Comments on: Raise cash from trusted, close resources first.

By: Tim S

Tim S — Thu, 18 Feb 2010 02:52:40 +0000

Dave or Anyone..,

I have given thought towards the sweat equity process as a means for obtaining the funds needed in order to file the NPPA. I expect to share the royalties once the NPPA has been approved and the method is licensed, or sold.

My problem is finding the right source to obtain the funding needed. Obviously I am not talking to the right type of VC. For instance, all angel groups are asking for a business plan, projections, etc. I am not a business. My idea is not a widget. It is what’s labeled as a process/method. I am being told by very smart people, “Whoever purchases the right to your idea will immediately take you (the inventor) out of the equation.” That is understandable.
So, I am searching for direction in finding the right audience to ask for the funds.

By: Dave Berkus

Dave Berkus — Wed, 17 Feb 2010 19:03:31 +0000

Tim,
There are more ways to approach fundraising. Luis VillaLobos was most successful in forming an investment group around a royalty stream, understanding that there was no probability of selling the royalty-generating entity. You might consider the same – sharing royalties in return for investment.
-Dave

By: Tim S

Tim S — Wed, 17 Feb 2010 17:19:31 +0000

Your insight has been helpful in so far as I am going through a learning curve on raising capital. My dilemma is I have a system/ method with a PPA. My next step is to raise funds for the non provisional patent application. I do not own a business, nor do I wish to. Who should I approach for this kind of assistance? Needless to say, the entity from which I receive the funding will receive a percentage of the royalties from the sale or license to the patent. Yes, the due diligence has been performed. Friends, family, and bank loans are not an option for me to raise the capital.

By: Erik

Erik — Sun, 07 Feb 2010 21:18:02 +0000

Dave, this was very helpful for me because I had what I think is a similar experience. I worked for stock over a three year period where an engineer/inventor had a great product. I took it from patenting, to strategic supplier alliances, to an establish relationship with a major aerospace prime customer, to single handedly getting 1M in the defense budget in a four month time frame to have that product integrated into that customer’s product at their request, and brought in three investor groups that gave term sheets structured exactly like what our attys (Brobeck) said they would look like for our exit strategy if it ever came to pass. Now that I had funding and a govt contract in the pipeline, this guy did a 180 and rejected the deals leaving many angry people behind. I immediately left feeling I wasted three years of my prime. Today, he is still in a garage.

Reading your insight and similar experience helped me better understand my own experience and come to a place of release.

By: Dave Berkus

Dave Berkus — Wed, 03 Feb 2010 23:06:38 +0000

Carlos,
I do not sit on for-profit boards unless I have stock, and recommend that all potential private company board candidates plan to participate only if they have an equity stake. On the other hand, minority investor board members should expect non-qualified stock options vesting over a two-to-four period for their board services, time and risks involved. In future posts, I will lay out typical percentages granted in options to board members and advisory board members…
-Dave

By: Carlos T

Carlos T — Wed, 03 Feb 2010 22:49:59 +0000

Dave,
It’s pretty remarkable that on your first angel investment you received 5x in 5 years. Nice.

You mentioned you wanted the entrepreneur “to pay board members for service in cash or in stock options….”. Dave, of all the companies you’ve been involved with, how many boards have you agreed to sit on, where you did not inject a “major” amount of capital, or any at all? Instead you asked to be compensated with cash or stock?

-Not including not-for-profits of course.

-Carlos

By: Dave Berkus

Dave Berkus — Wed, 03 Feb 2010 21:43:59 +0000

Nathaniel,
There were no signs from the entrepreneur up to the time of the final negotiation for the company sale. In fact, two directors (including myself) and the entrepreneur actively negotiated with the buyer at the buyer’s facility located in a distant city.
-Dave

By: Nathaniel Broughton

Nathaniel Broughton — Wed, 03 Feb 2010 20:27:03 +0000

Dave, did you notice any signs from the entrepreneur that he was beginning to see it more as a lifestyle business as time went on? Or was it an abrupt “Nevermind.”?

I’m interested to learn if there are some common signs to watch for, and how to react as an investor.

By: Michael P Ridley

Michael P Ridley — Wed, 03 Feb 2010 17:24:47 +0000

all of us at some point in time when we either wake up in the morning or before going to bed at night, are faced with a mirror and our images. Friends come and go but they are the record of one’s activities, more vivid and telling than Homer coming in around the fire to tell the story of honor and bravery before the walls of Troy. Blood may not be in all cases thicker than water, but that is your genetic code and if you are not straight with them, the mirror becomes very large and very revealing indeed. Taking money from F&F is a two edged sword. On one hand who better would know you and your integrity but the dark side of the blade is that the person they think they know in order to put money in, has to be that person. Tough standard.