMO seed without a license, that creates big legal issues.
Halsey and her network of mentors are helping Yerka with the language of business and finance while honing the message about her revolutionary technologies. Scientists and researchers know about their respective fields, of course—but the business side can be foreign to them. The same can be said for many creative people who have come up with the next great thing, but don’t know how to wrap a business model, message or pricing around their innovation.
I’m glad we have gener8tor here, pitching in to help Nevada’s entrepreneurs garner success—and you should be too.
Learn more about gener8tor at www.gener8tor.com/investment-accelerators/reno-tahoe.