photo credit: tombothetominator

Do existing businesses need money? Probably.

Is this a time to start a business? Maybe.

In either case, the business plan you write today will be different than the one you wrote five years ago. Five years ago money was available. It is still there, but it is a lot harder to find, and to tie down. Here are the five keys to getting funding now:

1. Take it as far as you can yourself

Whether your business is is brick and mortar, or online, do as much as you can yourself. Bootstrapping is IN style, if indeed it ever went out of style. Getting funding to “expand” is always easier than getting funding to “start”.

Yes, this means more extensive planning and researching than you may have done previously.

Yes, this means developing prototypes and test marketing before spending millions on a project.

Yes, this means actually beginning the business if you can. Most businesses can start early. Most businesses can begin as an online business, a very inexpensive alternative to a brick and mortar business. A beauty salon would have a hard time, but a professional speaker, credit repair, and dozens of other businesses are naturals for online businesses. Even the beauty salon can begin online if it will have some unique products to sell. One lady I know began her business online, making custom mineral makeup. It was so successful that she never opened the boutique business she had planned. Now she fills orders from around the world every day. She discovered, too, that she didn’t even need a business plan – she had all the money she needed.

2. Be THE pro in the business

Nobody wants to finance your on the job training. Prove up front in your business plan that you’ve got industry experience and management success behind you. The “wanna be’s” are in for a rude awakening over the next few years.

Your business plan needs to tell the tales of your successes. Lists of “accomplishments” can get pretty boring. Translate those into real vignettes and it is a slam dunk. Don’t have the success stories to tell yet? Well, get them. Don’t expect funding until you’ve got the tales to tell.

3. Be The Dreamer

Capture your lender with your enthusiasm and sincerity. Swallow whatever fear and misgiving you may have, and march up to the lender, stick out your hand and say, “I’m Josephine Martinez, the entrepreneur down the street.” It doesn’t matter if that business isn’t open yet, you are still “the entrepreneur down the street”.

There is just something catchy about someone with such unbridled enthusiasm, especially in tough economic times. Your lender will want to capture your energy, and just may want to keep you around.

4. Be The Realist

Recognize that some businesses will be easier to fund than others. Repair businesses, credit businesses, low cost businesses will all be better off than a custom tailoring shop.

Highly capitalized businesses like restaurants, construction and resorts have a tough time presenting successful business plans in tough times. The tougher your business is to fund, the more important it is to do your homework. Don’t wait for your lender to tell you to do it, or even to vaguely ask for it. March in with your stats in your hand. It is the only way.

5. Go For It

This is the most important step. Lots of folks are sitting in the wings, waiting for the economy to change. Well, it is not going to change soon.

The US economy, and the world economy, are in the wringer like they haven’t been for half a century or more. Because of that, everyone assumes there is no money to be had. Well, it just ain’t so. There is money there, but few people know where to put their money so that it is both safe and making money. Your job is to prove that your business is the answer.

And there IS money out there. Lots of it. Honest. Go for it. Now.

MaryAnn Shank, the talented and rough weathered pro at Business Plan Master has helped thousands of businesses navigate tough economic times. Here is where her experience shines.

photo credit: Lori Greig

Green investing is growing up. Previously the province of a small number of investors who chased an even smaller number of companies, the market for environmental technology has expanded dramatically in recent years. And it has captured investors’ wallet share along the way. Inflows into green funds totaled $766 million for the year ending May 31, according to Morningstar, compared with $37 million in net outflows from religious funds over same time period. (Morningstar tracks these two subcategories under the umbrella of socially responsible investing, or SRI, funds). “The interest has turned from ‘maybe I’ll dabble in this’ to ‘this is an asset class I should include in my portfolio,’” says Jerry Moskowitz, president of FTSE Americas.

Surging fuel prices have helped make green technology one of the biggest equity growth areas in the U.S., says John Quealy, a green tech analyst at Canaccord Adams, an independent financial services firm in Boston. New products are keeping pace. Mutual funds represent the largest share of socially and environmentally screened funds, with $171.7 billion in total net assets invested across 173 different funds, according to the Social Investment Forum’s 2007 Report on Socially Responsible Investing Trends in the United States. Exchange-traded funds accounted for only 1% of the total assets of all socially and environmentally screened funds at the beginning of 2007, but their ranks are growing daily.

The source of investors’ fascination is, of course, the need to find alternatives to oil and other fossil fuels in today’s environment of scarcity and climate change. We’ve reached a point where environmental technologies have moved way beyond good wishes for Mother Earth, and are starting to make economic sense. Alternative energy has finally captured businesses’ and investors’ imaginations and the gold rush is on-and so are nascent fears of a bubble.

Oil prices of $140 or more per barrel highlight the scarcity-or at least, the fears of scarcity-of this hot commodity. Global demand for oil will only increase over the short term, even if record gas prices finally cause Americans to curb their consumption.

China and India are expected to more than double their energy use by 2030, according to the International Energy Agency. Increasing demand for fossil fuels pushes their prices up, which in turn spurs technological advances across all alternative energies. The world will continue developing better ways to power cars (the next iteration of the Toyota Prius, the ragingly popular gas sipper, will come with solar cells that help run its air conditioning), as well as alternatives to coal and other greenhouse gas emitters. Industry experts say that oil would have to drop back down to $50 per barrel for alternatives like solar, wind and geothermal energies to lose their economic viability.

Here’s a closer a look at the opportunities, and some potential risks, in green investing.

