There are some things in life that are “worth it” and some things that are not. We believe that the ideas we are promoting and working to make possible are “worth it.” They are worth enough that we have essentially thrown all of our time and finances to it for the last, ehem, unmentionably long time frame. We feel grateful for the generous support of friends and family in our efforts, both in occasional and appreciated financial contributions, and even more in the cheer squad effect and the brave willingness to watch our brood of kids from time to time while we have tended to business matters. Without the amazingly prolific support of our closest loved ones, we could never have reached this point. But here we are, on the verge of releasing our first product and offering an open-source research platform for doing amazing research and sharing it with the world. Life is amazing!
For those that are not aware, I am still a college student. Or I suppose a more accurate statement would be that I am again a college student. Chris has been a student for the majority of the last decade and is still waiting to get that final stamp of approval for a long awaited masters degree. Meanwhile we have five fantastic kids (pardon the blatant bias). While conquering enough worlds to make many people squeamish, we decided to build on a passion and a desire to make a difference by creating Pentandra Research Solutions—a business that openly works to build a solid research environment for truly collaborative, in-depth research.
Now, lest you think us to be completely insane (which I am not completely sure would be inaccurate—at least on some days), allow me to say that we have started our own businesses previously during similarly complicated periods of our life. However, there is a difference this time that is both exhilarating and exceptionally intimidating. Funding. What a difference that one word makes. Previously we started simple businesses that only had to support our very bare-bones financial requirements for a specific period of time. All of those businesses required very minimal cash investments to get them up and running and next to zero capital to run them after that. Not so this time.
I could ramble about all of the various financial requirements of this business, from web hosting costs to legal expenses, but I don’t want to bore you that badly. The biggest difference this time is that we feel compelled by the timing of this venture. Now, right now, is the time to bring this into reality. In order to do that we need to have more people involved.
So not only do we need to be able to survive as a family, but we also need to support those other people as well. That is a huge ol’ difference and it goes beyond our bank account’s ability to handle right now. We are so grateful to have been able to bankroll things along this far, but we recognize that the time has come to reach out. We need enough funding to get Geungle finished and up into the cloud, not just running from our local servers.
We don’t want this to be a hit-and-run business. We want to make sure that we will be around to maintain support, continue to improve, and protect our customers’ data. We don’t want to get into this just far enough to have people starting to experience fully open and rich research and then need to devote our time to some other job to pay the bills. Plus, we can’t ask others to give up their day job to help us start to move things full speed ahead if we do not have the finances to see it through.
While I am sure some of you are either shocked or even disturbed at my candor, I would rather have your eyes open to our reality, than protect my own ego or some sense of corporate detachment when it comes to finances. We really are open, just like our Open Business page says. We think that the best people to help us figure out how to cover the needs of this business are the ones that will most benefit from our success. Researchers that want better ways to manage and share their research are our best allies.
We contemplated the “Who do we know that could hook us up with some cash for getting this thing off the ground?” question many times. Unfortunately, we don’t run in circles that have tons of investing power and the circles we are closest to are already helping in all kinds of ways and can’t give much else. I am not writing this article to beg for money from any particular reader, but to use all possible readers as a springboard for our financing ideas. I would love to hear back from any of you that have tread the startup financing waters before, or that can see a flaw in my logic, or that happens to know somebody, who knows somebody, that is way into research and happens to have tons of money that they just don’t know what to do with. ;)
We believe in keeping as many doors open as we can. When we see what fits right we will move forward through whichever door(s) feels best.
Here are some of the financing doors we see as possibly open to us right now, along with the good, bad, and ugly of each. We may try any or all of these, or we may decide that none of them fits quite right. Or perhaps we’ll even have some long lost relative come volunteer to simply finance the whole thing (though, I sort of doubt the likelihood of the long lost relative idea). Whatever the end choice(s), I don’t want to rule any of them out, at least not yet, so I will share them all and see where it goes from here.
- Bank Loan
Good: We maintain control and will not have some investor telling us what to do. This is important since an investor may or may not be friendly with our open source or open business mentality.
