By: Jonathan Mills Patrick
Senior Vice President/Chief Lending Officer
UT Federal Credit Union
In the movie “Arthur”, with Dudley Moore, the main character is asked what it’s like to own a yacht. “It doesn’t suck” he quips in response. This is true of access to capital for startups.
92% of startups fail(1)
In a recent article in Fortune Magazine startup founders were asked the chief reason their startup failed. Now, you might think the #1 reason was access to capital. In fact, it was not (we will get to #1). However, access to capital was listed as the second most common reason for failure.(2)
The top reason for failure according to the poll was failure to find a market. Most likely it wasn’t that no market existed. Rather it was the difficulty in finding the right market to enter. Taking us indirectly right back to access to capital. It is easy to run out of cash when it takes 2-3x longer for startups to validate their markets(1) than traditional businesses.
Idea stage funding?
As a startup founder myself I can tell you the difficulties entrepreneurs face in finding access to capital. I was fortunate enough to be able to self-fund GoGrabLunch (my former business-to-business networking site). In fact, I deliberately choose not to take on outside investors. Which was one of my many mistakes (I’ve written a tell-all eBook about the lessons from that experience). We had some successes too, like accomplishing members in 45 countries.
My biggest take away was the desire to help create a “Capital Continuum” in Knoxville. And so in March of 2014 my company launched the Line12 fund. Regardless of their stage, our goal has been to help entrepreneurs launch and grow the business of their dreams. To support them when no other investor or lender would. To date we have provided over $200,000 in capital to various companies in the Knoxville community through this particular program. That includes folks like Charlene Oosterling of Stoopid Good Foods.
“If I didn’t have a resource like Line12(3), I’d probably be still spinning my wheels…” Charlene Oosterling, founder of Stoopid Good Foods
I imagine if you asked Charlene she’d tell you, that while not as fun as owning a yacht, access to capital doesn’t suck.
(1) From “The Startup Genome Report Extra on Premature Scaling”
(2) Fortune Magazine article, “Why startups fail, according to their founders”
(3) Line12 is the business micro fund from UT Federal Credit Union that has won national awards. Learn more at line12fund.com