Clean and Green

Investors considering environmental tech should start by defining their terms. For example, some use “clean tech” and “green tech” interchangeably, while others make a clear distinction. Jack Robinson falls into the latter group. The manager of the $410 million Winslow Green Growth Fund-whose three-, five- and 10-year performance has bested the Russell 2000 Growth Index-defines green companies as those involved in a bona fide, sustainable solution to global warming or other environmental ills; clean companies, in his parlance, are environmentally neutral. One clean company that Winslow holds in Green Growth is Bankrate, a North Palm Beach, Fla.-based online consumer banking and personal finance network. A green company he owns is Green Mountain Coffee Roasters, a Waterbury, Vt.-based purveyor of fair trade organic coffee that is carbon-neutral and donates 5% of its earnings to earth-friendly causes.

Investors must also decide for themselves what constitutes a green company. Quealy identifies four subcategories within the green sector: energy and power technology, which includes fuel cells; water technology; recycling technology; and bioresource technology, which includes ethanol. However, many so-called green companies don’t draw 100% of their revenues from green activities. Purely returns-driven investors may not care to know the full scope of a company’s endeavors, but those who see themselves as socially responsible will. “If you’re large enough, you’re going to be doing things some people don’t like,” says Peter Kinder, president of KLD Research & Analytics, a Boston-based social research and index firm.

Robinson won’t hold companies that are at all “dirty.” For example, he won’t own BP, even though the British oil company is also developing alternative energies. Don Rogers, executive director of Virginia United Methodist Pensions, won’t invest in conglomerates with more than 10% of their income from any combination of alcohol, firearms and gambling. Green investors also line up on different sides of the nuclear power divide, with some embracing the technology as an attractive alternative to fossil fuels and others shunning it as expensive, a cause of toxic waste and prone to accidents or terrorist attacks.

The growth of green tech investment vehicles mirrors the increase in individual companies in the space. When Robinson first began investing in the category 15 years ago, he had only a handful of stocks to choose from. These days, he says, “the universe has expanded dramatically and a lot of the small caps have become mid-caps or even large caps.” One stock that graduated from small cap to mid-cap on Robinson’s watch is Itron, a Liberty Lake, Wash.-based company that produces electricity, gas, water and heat meters. When Robinson first invested in the company in early 2006, its market cap was under $1 billion, and today it’s about $3 billion.

The Al Gore Effect

photo credit: World Economic Forum

Many credit Al Gore and his 2006 Oscar-winning movie, An Inconvenient Truth, for the uptick in consumers’ desire to go green. “He’s had a major impact on educating the public,” Robinson says. And today, more consumers are gaining access to green mutual funds through their 401(k) plans, he notes.

Christopher Manning, a financial advisor in Houston who focuses on SRI, says alternative energy investments are the most popular SRI category among his new clients this year. He uses Green Century mutual funds with his clients, as well as two PowerShares ETFs, Global Water and WilderHill Clean Energy.

Before he launched his own SRI-focused firm in 2005, Manning worried about how it would play deep in oil country. While he hasn’t encountered any outright hostility toward his mission, he says, he has found plenty of educational opportunities among potential clients. He’s also found himself quite a niche. “In this area, I’m the only game in town” for clients interested in SRI, Manning says.

Justin Harris, a financial advisor in Seattle, says few of his clients come in with specific requests about green investing. Most request a general negative screen that weeds out tobacco, gambling and alcohol stocks. While many advisors adopt SRI vehicles at their clients’ request, Harris went the opposite route: About seven years ago he set a mandate that all assets his clients invested with him would be in socially responsible investments. “I saw I wasn’t gaining anything by divorcing my money from my values,” he says. Harris didn’t lose any clients as a result of the mandate, and clients embraced the cause. “I find that people really want to be fully engaged,” he says. “They want to walk their talk.”

Policy Watch

As with so many issues in this election year, market watchers wonder how the new occupant of the White House will affect green technology next year and beyond. Both the presumptive Republican and Democratic nominees, John McCain and Barack Obama, respectively, support a cap-and-trade system for carbon emissions, so it’s likely this initiative will move forward regardless of the election’s outcome. A system adopted by the European Union several years ago, a cap-and-trade system creates market incentives for reducing carbon emissions. Companies are allotted a certain number of permits to release carbon gases, and if they can figure out a way to reduce their emissions, they can sell their excess permits for cash.

When investing in individual securities, investors can analyze how well companies are preparing themselves for these coming regulations, says Todd Larsen, spokesman for the Social Investment Forum, a trade association of the U.S. social investment industry. Companies will incur greater costs as a result of cap-and-trade regulations, and they will pass these costs along to their customers. For example, a one-cent increase in the cap-and-trade cost per ton of carbon translates into a 33% increase in the end consumer’s electricity costs, Robinson says. Investors interested in carbon as a commodity also have expanding options: In June, Barclays launched the first exchange-traded note offering investors pure exposure to the global price of carbon.

Many assume that a Democratic administration will be friendlier toward SRI principles. For example, conventional wisdom holds that Obama would be more likely than McCain to increase incentives for environmentally friendly corporate behavior. But in some ways, among individual investors the opposite may hold true. “SRI is demand-driven, and there’s nothing like a Republican president to drive demand,” says one prominent industry participant who requested anonymity for fear of being perceived as cynical. Indeed, frustration at President George W. Bush’s dismal environmental record has contributed to the popularity of alternative energy investments in recent years.

