Friday, February 29, 2008
Connecticut Business Financing & Assistance Fair
If you need capital or other resources to start or grow your business, we want to talk. We’ll tell you about available grants, loans, venture capital and angel investors. Or if you need assistance finding space, engineering expertise, permits, help with a business plan, information on patents or legal structures for your business, experts will be on hand with answers. Our aim is to help you help us create jobs.
Click here to view the flyer for the event.
3:30 - 3:45
How to write a business plan to start a new venturePresenters: Shipman & GoodwinORHow to write a business plan to grow an existing companyPresenters: TBD
4:00 - 4:45
Funding Sources: Which ones are right for your stage of developmentPresenters: Brown RudnickORWhat you need to know to obtain a bank loan Presenters: Webster Bank; CVG
6:00 - 7:30
Reception and Exhibits
Tuesday, March 18, 2008
Gengras Student Union at University of Hartford, Hartford, CT
4:30 pm to 7:30 pm
Thursday, February 28, 2008
A.J. Kubani gets his ideas from his own needs -- like the need for a portable, battery-powered light bulb that you can just stick on the wall. He also reads classified ads and searches in stores for unusual gadgets that he can license and promote. But the product still has to meet a need. It's funny how that is such an essential element for success.
He also says that it pays to advertise on boring TV shows and networks. That way, his ad stands out and grabs attention. Interesting point to ponder....
Wednesday, February 27, 2008
I was particularly interested because I'm doing volunteer work to help people in my town and church age in place. Aging in Place is a national movement. Most older folks simply want to stay in their homes, not move to assisted living or a nursing home. Aging in Place organizations help them do that.
The thing that struck me most about my students is that they each perceived a need in the marketplace and commenced to fill it. They took their own money and time and just did it.
Please contact me with questions or comments.
Tuesday, February 26, 2008
No matter how you feel about the controversy, the lesson is important. Commercialization is key. Look at Google. The Google guys didn't invent paid search. They just capitalized on it better than the originator. Overture, now owned by Yahoo! originated paid search. Google had to pay Yahoo! a license fee, after being sued by Overture for patent infringement. (They settled the suit out of court.)
If you're an inventor or are working with an inventor, get yourself allied with good marketing people. Figure out how you'll take your great technology and commercialize it. And don't waste precious time. Bell beat Gray to the patent office by minutes.
Friday, February 22, 2008
Psychology is very important for investors, said the panel. In other words, investors are looking for liquidity events. Last year, there were more IPOs (initial public offerings) and a lot of M&A activity, which have made VCs more likely to make new investments. At the same time, it's difficult to take a company public. A company needs about $100 million in revenue to have an IPO, and it can take about seven years for a business to get to that point. Legal and compliance costs are rising. Compliance with Sarbanes Oxley can cost $1 to 3 million annually. This legislation has had a real dampening effect on business formation because even private companies need to be concerned about compliance.
On the down side, the article also points out that average returns to VCs are about equal to that of the S&P, which is also helping to keep money on the sidelines. In addition, start-ups don't want to part with control just to raise money. They are asking for just enough to become cash flow positive, rather than the millions they asked for prior to 2001.
What are your thoughts about Venture Capital?
Thursday, February 21, 2008
Ms. Spors doesn't say that you don't need a plan. Rather, she says that you shouldn't spend too much time writing a huge plan. As Ms. Spors's small business column points out, entrepreneurs need to put their time into getting going. They need to create prototypes and figure out if they can manufacture a product or deliver the service at a profit. If they spend too much time planning, they can lose their window of opportunity.
At the same time, she says that you need to do some planning, as the planning process makes you think through your business model. She also allows that the time you do need a written plan is when you're going to be pitching to investors. Still, you really need to spend most of the time crystalizing your idea, getting your management team in place and figuring out your costs and burn rate so that you know how much money to ask for. If you've gone through the planning process, you then have a roadmap -- Ms. Spors calls it a compass -- which can help you dodge roadblocks, while you head toward your goal. That's why when I work with clients, I usually write an executive summary which covers all the key topics investors ask about, plus financial projections with documentation of key assumptions. I have never crafted a 100 page plan, and have not written a 25-page plan since 2002. Yet, I have clients who have launched successful businesses and raised millions of dollars. The ones who accomplished these things used their brief plans as guides as they focused on executing.
To read all of the WSJ article, "The 100-Page Start-Up Plan -- Don't Bother", see my sidebar under shared items. If you want to explore your own business plan, please visit my website: www.upstartbusinessplanning.com or email me at: firstname.lastname@example.org.
Wednesday, February 20, 2008
The elevator pitch lasts about 90 seconds. That's all you've got to get the essentials of your business across to a room of potential investors. In some cases, you have a little more time -- three to five minutes. When time is up, you have to stop because more entrepreneurs are waiting to pitch right after you. The key to success in this situation is to be sure you hit the points that answer the questions that investors have. You have to pique investors' interest quickly.
