October 21, 2014 in ATDC News, Flashpoint, Startup Circles

In Startup Funding Search, Not All Investors Are Created Equal

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By Péralte C. Paul

It’s a safe bet that a guy with a penchant for wrestling alligators knows a thing or two about risk.

The experience also provides a good foundation for developing the skills needed to handle the dangers and pitfalls of a different arena: startup entrepreneur.

Kurt B. Uhlir, the chief executive of Sideqik and ’gator wrestler, said he likes taking risks, but calculated, educated ones.

The same holds true for leaders of startups and their early-stage funders, he said.

“Investors and founders should both steer clear of unbounded risk,” Uhlir said. “I believe we can teach people how to be better founders, just as someone taught me how to pull an alligator out of a pond. The goal is controlled risk and knowing what your experiment will prove.”

It’s a driving principle in Sideqik, the startup he co-founded with Jeremy Haile. Sideqik helps companies engaged in cross-promotions with other firms minimize risk in those efforts. It does that by helping those firms key in on their highest-value partnerships and create marketing campaigns best designed for each partner.

In addition to running Sideqik, Uhlir is a mentor at Flashpoint, a business accelerator program at Georgia Tech’s Enterprise Innovation Institute (EI2). Flashpoint is focused on helping early-stage startups grow quickly while mitigating risk.

“Working with Flashpoint has been incredible. Their approach really is unique and is changing how people build new companies,” he said. “As a mentor, I try to guide companies on their pursuit for authentic demand. Although, some days that means just taking a founder to coffee and encouraging him to keep up the hard work.”

Startups have a host of inherent risks, adequate funding being among them. But access to investors with money isn’t the only money concern startups should have, Uhlir said. Finding the right investors for your startup is just as critical.

In this edition of Tech Square Talk, we asked Uhlir to share his insights on that important component of the startup world and when to walk away from investors.

Q.: People say a good idea doesn’t always mean it can become a good business. Can the same be said for investors? Just because an angel or later round potential partner has lots of money to invest, does it mean a startup should take it?

A.: Just because someone will invest in your company does not mean you should let them. Every dollar (or $100K) is worth the same amount. However, there are costs and benefits that come along with every investor. A good investor is like a good running partner. When there’s a good fit, both sides feel comfortable and glad to be helping the other one reach his or her goals. It’s essential that you get along well with the investors and trust them.

Q.: What red flags must startups look out for that should lead to a “no thanks” to a potential investment partner?

A.: For me, a few common red flags are angel investors that go quiet on you or are known to disappear from discussions with other startups, have not made at least two investments in the last 12 months, and do not know what they need to be able to make a decision or feel comfortable moving forward.

Q.: Is it difficult to say “no” to money?

A.: Of course it’s hard to turn down money. Money is the fuel that keeps a startup running until it’s able to achieve product market fit and build a sustainable and growing business. However, as an entrepreneur, you have to be aware that there are risks in taking money from investors who aren’t a good fit for your business. We’ve been lucky/blessed/honored to be able to work with some really great investors who are a great fit for us personally and provide a lot of value to the business.

Q.: What’s been your experience early on when launching fledgling companies or leading them in saying “no?”

A.: It can be hard both when making the decision and helping someone else make that decision. For me, it comes down to really believing in what you are building and knowing that there are a lot of investors out there. You have to talk to a lot of potential investors to ensure you are finding ones where it’s a good fit for both parties.

Q.: How much negotiating leverage do founding entrepreneurs have with potential investors and does it matter what stage the startup is at in its lifecycle?

A.: It depends both on what stage the company is in and the background of the founders. Founders that know the industry and have repeatable successes under their belt may get a little more negotiating room. However, in the end, it comes down to what the company has learned about the problems it’s solving and how customers are reacting to the company’s offerings.

Q.: Obviously, there are different types of investors, from angels to later round funds. But there also are different investment packages and funding vehicles. What’s the basic strategy for picking the right package?

A.: It really depends on what your investors are comfortable with and the overall terms. Both notes and priced rounds can have very similar end results. It’s up to the founders to understand the terms and have good counsel to help guide them. Ultimately, it’s up to the founders to be experts on the terms and to make sure that investors’ interests align with the founders’ interests.

Q.: What got you into alligator wrestling?

A.: I moonlighted with a stunt company for a number of years. While picking a friend up from training after a small, outpatient procedure, I learned about one of the few places where you could learn to handle alligators without working there for many months, so I booked a flight that weekend. After all, we all have hobbies.

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