Investors or Believers

While the next occupant of the White House may affect certain environmental policies, SRI and green investing has enough momentum that it should make progress no matter who wins this November. “There has been a sea change at work,” says Calvert CEO Barbara Krumsiek. Corporations have embraced positive change on environment, social and governance issues (also known as “ESG”), she notes. Large institutions like public pension funds have taken up SRI investing, including shareholder advocacy, and investors are expressing unprecedented interest in SRI, Krumsiek continues.

Calvert doesn’t track how many of its investors are purely returns driven, as opposed to those who invest according their beliefs, but Krumsiek believes that both groups are well represented among her shareholders. The venerable SRI fund family ventured into the green tech space last year with the launch of the Calvert Global Alternative Energy Fund. The fund was down 12.1 % as of June 30, negative 0.2 points below Standard & Poor’s 500 results for the same period, according to Morningstar. Calvert plans to launch a Global Water Fund in the third quarter.

Bill Crager, president of Envestnet, a Chicago-based provider of investment management products and services, envisions a day when information on companies’ environmental, social and governance track records will become more readily available. One day, he predicts, clients might receive, along with their quarterly returns statement, a statement of their holdings’ sustainability efforts. This could take the form of a report on individual companies and how they help or hurt the planet during that time frame, by opening up a water filtration plant, say, or by polluting a local river, Crager says. Envestnet’s products include Veris Sustainable Strategies, mutual fund portfolios for socially conscious investors.

Potential SRI investors will invariably ask whether investing with their hearts-and their attention on ESG reports rather than earnings reports-will damage their wallets in the form of lower returns. “My experience is all investors are returns driven,” says Dan Porter, founder and vice president of marketing for IW Financial, a Portland, Maine-based provider of environmental, social and governance research, consulting and portfolio management solutions. “When I want to incorporate my values, the question is, can I do that at an acceptable level of cost?” The answer will vary from client to client.

Ready to Boil?

Only a handful of green mutual funds and ETFs tracked by Morningstar have even a five-year track record. “The jury is still out about performance of SRI funds in general,” says Stephen Horan, head of private wealth and investor education at the CFA Institute. “Both sides can cite studies to support their case.” Not surprisingly, of those that do, some have underperformed and others have outperformed the broader market. Those in the latter category include Winslow Green Growth, with 11.2% five-year returns as of June 26, compared with 7.4% for the Standard & Poor’s 500; and the New Alternatives Fund, which invests in alternative energy and boasts an 18.1% five-year return as of June 26, according to Morningstar.

Outsize returns like those may prompt the question of whether alternative energy is entering bubble territory. It’s never an easy question to answer. “If it pops, we’ll know,” says Johann Klaassen, vice president of managed account programs for First Affirmative Financial Network, an independent investment advisory firm in Colorado Springs, Colo., that designs green investment portfolios. That said, Klaassen believes alternative energy is still in “the opportunity phase.”

Robinson says solar companies got “priced to perfection” recently but have since receded from their highs. It would be wrong to avoid the category altogether, he says: “Long-term, solar is a part of the solution.” Oil prices will not likely make a big retreat, he believes, and demand for alternative energy sources will only grow.

After all, it’s not as if the world will stop using energy. FTSE’s Moskowitz says green tech companies are reporting solid earnings that are reflected in FTSE’s environmental indexes, the FTSE ET50 and the FTSE Environmental Opportunities All-Share Index. “They don’t look wild,” Moskowitz says of his indexes’ components.

Even so, green tech investors must have a strong stomach to weather the sector’s volatility. Some of that volatility comes from the fact that most green tech stocks are small-cap growth companies, which are among the most mercurial. In addition, Quealy says, “We live in an unbelievable bull market for commodities, where geopolitical discussions swing the price of oil two to three bucks daily.” This adds another layer of volatility to green tech stocks that other sectors don’t share, he notes.

Quealy still thinks green tech companies rank among the best secular growth opportunities for the next five to 10 years. Stock pickers would do well to study the management, market and marketable technology of the companies they’re considering, instead of blindly investing in the sector as a hot growth prospect, he advises. “The passive investment approach is likely to be a risky one as Wall Street decides who the winners and the losers are,” Quealy says.

Jan Bryan, a planner specializing in SRI out of Prescott, Ariz., reports that while her clients expect competitive returns from their investments, these long-term investors also understand and accept cycles of underperformance. For example, when defense and big oil are doing particularly well, portfolios that eschew them will miss out on those gains. Her clients have found other kinds of rewards in SRI and green investing. “Clients absolutely love it when you ask them their views on social issues,” she says. “They feel respected and heard, and these are the most loyal clients.” Klaassen also notes the phenomenon of “sticky clients” in the space: “They get invested in us, as well as with us.” First Affirmative does get some returns-driven investors, but they generally don’t stick around for long. “Hot money flows in and flows out,” Klaassen notes.

Elizabeth O’Brien is an author with Financial Planning magazine. For more information, please visit http://www.financial-planning.com

photo credit: Theodore Scott

Many say that now may not be the best time to deal with the Spanish market. Property, once one of the most intriguing aspects of Spain, has now become overcrowded and overpriced. But on the other hand, investing in businesses there has started to let its potential shine.

There are thousands of new businesses, entrepreneurs, and small businesses looking to expand in Spain. They can now use networks such as the Angel Investment Network to connect to investors in Spain, around Europe and in some cases globally. Over the past few years, several local networks of business angels have also cropped up, such as CIDEM/XIP.

