Getting startup funding is risky business

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By Jacob Dubé

Ryerson students from all programs are starting their businesses in hopes of making it big. But after they’ve sketched out their ideas and found their target market, there’s one last thing to figure out: where does the money come from?

That initial sum of money, called seed capital, is key to launching a fledgling business, because everything is an expense. Startups need money to develop a prototype of their good or service, hardware businesses need to pay for raw materials and production, while software businesses need to hire programmers and designers. And everybody needs a website, which brings in a whole lot of extra costs on its own.

Sean Wise, associate professor of entrepreneurship at Ryerson, says that it’s much easier to get a business started today than it was decades ago.

“In 1997, we had no internet infrastructure. There was no Amazon, PayPal, eBay or Facebook. If you needed something for your website you [had] to build it yourself. Now there is so much infrastructure on the internet and so many people working on startups that the cost has gone down massively,” Wise said in an email

But students, who are already knee-deep in tuition costs, have no choice but to find ways to make ends meet in their aspiring businesses.

Aron Tolentino, a third-year Ryerson student in the business management program, double majoring in entrepreneurship and marketing, took the risk into his own hands.

A few months ago, Tolentino created Litewire, a portable smart-phone charger with both micro USB and Apple Lightning ports.

To fund his business, Tolentino took out a $10,000 loan by himself, which he says was a big risk.

“At first, it was kind of hard to tell [my parents] I was actually

going to do this,” Tolentino said. “First of all, because it’s risky, and money-wise, time-wise, it’s going to interfere with my studies.”

Tolentino used the money to hire freelancers to join his team. A designer created the prototype of the charger and a marketing free- lancer creates content for the web- site and the upcoming Kickstarter campaign, launching Nov. 1. He is looking to crowdfund $10,000 to cover his costs.

“I’m the type of person that values experience more than in-class time and lectures because, to be honest with you, for the past six, seven months I’ve been working on this, I’ve learned more compared to whatever I’ve learned in class,” Tolentino said.

Despite the high costs and risks, Tolentino says it’ll all be worth it.

“Let’s say it doesn’t even pan out, I still learned a lot of things … from working, to making the design 3D model myself,” he said. “Getting through that process of actually starting up a business will benefit me in the long run.”

Funding everything yourself isn’t the only option when it comes to finding your seed capital. Two years ago, fourth-year Ryerson finance student Akshay Gulrajani got funding for Supa Shirts — his pop-culture clothing company that features designs from local artists — through friends and relatives.

“I didn’t want to give up equity in my business, so I asked them to give me a loan, which I would repay back within a year at an interest rate that we had decided. An interest rate that was better than a mortgage rate, stuff like that,” Gulrajani said. “By doing that, and going that way, they believed I could repay the money back, and at the same time, they weren’t as vested in the success of my business.”

Although there were times when Gulrajani wasn’t sure he would be able to pay back the loans within a year, he says that his background as a finance student helped ease the pressure of repayment.

He was able to create his own financial statements, and on a monthly basis he provided an income statement to everyone who had given him a loan. They could see where his business was standing, what was going on and what his profits were.

“I feel that really helped ease them, financially speaking. They were comfortable with that information that I don’t feel it ever really proved to be a strain for myself,” Gulrajani said. He said the most important part of getting a loan is to never miss a deadline.

Gulrajani is also VP of business development at Enactus Ryerson. Enactus teaches student startups how to pitch to incubators, and directs them to other business opportunities. It’s one of many organizations at Ryerson dedicated to helping and funding student businesses.

“I think it’s fantastic being a Ryerson student, absolutely fantastic if you have any entrepreneurial interest or mindset. I kid you not, there is no better school in the country than being at Ryerson,” said Sami Dalati, Ryerson alumni and co-founder of Brizi, a sports-related multimedia fan engagement startup. “I mean, Ryerson has many things it has to improve on, but for entrepreneurs, there’s true resources, tangible resources, that one can leverage.”

Dalati met Brizi’s co-founder, Anna Hu, and founded the company at a business accelerator program called The Next 36.

Dalati says he built the first prototype of Brizi’s camera system in his tiny bedroom under lamp-light. Thanks to his background in electrical engineering, he did most of the soldering himself on his bedroom floor.

“That’s why I lost a lot of hair since then,” Dalati said.

Brizi is currently based at the DMZ, and Dalati says they leverage as many opportunities at Ryerson that they can, including taking advantage of resources such as the Launch Zone and the Norman Esch foundation.

But before a business can get funding from one of these organizations, it has to be able to pitch. Pitching to an organization for funding requires a startup to sell its idea to a panel of professionals, and that’s where the real challenge lies.

Gulrajani recommends that startups be running for about six months and already have a working prototype before pitching. In preparation for the pitch, he says business owners need to be knowledgeable about their product and be passionate as well.

“You have to know every angle where a potential question might come up from,” Gulrajani said. “You also need to be really passionate. That’s something that can’t really be taught, but we like to support ideas where the creator behind it is passionate about what they’re doing and involved hands-on in almost every aspect of their business.”

According to Dalati, no matter how you get there, the most important part of starting your own business is to have the strength to keep going.

“In a startup you’re going to fall a lot of times, you fall on a daily basis, so you need to have the grit and the perseverance to keep pushing.”

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