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Category Archives: Financing a Startup

What Exactly Are You Selling?

By | Business By The Book, Financing a Startup, Sales, Sales, Starting Up | No Comments
What Are You Selling?

As an entrepreneur, your most precious resource is your time and how you invest it. You can invest your time trying to get customers (by solving their problems) and/or you can invest your time trying to get investors. The more time you spend getting customers (selling your product), the less time you will need to spend getting investors (selling your stock). And if you spend enough time getting customers, you will not need investors. And just at the point that you don’t need investors is when they will start pestering you to let them invest. But of course by then…

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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…

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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:…

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Why Crowdfunding Doesn’t Work for Early-Stage Companies

By | Business By The Book, Financing a Startup, Investing in Small Businesses, Organization & Strategy, Planning | No Comments
Crowd Funding

The concept of crowdfunding seems to be a cool idea with good buzz, but I’m not convinced that crowdfunding will work very well besides small projects. A typical early-stage company that is burning cash and going through a “J” curve for years as they attempt to create a product, test market demand, and scale the company to profitability carries a lot more risk than sending a musician five dollars in exchange for getting an MP3 download and a bumper sticker the following month. The crowdfunding process via sites like Kickstarter and Indiegogo works well for small projects where the “investors” get a CD, MP3,…

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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.,…

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Aspiring Entrepreneurs: Change Your Lifestyle Prior to Launch

By | Business By The Book, Cash Flow Management, Financing a Startup, Ownership & Purpose, Self Evaluation, Starting Up | No Comments
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If you are serious about starting or buying your own business, one of the very first things to do is change your lifestyle. Anytime God calls us to obedience, it is often accompanied by a drastic change in direction. Becoming an entrepreneur is no different. If you have the typical lifestyle of credit card payments, car payments, and a house payment, it will be nearly impossible for you to start/buy a business and get it ramped up to the same level of income you need in short order. The question we should ask ourselves at this stage is not “how…

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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…

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Raising Capital for an Alpaca Farm

By | Business By The Book, Finance, Finance, Financing a Startup | No Comments
Raising Capital for an Alpaca Farm

Q: We are interested in starting an Alpaca farm. Do you think this is something investors might be interested in investing in? A: There are a whole host of dimensions that you should consider in terms of attempting to raise venture capital for any opportunity, let alone an Alpaca farm. See our other blog posts on raising capital to give you a sense for the difficulty and complexity of the process when you try to raise capital for any business. But let’s say that you decided to press on and you do raise some capital from an investor. In other…

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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…

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Looking for Sponsor Company to Develop a Product Idea

By | Channels and Alliances, Coming Up with an Idea, Financing a Startup, Intellectual Property, Organization & Strategy, Selling Your Idea or Invention | No Comments
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Q: I have an idea for a product that doesn’t exist yet based upon my internet research. It has been on my mind for some time and I keep shrugging it off but feel that God may be putting it on my mind for a reason. I would like to know of a Christian company that will work with me to create this product and possible help market it. I am very skeptical about being taken advantage of by the wrong people/company. Can you recommend someone that will help me with this? A: It is possible to get the type of sponsorship you sketch out, but…

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