Having become one of the top ten economies in the world, Spain has begun to attract significant amounts of investment from foreigners. The growth has remained steady over the past ten to fifteen years, convincing investors that new businesses here have the potential for a very profitable turnover. However, when angel investors invest in new businesses, they want to make sure they cover a variety of market and industry sectors, as opposed to the real estate market where certain aspects have become oversaturated, causing the property bubble to burst.

Many Spanish companies have expanded internationally over the past ten to twenty years, and new businesses are looking across borders for potential capital investment. This also works the other way around, with many foreigners moving to Spain to start a new business.

Contrary to some other parts of Europe, most business angels in Spain do not get too involved with the overall running of the business, making it less of an overall partnership, but there are still many intangibles such people can provide. However, most investors will have the benefit of experience of the market sector, solid knowledge of how start-ups are structured, and possibly access to contacts around the world.

To help connect both parties, the Angel Investment Network has set up a branch in Spain. With this, both entrepreneurs and investors can find the right kind of partnership online. The Spanish website already has thousands of registered entrepreneurs listing their products and business ideas, along with business angels from all over the world who are interested in making an investment in the Spanish market, with experience in all sorts of industries.

Mike Lebus works with entrepreneurs seeking investments, via the Investment Network in Spain, which is part of a worldwide network of websites that help angel investors connect to entrepreneurs around the worl

photo credit: SuperFantastic

During the 1970s in a number of countries around the world, a push began to install solar energy panels on private residences. Many experts contended that solar energy, including solar energy incorporated into residential property, was to be the proverbial wave of the future. In reality, the early movement towards solar energy somewhat sputtered during the latter part of the decade and into the 1980s. A primary concern associated with solar homes centered on the fact that many consumers ended up finding that the installation and utilization of solar power systems into their homes was not proving particularly cost effective.

Since the advent of the 21st century, there has been a significantly profound renewed interest in solar energy generally and in solar homes specifically. The “rebirth” of the trend towards the construction of more solar homes and towards the retrofitting of existing residential properties with solar systems has occurred for two primary and essential reasons.

First, an increasing segment of the media has become concerned with the impact that carbon based energy sources are having on the environment, on the planet. As a consequence, there are an ever growing number of people who are making a concerted effort to make their living spaces far more environmentally friendly. From recycling to the use of alternative energy resources such as solar power, more men and women all of the time are becoming committed to establishing and maintaining homes that are more environmentally friendly.

Second, the costs associated with petroleum, coal and natural gas as primary sources of power have increased dramatically over the course of the past several years. The net result of this tremendous cost increases has been to make alternative energy resources – including solar power – far, far more cost effective. Therefore, many people are now turning (or returning, as the case may be) to solar homes because these types of residences have become cost effective in the current marketplace.

While many people are hoping that the costs associated with petroleum, coal and natural gas will drop sooner rather than later, most industry experts and financial analysis predict that this probably won’t be the case. Therefore, research and development is becoming more intense when it does come to alternative energy resources such as solar homes. Moreover, consumer demand for alternative energy resources, including residential property that relies on solar power, is increasing markedly. These are companion long-term trends that are expected to continue into the future.

With this in mind and understood, many financial experts and analysts are suggesting with increasing regularity that making investments in such alternative energy resources such as solar homes is a wise course to take. These analysts maintain that the days are long gone when an investment in solar home technology was considered speculative at best. Rather, investments in such alternative energy resources such as solar homes is considered to be a sound course which will allow for the realization of significant profits in both the short and the long term.

Copyright (c) 2008 R Douglas Allen

R. Douglas Allen is general partner of Blue Lion Capital Management, a private equity company specializing in clean technology and alternative energy.

You can learn more about Blue Lion Capital Management and Mr. Allen by visiting this site:

http://www.bluelioncapitalmanagement.com

photo credit: oneVillage Initiative

If you are an entrepreneur with a small technology based company looking to take it to the next level, this article should be of particular interest to you. Your natural inclination may be to seek venture capital or private equity to fund your growth. According to Jim Casparie, founder and CEO of the Venture Alliance, the odds of getting Venture funding remain below 3%. Given those odds, the six to nine month process, the heavy, often punishing valuations, the expense of the process, this might not be the best path for you to take. We have created a hybrid M&A model designed to bring the appropriate capital resources to you entrepreneurs. It allows the entrepreneur to bring in smart money and to maintain control. We have taken the experiences of several technology entrepreneurs and combined that with our traditional investment banker Merger and Acquisition approach and crafted a model that both large industry players and the high tech business owners are embracing.

Our experiences in the technology space led us to the conclusion that new product introductions were most efficiently and cost effectively the purview of the smaller, nimble, low overhead companies and not the technology giants. Most of the recent blockbuster products have been the result of an entrepreneurial effort from an early stage company bootstrapping its growth in a very cost conscious lean environment. The big companies, with all their seeming advantages experienced a high failure rate in new product introductions and the losses resulting from this art of capturing the next hot technology were substantial. Don’t get us wrong. There were hundreds of failures from the start-ups as well. However, the failure for the edgy little start-up resulted in losses in the $1 – $5 million range. The same result from an industry giant was often in the $100 million to $250 million range.

For every Google, Ebay, or Salesforce.com, there are literally hundreds of companies that either flame out or never reach a critical mass beyond a loyal early adapter market. It seems like the mentality of these smaller business owners is, using the example of the popular TV show, Deal or No Deal, to hold out for the $1 million briefcase. What about that logical contestant that objectively weighs the facts and the odds and cashes out for $280,000?

