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BLP Funding Symposium A Big Hit!

January 25, 2013

 Blackstone LaunchPad gives WSU entrepreneurs access to funding experts

 Representatives of nearly a dozen Detroit-area lending organizations came to Wayne State’s campus recently to advise student entrepreneurs on funding strategies to get their start-ups up and running.

 The Dec. 4 funding symposium, which was held in the David Adamany Undergraduate Library, was organized by Blackstone LaunchPad, the Wayne State business incubator funded by New York City-based Blackstone Charitable Foundation. Aubrey Agee, senior program administrator for Blackstone LaunchPad, said the event was intended to help students “break through that wall between lender and entrepreneur” and avoid the “false start” that occurs when products or services are developed and marketed without sufficient funding to place them in consumers’ hands.

 A key theme to emerge from the symposium was that successful fundraising requires knowledge of lenders’ unique markets. The city’s various funding organizations were founded to address disparate business needs and because of these missions have varying eligibility requirements for funding recipients. Consequently, experts cautioned, savvy startups will determine which organizations can help them before networking or designing pitches. Entrepreneurs should also research the funding sources that are most appropriate for their business development objectives. Experts noted that crowdsource funding platforms, for example, work well for products and services that donors can experience directly but aren’t effective for auxiliary or support tasks such as advertising and marketing.

 

 The evening’s panel of lenders included staffers with a range of organizations catering to small and large, new and established business enterprises. On hand were:

 ·         Amy Kaherl of Detroit Soup, a self-described “democratic experiment in micro-funding” through which donors attend a monthly dinner and vote on projects to fund after hearing pitches. Typical grants range from $800 to $1,200, and the target market consists of Detroiters seeking positive change for the city.

·         Elizabeth Garlow of Kiva Detroit, through which the non-profit group Kiva works with community organizations and lenders to provide microloans to local small businesses. Kiva Detroit provides loans of up to $10,000 to people without access to traditional banking systems. “Character-based loans” recipients must be nominated from within the community, and receive help crafting a personal and business narrative to make their case for funding.

·         Erin Grant of Detroit Development Fund, which provides loans and technical assistance to small business owners, developers, building owners, contractors, and subcontractors who are unable to acquire the levels of capital they need from traditional financing sources. Recipients must be in business for at least one year and generate a minimum of $100,000 in sales. Loans range from $50,000 to $250,000.

·         Ronald Dickerson of Fifth Third Bank, one of the largest money managers in the Midwest with more “stringent” criteria for lending than local, more flexible organizations. As Dickerson noted, banking regulations preclude Fifth Third Bank from lending to certain industries, however it does given money to alternative lenders through its Foundation Office. Dickerson said startups should begin cultivating relationships with conventional lenders early in anticipation of the day they are prepared for bank funding.

·         Chris Blauvelt of Patronicity, a localized crowdfunding platform that helps local businesses raise small amounts of capital through online donors, who in return receive goods, services, or other rewards. Patronicity clients need only “a story and a network,” said Blauvelt, adding that an organization has more than a 50% chance of meeting its goals when using Patronicity or a similar service.

·         Kory Scheiber of Detroit Micro Enterprise Fund, which provides micro-loans to start-up and established small businesses that lack access to traditional financial sources. Dm-ef, as it is known, serves clients in Detroit, Hamtramck, Highland Park, Ecorse, River Rouge, Pontiac, and Lincoln Park, and provides up to $10,000 for start-ups and up to $35,000 for firms that have operated for at least two years. Its programs include the Dm-ef Core Loan Fund, the Wayne County Urban Loan Fund, the Detroit Food Movers Fund, the Green Enterprise Fund, and the Women’s Empowerment Fund.

·         Vanessa Rucker of the Center for Empowerment and Economic Development (MI CEED), which supports women and minorities through business development training, supplier certification, business-to-business networking, and capital assistance. Rucker said MI CEED provides five-year loans in amounts ranging from $5,000 to $50,000 to Detroit entrepreneurs with a business plan.

·         Han Peng of the First Step Fund, a partnership of the Invest Detroit Foundation, TechTown, Ann Arbor SPARK and Automation Alley that supports a revolving loan pool financing emerging and newly-formed small businesses in southeast Michigan. Recipients must complete a training program through a qualified regional business incubator.

·         Jim Xiao of Detroit Venture Partners, which describes itself as a venture capital firm “on a crazed mission.” The firm backs seed and early-stage technology companies seeking to rebuild Detroit.

 

Pitch it quick

 To get fundraising tips from the panel, entrepreneurs were invited to make a two-minute pitch describing their product or service, its target market, and how financing would be used. The evening’s pitches concerned a marketer for local retail events, a hybrid community space-and-coffee house, an apartment building, a magazine, a manufacturer of bio-based materials, an e-commerce venture, and an alternative light bulb.

 Panelists steered entrepreneurs toward (and away) from funding sources based on a variety of factors, including available collateral; competitors; expected time between receipt of funding and profit generation; ability to repay quickly; business plan robustness; prospective market size; job creation; patent status; and appeal to  the “green” movement. Panelists also asked entrepreneurs to evaluate the health of their relationships with lenders, city officials, and community leaders, noting strong ties can ease approval for capitol developments and boost the rate of product or service adoption.

 Much of the evening’s discussion focused on crowdsource funding and its appeal as a win-win platform through which entrepreneurs and donors both benefit. Panelists cautioned that crowdsource funding, while an excellent choice for some startups, is time- and labor-intensive and often misunderstood.

 “Crowd funding is awesome, but it’s a lot of work,” Kaherl said, noting that it requires constant monitoring of the online community and social media. Garlow noted that crowdsource funding platforms with an “all or nothing” orientation provide no funding at all for entrepreneurs who fall short of their stated goals, and Blauvelt warned that entrepreneurs frequently fail to offer a sufficient range of incentives to entice a diverse network. These platforms can generate tremendous word-of-mouth for young ventures, he stressed, but a cost-benefit assessment is a must.

 “If you don’t need the publicity,” Blauvelt said, “it’s probably not worth it.”