Entrepreneurs like entrepreneurs

First-time entrepreneurs want to ask questions of successful entrepreneurs. Successful entrepreneurs like investing in young entrepreneurs. Entrepreneurs of all kinds thrive on each other's passion.

Gaps have formed in the traditional funding path for early stage companies. Many venture capitalists are moving towards bigger funds that invest larger amounts of money in lower risk companies that have already proven their model. Angel investors are banding together into syndicates that look more and more like venture capitalists. We think we can help to fill some of those gaps and then introduce companies to angel investor groups or venture capitalists at the right time.

We do this because we want to. All of the mentors are successful entrepreneurs who have many options about how to spend their time. We mentor startup companies because we enjoy it. Having an equity stake in our companies makes it more fun but our primary motivation is meeting young entrepreneurs, not squeezing as much money out of each deal as we can.

How much funding does each company receive?

Each company receives up to $20,000 in cash. We provide you with all of the basic infrastructure that you're not spending that money on office space or legal fees. That's meant to be enough to cover your living expenses, hire an employee or contractor, and do some test marketing.

In addition to cash, each company in our portfolio gets access to our network of mentors, service providers, and more than $20,000 in free stuff.

What kind of companies do you accept into the program?

Most importantly, we want to get involved with companies that we can have the biggest impact on. After all, its not really about the $20,000 its about the 20 mentors who are going to spend time with the companies and help them to focus on the right priorities and with key introductions to customers, partners, employees and investors. If someone submitted a great company idea, but none of us had any real value add beyond the money, we'd probably pass on the deal and select another company that we thought we could really benefit from our advice and relationships.

We like lean companies that can get to profitability quickly and can scale rapidly. Most of us have technology backgrounds and while it is not a requirement, it is very likely that the companies we select will have technology components to them. We're happy to start with just an idea on a napkin, but we'll also work with companies that have some customers or angel investors and are now ready to scale their business.

How do you compare to other startup programs?

We learn as much as we can from other startup programs and everyone we have talked to has been extremely helpful and supportive of each other. Paul Graham set a great example by putting his documents and terms out for everyone to see and use if they want to and we plan on doing the same.

We don't think of the different startup programs as better or worse than each other. Some have been doing it for a few years and others are brand new. If you are an entrepreneur starting a new company and want this kind of support, you probably should apply to a bunch of programs, see which ones you get accepted into, and select the one that has the mentors who you think can help your business the most.

What about the economy? Is now a good time to start a company?

Now is probably the best time in the past decade to be doing a startup and to be investing in startups. Most people look at the current economic condition and see the losses they have from last year. If you are starting from scratch then you haven't lost anything, and there is nowhere to go but up. During times like these labor and supplier costs are lower, there is less competition, and all budgets are being re-examined. People are open to new ways of doing things that will help them to reduce costs or find customers.

With the growth of cloud computing and open source software, the capital requirements of starting new technology companies is dropping rapidly and heading towards free. Traditional barriers to entry are being abolished and companies are being started on credit cards and then bootstrapped to profitability.

What does it cost me?

Capital Factory receives a 5% equity stake in your company under founder-friendly terms. You will be able to download a copy of our standard legal documents soon.

Why Austin?

Austin is a great place to start a company, a great place to have fun, a great place to raise a family, and is extremely well positioned for the tough economic times facing our nation.