As we discussed the dynamics of this market, we were drawn to a merger and acquisition model commonly used by technology bell weather, Cisco Systems, that we felt could also be applied to a broad cross section of companies in the high tech niche. Cisco Systems is a serial acquirer of companies. They do a tremendous amount of R&D and organic product development. They recognize, however, that they cannot possibly capture all the new developments in this rapidly changing field through internal development alone.

Cisco seeks out investments in promising, small, technology companies and this approach has been a key element in their market dominance. They bring what we refer to as smart money to the high tech entrepreneur. They purchase a minority stake in the early stage company with a call option on acquiring the remainder at a later date with an agreed-upon valuation multiple. This structure is a brilliantly elegant method to dramatically enhance the risk reward profile of new product introduction. Here is why:

For the Entrepreneur: (Just substitute in your technology industry giant’s name that is in your category for Cisco below)

1. The involvement of Cisco – resources, market presence, brand, distribution capability is a self fulfilling prophecy to your product’s success.

2. For the same level of dilution that an entrepreneur would get from a VC, angel investor or private equity group, the entrepreneur gets the performance leverage of “smart money.” See #1.

3. The entrepreneur gets to grow his business with Cisco’s support at a far more rapid pace than he could alone. He is more likely to establish the critical mass needed for market leadership within his industry’s brief window of opportunity.

4. He gets an exit strategy with an established valuation metric while the buyer helps him make his exit much more lucrative.

5. As an old Wharton professor used to ask, “What would you rather have, all of a grape or part of a watermelon?” That sums it up pretty well. The involvement of Cisco gives the product a much better probability of growing significantly. The entrepreneur will own a meaningful portion of a far bigger asset.

For the Large Company Investor:

1. Create access to a large funnel of developing technology and products.

2. Creates a very nimble, market sensitive, product development or R&D arm.

3. Minor resource allocation to the autonomous operator during his “skunk works” market proving development stage.

4. Diversify their product development portfolio – because this approach provides for a relatively small investment in a greater number of opportunities fueled by the entrepreneurial spirit, they greatly improve the probability of creating a winner.

5. By investing early and getting an equity position in a small company and favorable valuation metrics on the call option, they pay a fraction of the market price to what they would have to pay if they acquired the company once the product had proven successful.

Let’s use two hypothetical companies to demonstrate this model, Big Green Technologies, and Mobile CRM Systems. Big Green Technologies utilized this model successfully with their investment in Mobile CRM Systems. Big Green Technologies acquired a 25% equity stake in Mobile CRM Systems in 1999 for $4 million. While allowing this entrepreneurial firm to operate autonomously, they backed them with leverage and a modest level of capital resources. Sales exploded and Big Green Technologies exercised their call option on the remaining 75% equity in Mobile CRM Systems in 2004 for $224 million. Sales for Mobile CRM Systems were projected to hit $420 million in 2005.

Given today’s valuation metrics for a company with Mobile CRM Systems’ growth rate and profitability, their market cap is about $1.26 Billion, or 3 times trailing 12 months revenue. Big Green Technologies invested $5 million initially, gave them access to their leverage, and exercised their call option for $224 million. Their effective acquisition price totaling $229 million represents an 82% discount to Mobile CRM Systems’ 2005 market cap.

Big Green Technologies is reaping additional benefits. This acquisition was the catalyst for several additional investments in the mobile computing and content end of the tech industry. These acquisitions have transformed Big Green Technologies from a low growth legacy provider into a Wall Street standout with a growing stable of high margin, high growth brands.

Big Green Technologies’ profits have tripled in four years and the stock price has doubled since 2000, far outpacing the tech industry average. This success has triggered the aggressive introduction of new products and new markets. Not bad for a $5 million bet on a new product in 1999. Wait, let’s not forget about our entrepreneur. His total proceeds of $229 million are a fantastic 5- year result for a little company with 1999 sales of under $20 million.

MidMarket Capital has borrowed this model combining the Cisco hybrid acquisition experience with our investment banking experience to offer this unique Investment Banking service. MMC can either represent the small entrepreneurial firm looking for the “smart money” investment with the appropriate growth partner or the large industry player looking to enhance their new product strategy with this creative approach. This model has successfully served the technology industry through periods of outstanding growth and market value creation. Many of the same dynamics are present today in the high tech industry and these same transaction strutctures can be similarly employed to create value.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, representing owners in the sale of privately held businesses. We provide Wall Street style investment banking services to lower mid market companies at a size appropriate fee structure.

photo credit: Hot Meteor

Alright, so you woke up one day, checked your Swiss Bank Account, called your family office planner, had breakfast with your private client service wealth manager, got your tax accountant on the phone, and between three of you, you decided to invest your proceeds from your latest company’s Merger or Acquisition not into some dubious hedge fund or start-up biotech venture, but into financing Hollywood films because you figure you need the State tax Credits, the Federal tax write-offs, as well as a nice hedge of revenues from a few movies.

Now, this may not ring too well initially with your hedge fund manager neighbors in Connecticut or your oil and gas investor friends in Bahrain or Dubai, but aren’t these the same guys who are financing Hollywood blockbusters? And the only question for you, how do you get in the game without feeling like the Uncle of the film school student who wrote his nephew a $1,000,000 check for a film that starred his theater department classmates and ended up as a free download on youtube.com?

