Business Resources

Articles | Q&A | Blog Posts

Category Archives: Financing a Small Business

Raising Small Amounts of Capital

By | Business By The Book, Financing a Small Business, Financing a Startup, Planning | No Comments
Seed Capital

One of the most frequent questions I get is how to raise relatively small amounts of capital, such as $25k to $500k. Believe it or not, raising small amounts of capital is actually harder than raising large amounts of capital. The reason small amounts are more difficult are manifold, but here are a few: Amounts below $5m fall below normal “institutional” fund minimums and the institutional equity financing process, therefore the entrepreneur is left to chase down angel investors, which is a fairly difficult process because they usually do other things for a living rather than getting paid to invest…

Read More

How Should I Evaluate a Venture Capital Firm?

By | Business By The Book, Finance, Finance, Financing a Small Business, Financing a Startup | No Comments
Evaluating a VC Firm

Q: I’m raising a seed round for a consumer web startup and I’m getting good interest from VCs. What questions do I need to ask of them to gain insight into how well we’d work together? A: I suggest that there are two stages of research/questions to determine fit with you and your company: Prior to Contact: Research prior to making contact to qualify them in terms of the broader fit and, Prior to Commitment: Questions you want to ask once you’ve made contact to further qualify them since you will be partnering with them for years Prior to Contact:…

Read More

Healthcare Product Company Needs Seed Capital

By | Business By The Book, Channels and Alliances, Financing a Small Business, Financing a Startup, Planning, Selling Your Idea or Invention | No Comments
New Healthcare Product

Q: I’ve developed an innovative product for the healthcare industry, specifically for the hospital environment that improves patient health and safety while lowering the healthcare provider’s time and cost. We are looking for $250k to $500k to fund the manufacture of the first few prototypes and to perform the early sales and marketing effort to get our product to market. What suggestions do you have for me? A: Given the fact that your capital need is $250k – $500k puts you in the realm of angel investors and seed capital investors. While there are many angel investors in the U.S.,…

Read More

How to Change a Loan to Equity But Maintain Ownership

By | Business By The Book, Finance, Finance, Financing a Small Business, Financing a Startup | No Comments
Debt vs. Equity

Q: I am the sole owner of an S-Corp that has received capital from a lender/investor in the form of a loan. Is there any way I can restructure the capital I’ve received to show up as equity instead of a liability to improve my balance sheet without having to sacrifice the ownership of my company? Basically, I want to keep the investors on a fixed annual return for their money, but classify their capital as a equity to meet certain net worth requirements for my industry. A: You can change the debt to non-convertible preferred equity with an annual dividend…

Read More

Just Say No to Venture Capital

By | Business By The Book, Finance, Finance, Finance & Accouting, Financing a Small Business, Financing a Startup, Organization & Strategy | No Comments

There is a constant stream of entrepreneurs that ask me to invest in their idea or ask me advice about how to raise venture capital for their business plan.  In many cases, they should just say no to venture capital. There are a lot of benefits to raising venture capital such as the ability to fund a big capital need in a company’s early stages, the ability to tap into the investor’s savvy business advice and mentoring, and the ability to tap into the investor’s deep relationship network. But there are also a lot of disadvantages to raising venture capital…

Read More

Institutional Equity Financing (Venture Capital and Private Equity)

By | Business By The Book, Finance, Finance & Accouting, Financing a Small Business, Financing a Startup, Growing a Business, Growth Strategy, Investing in Small Businesses | No Comments

Equity Financing is usually invested based upon the future prospects of a company and the anticipation of a future exit event that will provide acceptable returns to the investment fund. At the Growth Stage, Equity Financing is typically in the form of growth-stage Venture Capital invested by institutional venture capital firms, and at the Middle Market stage, Equity Financing is typically in the form of Private Equity invested by institutional private equity firms. There are also 571 active corporate investment arms that are identifiable that actively make corporate investments in smaller companies as a part of their growth strategy and…

Read More

Venture Academy Video Excerpt: Fixed Asset Investment

By | Business By The Book, Finance, Finance, Financing a Small Business, Growth Strategy, Investing in Small Businesses, Office and Operations, Venture Academy | No Comments

This video provides insight into the impact of the level of Fixed Asset investment in your business planning:     This video is just 1 of nearly 200 videos available with a Venture Academy subscription and is excerpted from the Venture Analysis section.

Read More

Stages of Company Growth and Capitalization

By | Business By The Book, Finance, Finance, Financing a Small Business, Financing a Startup, Investing in Small Businesses | No Comments

One of the most pressing concerns for entrepreneurs of early-stage and middle market companies is the question of the capital formation process and how to adequately finance their companies to support their growth plans. The types of financing available to entrepreneurs vary widely and are most dependent upon the stage of the company and the perceived risk/reward tradeoffs by investors and lenders.  The table below summarizes the typical business stages, their goals, and the generally available financing options: Company Stage and Type of Capitalization: The overall enterprise value and how it tends to change and grow over time from stage…

Read More

Venture Academy Video Excerpt: Equity Financing and Venture Capital

By | Business By The Book, Finance, Financing a Small Business, Investing in Small Businesses, Valuing a Small Business | No Comments

This video gives a fairly thorough explanation of raising different types of venture capital at the various stages of a company’s life:     This video is just 1 of nearly 200 videos available with a Venture Academy subscription and is excerpted from the Finance and Accounting section.

Read More
your-business-model

Your Business Model Determines Your Success or Failure

By | Business By The Book, Financing a Small Business, Growing a Business, Organization & Strategy, Self Evaluation, Writing a Business Plan | No Comments

In business school, I had the privilege to read, study and analyze 1,600 business cases and as a strategy consultant I had the opportunity to transform several different businesses and industries. Additionally, over the past two decades I have reviewed, invested in, and created hundreds of business plans as an entrepreneur, Entrepreneur in Residence/Venture Partner with two venture capital firms and Chairman of a Seed Capital investment firm. One of the lessons that I’ve learned — often painfully as I look back on my mistakes — is that business models really do matter and have a tremendous impact on the…

Read More