Bad: We have to pay it all back, starting right away, with interest and fees tacked on. Also, banks like companies that already have a good track record—that’s tough since we are brand new.
Ugly: That whole decade long education thing and personally financing this business for so long has left us with little collateral for a bank to look at as the “fall back on” motivation to loan to us.
- Alternate Style Loans
Good: Same control thing as a traditional loan, but with a greater likelihood to be approved.
Bad: Again, we have to pay it back from the very beginning when cash will be tightest, but with potentially higher interest weighing things down.
Ugly: Extra red tape sometimes gets involved.
- Business Competitions
Good: Essentially “free money” that could be used with no major strings attached and no drain on the company in the future to pay it back.
Bad: They take time away from our other work to submit to, prepare for, and participate in. They offer nothing close to a guarantee that we will win anything. Really it feels a bit like gambling—something I am not fond of when it come to a business that matters this much to me.
Ugly: Honestly, research may be hugely important to me and to an involved researcher, but business competitions are usually run and judged by business people, not researchers. In other words, I fear we might not have great outcomes in those kind of events, just based on the “cool factor.”
- Angel Investor(s)
Good: They are relatively comfortable with the risk involved in a collateral-poor startup and willing to wait to see rewards on their investment. Also, they can sometimes offer great moral support as well as connections to other folks that have already traveled this road (it’s great to have amazing mentors—we already have many, but more would certainly not be a bad thing).
Bad: It can be tough to find them or get their attention and there are legal costs involved that are discouraging at this point.
Ugly: Since looking into funding options, I have heard more than one horror story of a highly overbearing or difficult to work with angel—not super excited with that possibility.
- Venture Capital
Good: They have amazing networks of resources that could be extremely helpful. Plus, they are also familiar with the risks involved with our lack of prior financial history and they are generally willing to wait for the rewards on their investment to come in.
Bad: They often want to invest huge amounts of money, requiring uber-fast growth—something that just doesn’t seem to fit right now. Also, they are more controlling of what we do and have much greater say in how things are handled. We are open and willing to pay attention to all suggestions, but not so excited to be directed by people that are essentially only in it for the money and not aware of or concerned with the needs of the research community.
Ugly: They often require a sell-out at some future point in order to facilitate their highly lucrative “exit” from the business. Plus, if things are not managed the way they want (again, our dedication to the open source and open business movements as well as our diehard commitment to quality over quantity research could be a problem for some), they could potentially kick us right out of our own company. Those horror stories prompt much of my anxiety over the entire funding paradigm.
Good: Crowdfunding, through things like Kickstarter, can provide amazing amounts of funding and support for a project. I love that the support usually comes from the community that wants the project to succeed anyway! It does not have to be paid back with cash, but with specified “rewards,” successful completion of the funded project, and doing amazing things with it for the community (a self-imposed requirement). Plus, I want to believe that if people from the community “invest” in us, they will naturally feel a part of our company and get involved in other ways too.
Bad: I would not want to offer “rewards” that are hokey and of little-to-no value to the “investors.” At the same time, we can’t offer rewards too astounding or the rewards themselves pull back too much of the raised funds—this would make it impossible to accomplish what we need to.
Ugly: There are people that think crowdfunding is a hokey thing and I don’t want to ever give the impression that we are doing any of this just for the sake of getting our hands on some quick cash. I sometimes wonder if asking for financial support from the community will actually turn people away from us (it’s my old elementary school fundraising insecurities coming back to haunt me I am sure).
Like I said, there are certainly other possibilities and I am not closing the door on other options either. For now, though, that felt great to get all of this down and out there. Thanks for letting me (not that I gave anyone much choice) use this blog as a mental financial sounding board. Somehow that all seems so much neater and more simple now that it’s down in text. We feel pretty sure of a few of these doors—one way or the other—but for the most part, we are going to simply test a lot of doors and see which ones seem to fit. I’m happy to keep you up to date as we step through or slam shut any of these possibilities. :)