COMPANY: Net.Capitol Inc. is a Washington, DC, developer of Internet-based products for public affairs and political organizations. The company is now a subsidiary of Netivation.com Inc., a medical and political solution provider in Post Falls, Idaho.
BLUNDER: not raising enough money to finance his business
Greed isn't always a bad thing. It comes in handy when you're asking for a loan-Oron Strauss, 27, certainly couldn't finance his business out of his own wallet. "I had nothing," says Strauss, who started his business in his modest apartment living room, alongside his yellow lab, Bonzo.
Something of a politics and history junkie at Dartmouth College in Hanover, New Hampshire, Strauss combined both of his loves by creating Net.Capitol Inc. He found three partners around his age, one with a tech background and two with political connections; he raised some cash from angel investors and "from, as they say, the three Fs: friends, family and fools." But he should have found more fools-or asked for more money. Back in 1996, Strauss initially raised around $60,000 when he actually should have tried for half a mil'.
Eighteen months later, "we were in a tough situation," says Strauss. "We were having a hard time raising money-which is a kind way of saying 'We were out of money.'"
It was hurting Strauss both personally and professionally. Personally, he was killing his credit rating with six figures-worth of credit card debt; professionally, his company was dying a slow death. "All the managers took significant pay cuts," reports Strauss, and often he and his staff received no money. At one time or another, "our cell phones, Internet service, phone system and copier were turned off-or threatened to be turned off-because we didn't pay the bills on time." And investors, it seemed, were happy to heap on their best wishes but not their money.
Meanwhile, Strauss and his team were trying other little projects: "We had put together, kind of for fun, the first online Congressional directory [called CapWeb Custom]," he says. (This is what they do for fun?) The AFL-CIO loved the tool, paid $1,000 for it, and suddenly Strauss and his partners realized their strength was in Web-based tools, not Web-based content. In fact, late last year, they allowed themselves to be acquired by Netivation.com-a move that helped turn Net.Capitol into a million-dollar company. Strauss, president and CEO of Netivation's Public Policy and Politics Division, is now the second largest shareholder. And Bonzo has his own doghouse, in Strauss's posh office. Strauss's advice for avoiding his mistake?
- "Recognize that raising money is hard. It takes twice as much time to raise half as much as you think it will."
- "Figure out what you need the money for, because if you think you need X, chances are, you need 3X or 4X."
- "Get [advice from] people who have been through [raising money] before-whether they're advisors or investors or board members or whomever. I had some incredible board members, and I didn't use them enough. I didn't engage them into understanding what I was raising the money for."
Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.