November 19, 2007

Is your business a lifestyle business?

I had an early Monday morning meeting today with a member of the FundingUniverse advisory board that stirred up a few thoughts regarding the the type of entrepreneurs that we are attracting as customers.  As I have mentioned several times, FundingUniverse was initially founded with the goal to connect entrepreneurs to angel investors.  While we haven’t lost site of that goal, we have expanded our services to help entrepreneurs connect to other funding sources (including credit cards, lenders, banks, VCs, venture debt, and more).

One of the main reasons that we have done this is because we want to help more entrepreneurs get the funding that they need to grow their business and become successful.  There is a lot of research out there about the entrepreneur/angel market that suggest that only a very small percentage of entrepreneurs are successful raising angel money.  Here are some stats that I have picked up that I find very interesting:

  • There are nearly 5.6 million new startups each year in the U.S.
  • At any given time, nearly 1/3 of those businesses will be trying to raise money (~1,856,000)
  • Here’s the key stat:  it’s believed that  only 50,000 receive angel money (approx. 2.7%)

If those statistics are accurate (or even close to accurate), that means that only 3 out of every 100 entrepreneurs will successfully raise angel money.  Can you believe that?  So… now you can see why we have expanded our network of investors to include lenders, banks, VCs, etc!  ;)

Now… getting back to the title of this entry.  If your business is a lifestyle business (won’t scale to be a very large business — think $30-$100M in revenue annually — with the opportunity for an exit), then you automatically take yourself out of the running to be 1 of the 3 that gets angel funding.

Is that a bad thing?  Not necessarily… it can be a fantastic lifestyle (and you do have other options).  I’m just trying to accurately set expectations.  If you are a lifestyle business, we have options for you too.  They include:

  1. Bootstrapping
  2. Friends & Family
  3. Credit Cards
  4. Line of Credit
  5. Equipment Leasing
  6. Hard Money Loan
  7. Commercial Loan
  8. SBA Loan
  9. Venture Debt

Be honest with yourself and be smart about who you approach for financing.  Good luck!