So after doing your share of homework, here’s what you discover may be the opportunity to spice up your wealthy but boring life:

*Sergey Brin And Larry Page Of Google, Fred Smith, the CEO of Federal Express, Norman Waitt, the Co-Founder of Gateway Computers, Jeff Skoll Of Ebay, Todd Wagner and Marc Cuban (formerly of broadcast.com), Max Levchin and David Grodnick Of PAYPAL, Marc Turtletaub of The Money Store, Roger Marino Of EMC Corp, former Chicago bulls co-owner Jim Stern, Sidney Kimmel Of Jones Apparel Group, Minnesota Twins owner Bill Pohlad; Real Estate Developers Tom Rosenberg, Bob Yari; and, financiers Robert Sturm, Sheikh Waleed Al Ibrahim, Zeid Masri of SilverHaze Partners, Michael Singer, Mark Esses, David Larcher, Michael Goguen, Richard Landry, Michael Reilly, Rafael Fogel, and Philip Anschutz are just a handful of high net worth entrepreneurs who entered the motion picture finance and production business with successful results.

*There are various tradable state, federal, and international tax credit incentives that would offer a premium based on an equity position. Assuming there is a 10 million dollar budget film, where 50% of it is in equity, and 50% is through international distribution guarantees prior to release. Now assume there is a 20-25% tax credit on the entire amount of $10 million dollars, which will immediately translate into $2-2.5 million tax credit to an investor.

*Numerous hedge funds such as Reed, Conner & Birdwell (DISNEY), Legendary Fund (Warner Brothers), Melrose Fund (Paramount Pictures), Ingenious Media’s 700 Million dollar Float on London’s AIM, Benjamin Waisbren Investments, and a host of other funds and fund managers are entering the film finance arena.

*The explosion of international DVD, pay-per-view, home video, cable, megaplex theaters, the future of multi-lingual Internet video on demand downloads, and cross-market digital distribution including low-cost theatrical digital projection, the movie industry is accelerating at an unprecedented growth rate.

*The American Jobs Creation Act of 2004, which amends the Internal Revenue Code of 1986, was signed into law . The Act creates three tax incentives expressly applicable to motion pictures, one of which – § 181 of the Internal Revenue Code – is especially significant to independent film producers and their passive investors on qualifying films with budgets under $20 million dollars.

*The filmed and other entertainment sectors are constantly outperforming and beating analyst expectations with regards to growth, and are the only industries resistant to untimely global events and adverse economic conditions.

*Movie Investor returns may be more favorable and more liquid than holding direct equity positions in most public entertainment and other public companies, real estate investments, and other alternative investments.

*There is a huge demand, audience, and growing distribution structure for specialty independent, ,crime, horror, and other low budget films as exemplified by the success of such films as “Brokeback Mountain”, “Sideways”, “Capote”, “Garden State”, “Napolean Dynamite”, “Y Tu Mama Tambien”, “My Big Fat Greek Wedding”, “Memento”, “Crash” , “Saw 1 &2”, Friday The 13th”, “Halloween”, “Texas Chain Saw Massacre”, “Hostel” and “WOLF CREEK”, which was made for $800,000, bought for nearly 4 million dollars prior to its release by Dimension, as well as “Hustle and Flow” which was made for $2 million dollars and bought for $16 million by Paramount Pictures.

*Apart from large blockbusters such as “King Kong”, “Harry Potter”, and other large scale studio films, the majority of studio-produced films have been under performing at the box office. The films that have been successful for studios were all externally financed and or co-financed with studios, sold for 2-3 x their costs, and a majority of them retained foreign sales rights to maximize revenues.

So after looking at all the great benefits, how do you actually go about finding a deal or movie project where you are certain that half your money isn’t going to be used by a Hollywood producer as a down payment on a new mansion in Pacific Palisades?

The key that separates the successful film financiers vs. the newbie Oil magnates who come to Los Angeles with a pocketful of money and end up leaving with half a pocketful of money is called several things: structured finance, leverage, risk minimization, multiple exit strategies, tax credits, and the ethical consciousness of the filmmaker/producer.

What does that translate to you in a real world scenario. Lets say you want to finance 100% of a $1.5 million dollar low budget genre film whose worst case scenario is a DVD release and profits from international sales and perhaps some other equity sweeteners in the conversion of the securities that you subscribe for as part of the deal. Well, if you write a check for $1.5 million, and the film is shot in a state that has 30% in tax credits, you get back $450,000 in tax credits + under Section 181, you are able to write off that amount under Federal. So you are already making a nice return before the profits kick in. Then you figure you sell the film to 50 countries, and if you are really lucky, you sell the film for 3-4 times it cost to a studio at a swanky festival like Sundance, Toronto, Cannes, etc. Do this over 5-10 films and you can make a very profitable name for yourself among the Hollywood elite.

But lets really take this a step further and see how the bigger boys leverage film investing because they can get a bigger star which can translate in larger overseas sales. Lets say a filmmaker/producer has a $10 million film and you want in on the action. You would park $5 million in equity, receive an 20-30% tax credit on $10 million which will be $2-$3 million, the producer will get the biggest star he can, get a studio to kick in the other $5 million dollars, you wont worry about ever seeing a penny from the theatrical release because you know your DVD profits and international sales will cover your equity position. Make sense?