Having judged entries for venture fairs and graded pitches at venture boot camp, I can say that the biggest mistake entrepreneurs make is not answering the key questions. The Connecticut Venture Group has a form to fill out for its Crossroads Venture Fair. (You can see the forms at www.cvg.org) You would not believe how many people don’t answer the questions on the form. For example, in response to “What is the market?” several hopefuls wrote about the product. To win over VCs, answer the questions correctly, clearly and succinctly. It seems like this should be pretty basic, but it obviously isn't for many people.
The other problem is that inventors and other highly technical people tend to be in love with their technology. That's all they want to talk about. But they lose their audience. Investors want to know about your value proposition, the market potential, your management team and your business model. If you want to read more about the top ten questions, visit my website: www.upstartbusinessplanning.com.
Please comment or ask questions.
Tuesday, February 19, 2008
This just shows that there are so many ways to rethink the marketplace. You just have to be open to seeing the possibilities. Rampell says that people do not like to pay for software. They typically will opt in for a free trial but then don't convert when the trial is over. His business offers the software for free when the trial is over, as long as the consumer signs up with companies such as Gap or Blockbuster to purchase items from them. Once they purchase from Gap, for instance, they get the code to download the software for free. Gap then pays the software company. TrialPay is an intermediary and collects a commission. Pretty good variation on the affliate theme.
Friday, February 15, 2008
Rather, he's saying that so much growth and change is taking place in digital media that it's a great time to be in a start-up in that space. He lists the reasons:
- A big, growing market.
- Lots of "white space", i.e., unexploited niches.
- Room for geographic expansion.
- Lots of infrastructure in place
- Distracted incumbents
- Uncertain economy
If you want to read more, go to his blog -- http://blogs.mediapost.com/spin/?p=1234
The point is that entrepreneurial people and inventors tend to see the opportunities. That's what Mr. Morgan is seeing. You can too.
Please contact me with your questions or comments.
Thursday, February 14, 2008
A good Web site designer ought to know what to do to optimize your site, but what if you're just using a free template and building the site yourself? When I was making one of my sites, I overlooked one of the most important things you can do -- writing a good statement about the site for people to read on the search results page. The description of my site said something about my host and Web site software, www.1and1.com and Website Creator, not about my site. So if you typed Wyn Lydecker into Google or Yahoo!, my site, www.wynlydecker.com, would come up in the results, but you learned nothing relevant about my site.
I quickly went to my host and my Web site creation software, which is provided for free, and found that I had neglected to put in a meta description. I added the description, and within two weeks, Google displayed the correct description of my site.
I also checked my meta tags. Meta tags are keywords you want to have associated with your site. So if someone types in a keyword, the search engine crawlers will have made a connection between that keyword and your site. That helps the site come up in results. Of course, if you have an advertising budget, you can bid on keywords and purchase a featured position in the search results. Google and Yahoo! make money that way. Your site can get top billing. But you'll pay money to the search engines every time someone clicks through to your site.
I'll be writing more on Search Engine Optimization. In the meantime, Google and several blogs have great articles on how to optimize your site. (see my sidebar for a link to one of the articles from Ask Enquiro -- http://ask.enquiro.com/ and Google's blog on the topic -- http://googlewebmastercentral.blogspot.com/.)
Wednesday, February 13, 2008
Here's a little advice. If you're going to run a business, keep a record of every check you write, every bill you pay electronically and every credit card purchase you make. You can do this with paper and pencil or on Excel or some other financial software.
When you book a sale, write it down. Write down when you expect to be paid, and then, when the cash comes in, you should record that revenue. That way, you have the ability to know what is really going on in your business and whether it is as successful as you want it to be.
It's easiest to keep your books on a cash basis, that is, just keep track of every cent of cash that comes in and flows out. If you want to know more about how to categorize all this, you should look at the IRS's Schedule C. That lists the categories of expenses and can help you keep track in the same way the IRS wants you to make your reports. You can also go to the SBA's site and read about financial statements. This will help you understand the difference between things like inventory, cost of goods sold, gross profit, overhead, EBITDA (or operating profit) and net profit. You can also learn about capital expenditures and how to account for them. Visit these government Web sites to learn more: www.sba.gov and http://www.irs.gov/businesses/index.html
Before you go to an accountant or bookkeeper or purchase a tax package, it's good to understand the basics yourself. I've also written some explanations about all this for classes I've taught. Feel free to contact me, if you'd like personal tutoring or mentoring.
email@example.com or visit www.upstartbusinessplanning.com.
Tuesday, February 12, 2008
His main site is: www.cliffennico.com.
His "Demystifying the Business Organization" provides a great overview of the pros and cons of the different business forms. Read it over, take notes and then go to your own attorney or accountant and ask them for their advice. If you read Cliff's notes first, you'll be able to ask more intelligent questions, thereby using less of your professional's valuable time.
