Houston Voices

Startup funding: Know the bucks behind the business

A startup without funding is just a great idea. Miguel Tovar/University of Houston

A Cadillac with an empty gas tank is just a really nice, really expensive decoration for your driveway.

Change my mind.

A startup company without funding, is just a really great idea. A dream. Just like a car without gas will never get out on the road, a startup without funding will never get its product out on the market.

"There are opportunities for startup funding out there, your job is to find them and take advantage," says Daniel Weisfeld, CEO and founder of Resthetics, a blossoming startup that takes waste anesthetics and converts them into safe, renewable resources.

Mohamed Hashim, Resthetics co-founder and chemist, chimes in, "You have to do your homework. It's a slow process and hard work, but it'll be rewarding once the money comes in."

Putting the fun in startup funding

According to Weisfeld and Hashim, Resthetics joined the Texas A&M New Venture Competition and won admittance to the Texas Medical Center Accelerator, in addition to funding. In fact, their company is backed by the Texas Medical Center to date.

Business plan competitions give hopeful entrepreneurs the chance to vie for funding of their technology's development. They also give young entrepreneurs real-world experience and a chance to refine their business plans. Business plan competitions offer entrepreneurs a better understanding of what it's like to get a new venture off the ground and helps them learn to commercialize their technology.

You can browse a few business plan competitions here, including a Houston-based one.

Angel networks

While on the surface, an angel network may seem like a religious TV station, it's actually something a little more beneficial to your search for funding. Angel networks are composed of angel investors, i.e., people who invest their own funds into the beginning stages of a startup, with the hope of seeing a big return on their investment later on. Angel investors who invest in startups that end up failing will lose their money. It's a big risk.

They are called "angel" investors because these individuals give their own money to support startups, unlike venture capitalists who use funds pooled together from a group of investors.

Weisfeld suggests that, "Even if you don't think that your company fits someone's investment criteria, you should still reach out to them. Always ask. An investor might like you or your tech enough that they'll make an exception, or they may even recommend you to someone they know who is willing to invest."

Fun fact: In the early part of the 20th century, wealthy business owners gave their own money to support stage plays, so the term "angel investor" was born from Broadway.

You can find local angel investors in Houston here.

Non-dilutive funding sources

Often times, a startup will garner funding but will have to give up partial ownership of their company in return. This is not the case with non-dilutive funding sources. One example of non-dilutive funding is a bank loan. Sure, you'll have to pay a monthly interest rate, but you'll also get to keep absolute ownership of your startup.

Another example of a non-dilutive funding source is revenue sharing. Revenue sharing places more emphasis on a company's growth rather than its equity (your assets vs. your debts). This is important because it is congruent with the interests of entities who provide non-dilutive funding. Funding entities are more concerned with how sustainable your startup is projected to be rather than how much it is worth. This makes non-dilutive funding one of the best avenues through which to receive monetary sponsorship

Accelerators

Startup accelerators support startups as they are, well, starting up. Focused on the early stages of companies, accelerators offer startup funding, mentorship, connections in the industry, and education. Resthetics, a finalist for the 2018 MassChallenge accelerator in Austin, was able to expand its young company thanks in part to the connections made at the MassChallenge accelerator. Weisfeld and Hashim gained access to global mentor networks through the MassChallenge accelerator. Mentors helped them with manufacturing, quality management systems, and guided them as they developed Resthetics.

One of the primary differences between accelerators and business plan competitions is that accelerators offer intensive training and rigorous mentoring to push entrepreneurs to learn the ins and outs of running a business in the span of a few months. It's a hands-on crash course in business, and not for the weak at heart.

Brave souls can find Texas accelerators here.

Bang for your buck

So you've finally received the funding you need for your startup. Now what?

As a kid, my old man never let a teachable moment pass him by. After I spent ten bucks on a single Pog, my dad's new mission in life was to teach me the value of a dollar.

This lesson becomes all the more important after you finally receive funding for your startup. Weisfeld stresses the importance of budgeting after funding is acquired.

"What's the furthest you can go with the smallest amount of money?" asks Weisfeld.

Weisfeld opines that while you must be comfortable spending money, you also have to be confident with your budgeting strategy so that you spend each dollar as efficiently as possible as you take your product to market. After all, what funder is going to want to invest in someone who is wasteful with money?

