Some things never change

Some things never change. Like VCs and business angels for instance. Back in the day (January 1, 2000 to be precise) when we launched Venturedome.com our backers were private individuals and the now defunct Springboard.

Remember, this was the dotcom boom – the internet was the future. Investors wanted to know what our burn rate was! Curious question but the implicit argument in the question was that you had to have a really huge burn rate like Boo.com.

At the time I was always uncomfortable with this view of funding businesses and when the phrase was used by some well-meaning VC or BA the image that always came to me was of a burning parachute.

So I was somewhat surprised at a recent meeting with a VC and the management team of my latest venture (you all know what I am talking about) when the VC asked what our burn rate was. And these are sophisticated, smart people.

The truth is we had no burn rate – the CEO works for free (but needs an income and to get out there), the developers developed the site for free (but would like some comeback financially, naturally), and my services were based on passion, commitment and practical help (but hell – I need to feed the family).

Our financial adviser worked for free but sees the possibilities, so he has been willing to dedicate a lot of his time talking to VCs, BAs and other potential investors.

We’ve bootstrapped the whole enterprise. It worked like this:

1. No business plan – we just got on and created the site in December 2006. This is before I had ever met CEO Kevin Dixie. He lives in France and I live in UK. We communicate via email, Skype, Twitter and now Facebook.
2. Introduced CEO to developers at eleventeenth.com – they created phase 2 site in February 2007
3. Introduced CEO to finance guy – via email in February 2007.
4. Logo developed by friends. No cost.
5. We meet in real world at a meeting at GREEN Communications in Wakefield. March 2007
6. I write business plan. Why? The business model is so blinding obvious!
7. We now have a fully functional site with bloggers across the world using it. Cost to date? Our time commitment and hosting.
8. Number of VCs pitched too – zero. March 2007.
9. Decide we need a tiny amount of investment to bling up the site and start generating income. April 2007.
10. I re-write business plan again. May 2007.
11. Send business plan to three friendly VCs. First question: What’s social media. Second question: Is it like Facebook? Third question: What’s your burn rate? May/June 2007.
12. One VC still seriously interested and there are plenty more out there we are talking to – and they will all ask about burn rate.

So what have I learned?

Well with some really talented people around you and passionate people like Kevin you can:

• Bootstrap a business with no financial support
• Realise that PR does work – even bad publicity generates profile
• Can’t convince VCs about social media and Web2.0 – they don’t get it but are worried about it
• Run a business from three different places. You don’t all have to be based in the same office or country to make a company work
• Understand that life is hard for an entrepreneur – plus ca change – but it’s lots of fun

Any views?