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Little Money Matters
Camelia Nunez, founder of Milao Language talks about the impact of small investments.
Venture capital funding in the first quarter of 2014 reached its highest mark since 2001, hitting $23.87 billion. And yet, raising that initial round of funding continues to be a challenge for any start up, with most VCs preferring to make bigger investments in the second or later investment stage, where there is less perceived risk.
To build credibility and secure that vital capital required to bring product to market and land those first critical customers, start ups often are required to turn to friends, family and/or seek out government grants to secure those important small rounds of investment that allow the founders to advance the business.
“I’m not really interested at this point in the $2 million investment,” she admits. “As I see it, there are really two ways to go as a startup. You can go after that big round of investment right out of the gate, or you focus on customer acquisition, with the plan to build a business for the long term. In our case, I don’t feel comfortable looking for that big investment round without first achieving customer traction. We are looking to build a product people can use, and a product that teachers will rely upon to improve learning outcomes. If we aren’t landing customers, then we haven’t built the right product. It’s not that I don’t want investment – eventually – but the first validation I want is from customers.”
A professor at University of Waterloo in addition to her startup founder responsibilities, Camelia sought her first critical round of funding through academic channels, landing a grant to fund the initial research idea through the Social Sciences and Humanities Research Council (SSHRC), which supports post-secondary based research, research training and knowledge mobilization activities in social sciences and humanities. Camelia then secured a $20,000 Conrad Family Grant to help pay for her business training at the University of Waterloo’s Conrad Business, Entrepreneurship and Technology Centre where she transformed the original research idea into her Milao Language startup company.
Milao raised its first $25,000 round of funding through the Jumpstart mentorship and business accelerator program, an initiative administered through the Waterloo Accelerator Centre and supported by the Federal Economic Development Agency for Southern Ontario through its Scientists and Engineers in Business Program. The Jumpstart funding provided pivotal investment allowing Milao to build a minimal viable product (MVP), which is now in use at three universities (University of Waterloo, University of Ottawa and University of Texas) in a controlled rollout.
“In this initial stage of our business, the Jumpstart funding was crucial, allowing us to start building our product. It gave us the funds to hire the developers we needed to build that MVP, and it also gave us the credibility to begin pursuing follow on funding from organizations such as Ontario Centres of Excellence (OCE).”
“It may not seem like a lot, but when Jumpstart took a leap of faith and invested $25,000 in us, it allowed us to move to the next level as a company. We were then able to show to OCE that we have the ability to use that funding to progress our business forward, which is a huge confidence builder. Each of these funding rounds adds up. In total we have been able to secure more than $200,000 in funding through the grant process. That’s what has gotten our business to where we are at today. We have a product that works and it is in the hands of customers. Once we have proven that there is market demand for our product and that we can convert the users we have into sales, we’ll move on to those larger rounds of investment. At that point we’ll feel like we are bringing something really solid to the table.”
Camelia also notes that the accountability that comes with the grant application process keeps any startup on course and on track with their business plan. “It’s a lot of work to apply for grants and to seek out funding sources, but you can’t grow your business if you don’t have the money. It’s part of my job as a founder. Every report I write accounting back for our grant funding helps keep me on track and hold me accountable for all the milestones we set for ourselves when we applied. You are forced to think through the milestones, write them down and explain the progression of your business to someone else. It provides us with an opportunity to reflect on how far we have come, and think about where next we need to go.”