Now leverage this with different budgets, genres, stars, distribution, places where you can get high tax credits (Ie Puerto Rico is 40%), other exit strategies where you can find your shares on the London AIM, and you are on your new career path as a sophisticated and educated film financier. Off course, if you want to go even further and guarantee 100% of your capital, there are tricks to that as well.

If you have any further questions on your quest to a movie premiere on the French Riviera at the Cannes Film Festival, and its a burning a hole inside your heart and soul, contact yours truly at filmhedge@aol.com or yuri@noci.com

Yuri Rutman is a visionary entrepreneur who has seen his lifelong passion to make movies and break into Hollywood slowly manifest itself into a reality. From his childhood days as an immigrant, he believed in the American dream through perseverance, certainty, focus, and overcoming any obstacles. After spending more than ten years cultivating industry relationships, Yuri Rutman raised money online from an Angel Investor in San Francisco whom he never physically met until after “Mr. Id was produced. On the strength of the initial business plan, the Investor wired money to finance the project a few weeks later. He currently has an innovative principal protected film fund and tax credit investment fund for accredited investors, institutions, etc. He is skilled in investor risk minimization, private equity, exit strategies, global film finance, and creative endeavors. Please visit http://www.noci.com

photo credit: Marcin Wichary

Where, oh where, has that business grant gone? Everyone talks about them. Few seem able to actually find them.

Some, in fact, claim that business grants are everywhere; some claim they are as rare as a trout tooth. The truth, dear Watson, lies somewhere in between.

“Business grants are there for the asking!”

If you have done so much as a single search for “business grants”, you have most certainly discovered those web sites that proclaim, “They’re here — in my directory. Satisfaction guaranteed, m’am.”

Yeesh. I can hear the carnival hawker in the echo.

And it’s not just one site that makes such claims. No, hundreds of sites that make this claim. One gives your money back if you send in a reject letter from an agency you applied to; another says you are buying “soft goods” that can’t be returned. No matter. It’s all the same pitch.

“Good luck, Buddy. Business grants just aren’t there!”

When I found one site that claimed that business grants are a fantasy, it was actually a relief. Wow, an honest person.

Well, this person may have been honest, but she hasn’t done her homework.

“There are business grants to be had.” (This is my voice)

They are not growing on trees, but they are there. Consider, for instance, these scenarios:

Scenario No. 1 — Local Interest Grants

An experienced pre-school teacher sees a tremendous need to provide pre-school care for children in a low income area so their parents can go to work in a new plant being built nearby. Where can she go to get a grant to start her business?

Answer: The U.S. Dept. of Education is a good bet. The local county or state government might have money available, too. Even the new company being built might chip in with space and supplies. (If the pre-school expands, and becomes very successful, and even lucrative, it can still open more branches, franchise, or expand. In short, it, too, can still be profitable.)

Scenario No. 2 — Scientific Grants

A brilliant scientist wants to team up with a university, use their Ph.D. fellows to do research, and pin down the gene for one particular type of cancer. She has good credentials and high hopes. Where can she get a grant to start her company?

Answer: The U.S. National Science Foundation may indeed have something. (If the company proceeds to make this discovery, it is still able to sell stock, take in investors, or sell the patents. In short, it can still be profitable.)

Scenario No. 3 — Emergency Grants

A second generation Indonesian entrepreneur sees the devastation in her homeland caused by a tsunami. With her business contacts and experience, she knows she can help re-build her country. Where does she go for a grant?

Answer: USAID probably has $20 million or so on hand for just such a project. In fact, as I write this, that is exactly the situation. (This is not a “profit making” venture. However, somewhere in the $20 million grant, she will of course pay herself, and will be able to lay a strong foundation for a future business.)

So, Can I Reach Out And Pick One Off A Tree?

Are these three examples just aberrations? Emphatically, NO — there are thousands and thousands more where these came from. It’s all a matter of knowing where to look.

And it is a matter of being creative. Rarely can a person simply raise her hand, say, “Here I am, ready to take your money!” The bigger the grant, the more creative the approach needs to be, and the more experience the businessperson needs to have. But the money is there, waiting for creative, experienced entrepreneurs to claim it.

MaryAnn Shank, the founder of Business Plan Master has helped thousands of entrepreneurs find just the right financing for their businesses, whether from grants, from the SBA, from angel investors or alternative financing. For decades she has been a recognized expert in business plan development. Her knowledge is there for the taking.

photo credit: Jazz Defo

Many would-be entrepreneurs who are long on vision but short on capital think that “angel” investors are the way to go for start-up capital, and they very well may be. Before approaching them, here are 10.5 things you should know:

* 1) Angel investors generally participate in the early stages of a company’s growth; they will plan an exit strategy to recoup the capital they have invested within 3-5 years. At that point they expect their companies to have enough of a track record to be able to attract capital from sources that can invest a greater amount but are more risk-averse; for example, though a sale of the company. This may be through a public offering of shares (an Initial Public Offering, or IPO). Angel investors will typically sell their shares in your company at that point.
* 2) They want to make money and will cull over many proposals to find companies that they feel will be successful. Even so, they are realistic enough to know that not all of their angel investments will succeed. The success rate is typically around 30-50%. Therefore, they try to balance long shot investments with those that are more likely to succeed.
* 3) Unlike venture capitalists, they are often motivated not only by the prospect of making money but also by the desire to be involved in the operations of their companies as advisors or mentors. Often angel investors are people with management expertise themselves; they may want to nurture the growth of their companies by participating in such management activities as strategic planning or marketing.
* 4) They will want to know a lot of things about you and your proposed venture, foremost among them whether you have put your own money into it: have you, or are you willing to, take out a second mortgage on your house to fund it? Have your friends and family invested in it? In the language of angel investors, this is known as “having skin in the game.” If you can’t answer yes to these questions, they will probably conclude that you don’t have enough confidence that your idea will succeed in the marketplace to put yourself on the line. Why, then, should they have enough confidence to invest in your venture?
* 5) To a certain extent, they will expect you to understand the limits of their knowledge: what they know and don’t know, and to present your proposal accordingly. One of the things they will probably not know is the extent to which your idea is unique and protectable – particularly if it involves intellectual property, as many new companies do today. Speak to these issues without prompting.
* 6) They look for certain personal characteristics. Have you shown that you have integrity? Do you communicate clearly? Listening, which is perhaps better called “hearing,” is both a necessary and rare skill. And express yourself in a lucid fashion; this includes speaking English to them rather than the language or jargon of your field or its technical details.
* 7) Demonstrate both flexibility and agility. You may have the world’s best idea and the world’s best business plan – today. Conditions change rapidly, and you may have to be quite nimble in order to keep up with tomorrow’s market.
* Know that everything is negotiable, and be prepared to negotiate with them and everyone else. The skills noted above are key to win-win negotiation. Aim to create win-win situations.
* 9) In the end, as with most other decisions, gut feel is often the determining factor in angel investors’ decisions. In the end, their decisions are based on emotion, as most decisions are. But they need facts to justify their instincts.
* 10) They tend to run in packs – not herds, but packs. That is, individual angel investors may form groups interested in businesses in the same general area such as technology or biotechnology or in the amount of risk that they are prepared to assume. It is perfectly acceptable for you to ask, if you are turned down by one or a group of investors, if they know anyone else who might be interested. They often know each other and will happily recommend other people for you to contact – provided that they feel good about you and your idea.

10.5 They will not descend from the heavens on gossamer wings carrying bags of money. If by some chance they do, they’re not just simply going to hand those bags over to you.

In short, there is nothing supernatural about angel investors. If your first attempts don’t pan out, persevere; if your strategy is good, change your tactics. Keep on keeping on. Above all, stay out of your own way. The tips above should help you to do that. Eventually you will either find an investor or decide to give up. But don’t give up too fast.

Jeanette T. Wallace, Ph.D.
jeanette@leadership-works.com

http://www.leadership-works.com

314.772.7727

Jeanette Wallace, Ph.D., the president of Leadership Works LLC, is an organizational psychologist based in St. Louis, Missouri. Briefly stated, her firm’s mission is to help people and organizations get out of their own way as they move towards achieving goals. She has both individual and/or corporate coaching practices, all aimed at getting improved results both personally and organizationally.

She takes a process approach in her work and appreciates the strengths that clients can leverage in turning potential into performance and helps clients recognize and use them. She offers processes specifically focused on leadership, strategic planning, customer loyalty and both individual and organizational assessments.

Jeanette is an expert facilitator. She has practiced organization development for 25 years as both an internal and an external consultant to executives and managers of companies in a variety of industries. Clients in transition find her services particularly valuable.

photo credit: jaroslavd

It’s not new news any more, but China is on track to become a major economical superpower. Many people see it as an “upcoming” market, and often group it with the BRIC (Brazil, Russia, India, China) theme, but the growth in China is so fast, it actually poses a risk to the economy there.

Foreign companies and investors have jumped onboard in the last few years, even with the risks associated with the red tape that seems a bit more complex in China’s market than elsewhere. Foreign investment in China rose almost 50 percent for the first half of 2008 in comparison to the same period in 2007 (up to $52.4 billion), which was beyond all expectations and projections.

Over 14,000 businesses in China were financed by foreign investors in the first half of 2008, and this includes an increasing number of start-ups and small businesses. Many angel investors and entrepreneurs alike have been looking at making that step into the Chinese market. Factors such as the sheer size of the consumer market in China and the fact that Chinese residents’ disposable income is expected to rise make this a potentially lucrative investment opportunity.

The market in China is still in its early stages, and that is perhaps the most intimidating part. Unlike Hong Kong and Singapore, foreign investment has only been allowed in recent years. Only recently has China allowed foreign investors to form companies owned by foreign capital. These new changes have helped increase business flow within the country, and more tax friendly incentives for start-up businesses have been formed via Special Economic Zones and Development Zones, but there still is a long way to go.

With a strong economic surplus forming, China is not just becoming a place where foreign companies and investors look, but where a new wave of angel investors are emerging. By the end of 2007, more than 5,000 domestic Chinese enterprises had established direct investments in 172 countries and regions around the world. However, statistics show that Hong Kong is still the top foreign investing country in this part of the world. Critics do say that part of this is via Chinese companies looking for a tax break.

Foreign investment has been a factor in the markets of Hong Kong and Singapore for slightly longer. For instance, US companies are the top foreign investors in Singapore, followed by Japan, but Angel Investment is still relatively new in these locations.

Having angel investors in these markets is not a far fetched idea though. Several angel investor groups such as the Angel Investment Network have noticed this and have formed branches in China, Hong Kong and Singapore. The markets are still developing but show a lot of untapped potential and the Angel Investment Network’s portals should help bridge the gap between entrepreneur and investor.

Mike Lebus works with entrepreneurs seeking investments, via the Angel Investment Network websites of Angel Investors China, Hong Kong Investment Network and Singapore Angel Investment.