in late July 13, I took an idea to a Launch 48, a pitching competition & 'hackathon', with the idea to testing it, & perhaps forming a team around it, either for that idea, or maybe another. Not only did we win that competition, and put together a large team to build the opportunity, I also learned a whole lot in the process.
What we created was a working prototype proof of concept and a business model for a very large startup, called TerraLingo (I'll come to the size of it in a minute), which is a social media language translator, with interesting big data analysis and corporate partnership opportunities.The challenge is that to build something within the opportunity space that we saw,that could scale at a worldwide level, would take easily between $20-30 million of venture capital over 3-5 years. Like many startups in that space, it had a high failure capacity.
The problem was that because most of our team was 30+, and would be initially part-time, no startup accelerator in Australia would've approved our application, which is seen as almost mandatory to obtaining tech VC seed capital. And the normal model means giving up a fair chunk of equity to a VC (often here at very unfavourable terms), in order to get the cash you need to grow the business to a big enough level. To do a startup well, means having cash, and spending that cash wisely, whilst we validate our model, whilst gaining traction and creating revenue.To grow it means a location to operate from, cash to pay for staff, research, services, consultants, advisors, software, business infrastructure etc
Also inherent in the problem for most of us older guys doing a startup, is that we have 'golden handcuffs', - obligations. We have wives (or husbands), kids, mortgages, school fees, lifestyles, etc. Which meant that life for us in a startup requires us to have a new (better) plan, none of which would work for a VC-funded venture (or at least, not for any of the one's I've met).
To make matters even worse, the local VC's that I directly pitched to didn't get it, so seed funding was going to be really hard, which meant we really needed a better plan. As my great mentor, Neville Christie, recently told me -"It's not a lack of resources that you suffer from; it's a lack of resourcefulness".
So the plan expanded to bootstrap through direct customer investment, and create a range of services to allow us to stretch our resulting cash further. We developed a model which should give us access to all the people, resources, mentors, corporate clients & money that we'll need to build out TerraLingo, without VC money at onerous terms (eg 2 x Participating, preferred stock, anti-dilution, ratchet clauses, board seats, controlling interests, and....... the list goes on). My apologies for the jargon.
To get really creative, we looked to our own ingenuity. For example, instead of us paying $7k per person at a co-working space (do the math on 3-12 people), we could operate from effectively our own venue that a separate group/team has setup for us, leaving the cash from that saved expense free for more important costs like marketing & a bigger team; instead of outsource our core requirements, we 'insource' them.
To generate cash, you should also get creative, and by spending our time seeking customer, rather than VC money (often called 'bootstrapping'), we not only would validate our startup but raise the value of the business before obtaining external financing. I'll demonstrate the value of this method in one line:-
Angelist recently raised a Series A round of $24m, on a $150m Valuation - a series A! in doing so, demonstrate how other startups could use them & replicate their model = more value in their clients and their model.
I'll lay out the whole plan shortly, but what we've been creating (on the side) has become a fully vertically integrated accelerator & co-working space model, for which TerraLingo would be an anchor client.
And with the early equity that we don't have to give up to an accelerator or VC, we can reserve a larger slice for the team, and offer some up to group of direct investors, advisors, consultants and mentors to accelerate our growth. Just like Ycombinator & 500 startups do. In effect we create our own VC model - and then allow other startups to piggyback onto our model, expanding it to support "from ideation to exit".
I promised you an outline of how big an opportunity TerraLingo is; to give you a sense of scale, it was announced yesterday that Topsy was acquired by Apple for $200 million, and DataShift is worth even more. Perhaps we were too late to the table, though its a shame that some of our 'clever' VC's didn't get it.
However, we think we might have 'accidentally' created something far more valuable.
What we created was a working prototype proof of concept and a business model for a very large startup, called TerraLingo (I'll come to the size of it in a minute), which is a social media language translator, with interesting big data analysis and corporate partnership opportunities.The challenge is that to build something within the opportunity space that we saw,that could scale at a worldwide level, would take easily between $20-30 million of venture capital over 3-5 years. Like many startups in that space, it had a high failure capacity.
The problem was that because most of our team was 30+, and would be initially part-time, no startup accelerator in Australia would've approved our application, which is seen as almost mandatory to obtaining tech VC seed capital. And the normal model means giving up a fair chunk of equity to a VC (often here at very unfavourable terms), in order to get the cash you need to grow the business to a big enough level. To do a startup well, means having cash, and spending that cash wisely, whilst we validate our model, whilst gaining traction and creating revenue.To grow it means a location to operate from, cash to pay for staff, research, services, consultants, advisors, software, business infrastructure etc
Also inherent in the problem for most of us older guys doing a startup, is that we have 'golden handcuffs', - obligations. We have wives (or husbands), kids, mortgages, school fees, lifestyles, etc. Which meant that life for us in a startup requires us to have a new (better) plan, none of which would work for a VC-funded venture (or at least, not for any of the one's I've met).
To make matters even worse, the local VC's that I directly pitched to didn't get it, so seed funding was going to be really hard, which meant we really needed a better plan. As my great mentor, Neville Christie, recently told me -"It's not a lack of resources that you suffer from; it's a lack of resourcefulness".
So the plan expanded to bootstrap through direct customer investment, and create a range of services to allow us to stretch our resulting cash further. We developed a model which should give us access to all the people, resources, mentors, corporate clients & money that we'll need to build out TerraLingo, without VC money at onerous terms (eg 2 x Participating, preferred stock, anti-dilution, ratchet clauses, board seats, controlling interests, and....... the list goes on). My apologies for the jargon.
To get really creative, we looked to our own ingenuity. For example, instead of us paying $7k per person at a co-working space (do the math on 3-12 people), we could operate from effectively our own venue that a separate group/team has setup for us, leaving the cash from that saved expense free for more important costs like marketing & a bigger team; instead of outsource our core requirements, we 'insource' them.
To generate cash, you should also get creative, and by spending our time seeking customer, rather than VC money (often called 'bootstrapping'), we not only would validate our startup but raise the value of the business before obtaining external financing. I'll demonstrate the value of this method in one line:-
Angelist recently raised a Series A round of $24m, on a $150m Valuation - a series A! in doing so, demonstrate how other startups could use them & replicate their model = more value in their clients and their model.
I'll lay out the whole plan shortly, but what we've been creating (on the side) has become a fully vertically integrated accelerator & co-working space model, for which TerraLingo would be an anchor client.
And with the early equity that we don't have to give up to an accelerator or VC, we can reserve a larger slice for the team, and offer some up to group of direct investors, advisors, consultants and mentors to accelerate our growth. Just like Ycombinator & 500 startups do. In effect we create our own VC model - and then allow other startups to piggyback onto our model, expanding it to support "from ideation to exit".
I promised you an outline of how big an opportunity TerraLingo is; to give you a sense of scale, it was announced yesterday that Topsy was acquired by Apple for $200 million, and DataShift is worth even more. Perhaps we were too late to the table, though its a shame that some of our 'clever' VC's didn't get it.
However, we think we might have 'accidentally' created something far more valuable.
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