Whether it's negotiating with vendors, outsourcing, cutting costs, or using independent contractors, it is incontrovertible that financial efficiency should be your next goal after you've finally acquired your startup funding. As Weisfeld proclaims, "Every dollar you spend should in turn create the same amount of value to the company."

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This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

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Building Houston

 
 

A Houston-area family has made it their business to help Houstonians reduce waste in a convenient, sustainable way. Photo courtesy of Happy Earth Compost

Jesse Stowers has always strived to do his part for the environment. From recycling and making eco-conscious choices, the Stowers were doing everything right, but was it enough?

The family of five was throwing away two trash bags of waste a day that would later end up in landfills until Stowers stumbled on composting as a solution. In May, he launched Happy Earth Compost, a company set on making Houston more sustainable.

If you're unfamiliar with composting, get ready for a crash course. Composting is a sustainable method of decomposing organic solid wastes and turning that waste into compost, a substance that helps plants grow. Food scraps and household items like rice, pasta, meat, poultry, fish, vegetables, fruits, coffee grounds, spoiled food, and tea bags are just a few of the many things that can be composted rather than thrown away.

"Your food waste and compostable waste is anywhere from 25 to 50 percent depending on the family," explains Stowers. According to Happy Earth Compost, one human creates an estimated 1,642 pounds of trash each year.

When looking at striking statistics, it's clear composting has a direct impact on the future of our environment. In Houston, 81 percent of waste ends up in landfills that pile high, and the city exceeds the national waste average by 25 percent. While the smell of landfills may make you wince, the repercussions of exhausting those landfills are even more displeasing.

Not only are the plots of land permanently lost from agricultural and home development, but the landfills also emit methane gas, a greenhouse gas that's 28 times more potent than carbon dioxide, according to The Independent.

What started as the Stowers family's resolution to be eco-friendly became a full-blown business plan. After Stowers attempted to compost at home for his own family, he soon partnered with New Earth Compost in Fulshear, Texas, as a drop-off location for the waste and did a test drive of the service with his neighbors back in March. Happy Earth Compost now serves 350 homes in the Greater Houston-area and has plans to expand to College Station.

Happy Earth Compost has created a service, with pricing ranging from $15 to $35, that provides Houstonians with the bins to compost and picks up the waste from your door. The buckets can be picked up weekly, bi-weekly or monthly while the company does all of the labor and dirty work to help you compost. A new $5 drop-off option is also available for Houstonians who are willing to drive to one of the applicable farmers' markets.

Subscribers can also get free compost to use in their gardens, what gardeners often call "black gold" because of its value and benefits, says Stowers.

Members receive equipment and instructions upon registration. Photo courtesy of Happy Earth

The family-owned business' typical week involves picking up buckets from 300 houses, dropping off compost, cleaning those buckets, and starting the process all over again.

"It's not the most glamorous thing, but it's getting people set up to do it. We're trying to make things easy for everybody by doing the hard work on our end," he says.

Ease is a key feature that helps the service stand out to Houstonians. Composting in Houston no longer requires the personal labor of investing in a compost bin, balancing the mixture of materials, measuring the temperature of your compost, and ordering worms to help accelerate the process (you read that right).

At various farmers' markets around Houston, Stowers is quick to point out the convenience of the program he's created. "It's hard to convince people to compost. It's easier to convince them to try something that's beneficial and simple," he explained.

Jenna Arbogast, a Happy Earth Compost customer, had dabbled in composting on her own but never committed to maintaining it at home. "When I found out about Happy Earth Compost, I so excited that someone was taking the initiative to extend this city-wide. Being that we are such a large city, we have such a great opportunity to heal our environment," says Arbogast. "I really love contributing to something as a collective. Even though I could compost at home, I really wanted to support this initiative," she says.

To Arbogast, who has been using the service for three months, convenience and transparency have made Happy Earth Compost a joy to work with. "You get all the benefits of composting without the maintenance, and you're supporting a good cause," she says.

Since its May launch, the Happy Earth Compost Instagram has grown by over 1,900 fans. The Stowers family has been amazed by the response and hopes to expand to more households in Houston.

"I think there's definitely a movement to be more sustainable to actually consider what we're doing and take care of our stuff, including the earth," says Stowers. He envisions a future where composting is taught to future generations as a fundamental need for the environment.

"It may not cost us now, but it will cost us eventually. What can we do now to make a difference now?" asks Stowers.


Jesse Stowers started his family business in May. Photo via happyearthcompost.com

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