Monthly Archives: May 2011
Documentation for Raising Startup Capital
One way to save a small fortune on legal fees related to funding is by using existing legal templates to draw up a draft. Once both the investor and you have both agreed to the draft, you have your respective lawyers look them over. Everybody wants to save on legal fees. Continue reading
As you probably know, Linkedin just went public and its founder Reid Hoffman became a billionaire as a result. Few realize that Reid started the huge networking site from his living room. Continue reading
How to Buy a Business
Buying a business is an advanced form of entrepreneurship. It’s not something you can just fall into. You have to prepare for it first by becoming a student of the subject. This includes learning how to find the right business to buy, how to negotiate with the owner, and how to put the financing together. Continue reading
How to Meet Angel Investors for Starup Capital
Angel investors finance far more companies than venture capitalists and the good news is that there’s probably an angel investor group near you. To meet them about providing you with startup capital, you will need to contact the local network chapter or club. Sorry, but you can’t get their home number and email because they don’t want to be swamped by entrepreneurs. These days angel investing is a business for which they prefer to have a screening process administered by paid staff or volunteer MBA students. They have plenty of deals to choose from. Continue reading
Revenue Royalty Certificate Financing
A fairly old, tried and true financing method for both startups and small businesses needing growth capital is generically referred to as revenue-based financing. It’s also sometimes referred to as revenue participation or revenue sharing funding. The actual document used is typically called a Revenue Royalty Certificate (RRC) or Revenue Participation Agreement or some combination of the two.
I first learned about revenue based financing from one of the greats among angel investors, Arthur Lipper, who had a particular fondness for the instrument. This was back in 1985. Since then I have used it myself and seen others use it as well to both launch startups and provide growth capital to existing small businesses. Continue reading
There’s going to be a blog on the topic of “how to buy a business” as well. It’s coming shortly. My plan is to cover the basics on the topic. In the meantime, you can find out more about the how to buy a business course I offer by clicking the link.
How to Quickly Raise Seed Capital
Entrepreneurship is like a 25-level computer game. If all that you can think of when it comes to startup financing is “write a business plan and shop it around to strangers,” you’re stuck at the bottom level. There are 24 more levels above you.
Savvy entrepreneurs know how to create startup funding using various tactics. One of the classics entails using what is called “mobilization capital” obtained from the startup’s own customers. In a nutshell, you get your prospective customers or clients to supply you with the capital required for you to then deliver your product or service.
Here’s a story of a how an educational startup funded its launch using this tactic: Continue reading
Google Goes to War With Facebook
The Internet’s gotten rather boring over the past couple of years. For me it’s always been a place to conduct business and research not a place to engage in pointless socializing as the current Social Media phase seems to demand. I have just never been into schmoozing for the sake of schmoozing. So it’s rather nice to see the two 800 lb. gorillas of the Net start to go at it. This should make the Net fun again.
Frankly, I don’t like either one of these giants. It’s not good for small business when Google is so dominant in search. The latest algo modification shifted billions in revenue from one group of sites to another. Imagine if you had been playing by the Google rules for years building up your traffic only to see it collapse over night as a result. That’s what happens when one search engine is so dominant. It makes me long for the 1990s when you had eight or ten search engines to choose from whenever you wanted to do a search. Back then you would use two or three for all important searches to satisfy yourself that you had found what you were looking for. Continue reading
How many companies chasing outside capital actually raise any?
To me this is one of the most fascinating questions you can ask about startup financing. The figure I have been hearing regularly over the past 25 years is that venture capitalists invest in about one in ever 500 companies that approach them for funding. It should be added that venture capitalists rarely invest in startups. They prefer later stage companies which have proven themselves in the market place.
The success rate for startups chasing angel investors is even more difficult to dig up. My best estimate is that with credible ventures the odds could be as good as one in 200 to as low as one in 400. I admit that I’m pulling numbers out of the air here but this estimate is also based on 25 years of experience with startups. Continue reading