In a nutshell, if you just have a small business that you're running yourself, you can be a sole proprietor and file a Schedule C for your business income along with your personal tax return. If you want to protect yourself from liability, the LLC (Limited Liability Company) is very popular. Again, the business income flows into your personal return. If you want more formal structure, and you think you'll be selling shares in your company to investors, then a "C" Corporation is the way to go. But your corporation will pay taxes on its income. You'll pay taxes on your salary or dividends that the corporation pays to you. (Note: I'm not a lawyer or accountant, and this is not legal or accounting advice.)
The most important thing is to keep track of your business transactions. Don't get them mixed up with your personal money flows. While many people use QuickBooks, I prefer to use Excel. The beauty of Excel is that I can update my records and easily recalculate the totals. I have neat printouts to use at tax time.
Many people believe that they can just gather their information at the last minute and hand it over to accountants at tax time. But I believe that it's much more prudent to keep track of your money yourself so that you know what is going on. Accountants can make mistakes. Do your own due diligence. Know what records you need to keep and then keep them.
Monday, February 11, 2008
Since tax time is rapidly approaching, I'll be writing more about this topic in the days to come.
Friday, February 8, 2008
Business founders may not realize that investors will be looking for milestones to be achieved. That's why investors list milestones in a term sheet. Sometimes, they dole out the funds as the company reaches the milestones. This is called "staged closings." For example, if you have a dot-com, soft launches or hard launches can be milestones. As you negotiate, make sure your milestones are achievable.
Other things to know: Think about what you as a business owner are giving away to the investors. Is it worth it to you?
VCs usually want preferred stock so that their dividends can be accrued and they can get their money out before others. Preferred owners also get veto rights when voting on corporate matters.
VCs usually want to get their money out in 4-5 years. And they want a clear path to liquidity. The term sheets will have details about conversion of preferred to common stock. Remember that investors want to maximize their investment.
Most entrepreneurs think that they can raise capital quickly, but that's not true. VCs need to do background investigations into the company and the owners -- called "due diligence". Then, there's the negotiation of value and dithering over the term sheets. Once you've signed a term sheet, there's still a lag before you get the funds.
Keep in mind that more important than raising funds quickly is to make sure that your investors have deep pockets and will want to stay in the game for future rounds of investing, as needed. The section of the term sheet that addresses keeping the original investors in the game is called "Pay to Play."
Other clauses that protect investors are ones on antidilution and information rights.
As you go through a term sheet, it's really important to be sure you understand what all these clauses are doing for the investor and for you. That's why you need good attorneys by your side. Institutional investors bring a lot to the table, as they have experience you may lack. On the other hand, remember that they are out to maximize their investment with a clear path to liquidity. That may or may not be your goal. Protect yourself by negotiating intelligently.
If you want to maximize your valuation, do the following:
- Have a solid plan, a good revenue stream and solid management.
- Consider a staged closing.
- Establish a stock incentive pool (5-15%) to incentivize employees.
- Consider tax ramifications of all your business decisions. (Get a good accountant.)
Le me know if this has been useful. And please send questions for me to answer.
Thursday, February 7, 2008
How do you value a company? Virtually every one of my clients asks me that. The answer given at this Term Sheet Workshop echoed the ones I've heard countless times before, "It's a negotiation." But how do you, the entrepreneur, get the best valuation for your company?
The workshop leaders said that professionally produced financials really help. For later stage companies and companies with revenues, having a CPA help with the developing the best tax structure for the company is also valuable. And while LLCs are becoming more popular, and VCs are beginning to fund LLCs, making your business a C-corporation makes the funding process easier.
For more information on preparing professional financials, visit PriceWaterhouse Cooper at: http://www.pwc.com/extweb/industry.nsf/docid/F3576670492E1BEA85256AC50079E169.
Also understanding the process, including valuations at:
Wednesday, February 6, 2008
- Key players -- founders, issuers, purchasers, early investors
- Investment amounts
- Use of proceeds
- Price and capitalization -- valuation
- Closing date
- Form of investment -- usually preferred stock
In the next blog, we'll discuss valuation and other topics.
Please send questions or comments to this blog or to my email: firstname.lastname@example.org.
Tuesday, February 5, 2008
All these questions need answering. Stay tuned for more in the blogs ahead.
Monday, February 4, 2008
It's easy for the layman to miss key points that take rights away. Face it. Every entrepreneur wants to raise as much capital as she or he can, while giving away as little of the company as possible. The investors want to get as high a return as possible, and sometimes, they believe that requires taking a big chunk of ownership and rights away from the founders. You need a lawyer to help you. The investors certainly have lawyers.
In future posts, I'll go over the other points I picked up from this excellent workshop. Stay tuned.