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Category Archives: Financing a Startup

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…

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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…

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How to Start a $400 Million Business with No Money

By | Business By The Book, Financing a Startup, Growing a Business, Organization & Strategy, Planning, Starting a Family Business | No Comments

John Cook, armed only with a healthy mix of creativity and desperation, started Cook’s Pest Control with virtually no money in 1928 on the cusp of the Great Depression. The business is still owned and operated by his family, now in its fourth generation, and has grown into the seventh largest pest control firm in the U.S. with over 1,300 employees and 32 offices. Note that while most aspiring entrepreneurs dream of financial success like the Cook family experienced, as faithful followers of Christ we also need to view business as the Cooks do: it is a means to glorify…

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What Investors Look For in a Business Plan

By | Business By The Book, Financing a Startup, Investing in Small Businesses, Organization & Strategy, Writing a Business Plan | No Comments

I’ve invested in around 20 startups, helped launch scores of others, and advised hundreds more, but I’ve never written a business plan. That is to say that I’ve never written the traditional narrative style plan with all of various sections that you get with typical business planning software (and I don’t think I invested in many like that). All of the plans I’ve written (and the startups I’m drawn to as an investor) are combinations of: A Power Point presentation that tell the story well, and A detailed financial model (which led to the model on this site) to make the…

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Granting Sweat Equity in a Startup

By | Business By The Book, Financing a Small Business, Financing a Startup, Investing in Small Businesses, Leadership and Employees, Organization & Strategy, Valuing a Small Business | One Comment

Q: What is the best way to negotiate and grant someone “sweat equity” in my startup? A: Granting sweat equity in exchange for services rendered can be a creative and effective way to ramp up your startup with limited capital. The considerations will vary slightly depending upon which compensation method you use, but include i) the market value of your business, ii) the market value of the contributor’s sweat equity, iii) the risk premium, and iv) how the sweat equity is compensated. Market Value of Your Business – If the sweat equity is compensated in the form of equity, then both…

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The Best Angel Investor for Your Business…

By | Business By The Book, Financing a Startup, Investing in Small Businesses, Ownership & Purpose, Selling Your Idea or Invention | No Comments

…will understand the process well and has made enough angel investments to know what they are getting into …will know you well and is willing to write a check to invest in you and your business …will understand your industry well and can create tremendous value with their knowledge and contacts …will understand your business model well and is able to mentor you …is familiar with your stage of business and is patient and understanding as you work through the inevitable snags in the early stage of a startup

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Venture Academy Video Excerpt: Fume Date

By | Business By The Book, Finance, Financing a Startup, Starting Up, Venture Academy | No Comments

This video describes the need for a startup entrepreneur to know their Fume Date – the date that they are likely to run out of cash for their startup:     This video is just 1 of nearly 200 videos available with a Venture Academy subscription and is excerpted from the Venture Analysis section. For more on how to better plan financially for your startup, see the Startup Financial Model.

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