photo credit: ronbrinkmann

There are lots of articles and books written about the formula for start-up success, but start-up mistakes are much more consistent. These common mistakes will take even the best idea into start-up dead pool.

Greed

Getting rich quick only happens playing the lottery. If you are starting a company for a quick flip you are guaranteed to fail. If you suck all of the first profits into your personal bank account, you will fail. “Greed is good,” if your goal is failure.

Too Much Money

Flush with cash has put many a venture into complacency and on slow track to failure. Too much money often quenches entrepreneurial hunger, slows reactions, kills a sense of urgency, and can lead to a slow death.

Too Little Money

A lack of money can be just as hazardous. Lots of great ideas have certainly flamed out prematurely without sufficient funding. Given a choice, less is better, but none is certain.

Finding the right funding level is a balance between giving an start-up enough funding to test and adjust, but not enough to draw in laziness.

Believing There is No Competition

The number one lie told by entrepreneurs to venture capitalist. It is never true and believing it will get you beat every time.

When thinking about competition think about who is, who can be, and who will be. Create a plan for each. Put it in your business plan.

Equal Partnerships

The buck has to stop somewhere. Business by consensus will fail. It will slow you, divide you, and end you.

A start-up never has enough resources to lose focus or direction. You need to constantly be focused on the market, not internally. Equally partnerships turn your company into an never ending board meeting.

No (or Weak) Leadership

Start-ups need passionate, benevolent, dictators. If that isn’t you carefully select a partner that is. A young company needs definitive vision, direction, and tenacity to keep everyone locked into the same core success philosophy.

Weak leadership wastes time and money. Both guaranteed recipes for start-up failure.

Creating Products in a Vacuum

Products need customers and users. If you create without them you might as well not start. People buy when they feel valued, involved, and expectations are met. If you are developing only with internal requirement builders and product testers you will fail.

Big Customer Curse

A big customer can be very attractive and efficient for a start-up. However, you will forever be in jeopardy and the weight of that customer’s influence can lead you out of the bigger market.

Perfection

Release early and often. Perfection creates the “vacuum” effect, gives the competition time, and may lead you into a slow death march.

Low Prices

Cutting prices is a gut reaction to slow adoption or sales. Think about signals you are sending your market and the customer–Less Value Here.

If the market will not pay you what your product needs to yield to be profitable then cut it and make a new product.

Trying to Do it All

Focus is a start-up’s friend. Trying to do everything well, as the old saying goes, will lead to nothing being done well. Remember, you only have limited time and money. Focus.

Bill Rice helps companies convert web traffic to buyers. He is a recognized expert, adviser, writer, speaker, and entrepreneur in online lead generation.

Bill Rice is passionate about the social web (social media), online community building, and creating online consumer experiences. Bill Rice regularly applies those passions to design and write money making lead generation projects for his clients. Tell me about your project at It’s About Conversion! or Urgent Leads.

photo credit: armandoalves

In our investment banking business we are often contacted by business start-ups asking for our help in raising money. I am sure that we were not the first organization that was contacted and that these hopeful entrepreneurs had been searching for months for funding. I try to be helpful and spend time on the phone with these people asking what I consider to be basic Business 101 questions. What is your product or service? What unmet need is it designed to fill? Who else is in your space? How does their product or service compare to your product or service? What is the size of the potential market? Why would a customer switch to your company? How do you plan on selling your product?

Often I am amazed that the entrepreneur has focused inwardly on his hobby or invention or software and has given very little thought to the potential market. Why build a business to sell to a small market segment? Every once in a while, an entrepreneur contacts me and the product or service really hits me as a winner. That is what happened when I was contacted by Russ Notestine, an inventor with a unique product. He had many of the elements mentioned above going in his favor but was still struggling because he had little experience in actually marketing a product. One of the reasons I got interested was that Russ had created a product designed to help back pain sufferers.

Well, that was me, so I was all ears. I had tweaked my back in an athletic event, still approaching the competition with the zeal of a college athlete but trapped in a 50 year old’s body. I was in significant pain and took the usual over the counter pain killers that only reduced the pain by 10%. The next day I could hardly get out of bed my lower back pain was so intense. I called the local chiropractor and began a treatment routine that involved 3 visits per week, heat, electric stimulation and adjustments. I bought my kneeling chair so I could actually work. I even bought the inversion boots so I could hang upside down in an attempt to provide some kind of relief.

My chiropractor got me to the point where I was at least able to be productive at work, but I continued treatments for almost a year. The medical bills were expensive, totaling about $6,000. The really expensive part was the one and one half hours I took out of my work day 2 and 3 days a week. If any of you run your own company, that expense dwarfed my medical expense. Nothing was working for me and I was ready to eat spiders if I thought it could make this problem go away.

Well, Russ tells me that I am not unusual and that 50 million Americans will suffer from at least one bout of serious back pain in their lives. He had passed test number one. There is a huge market for this product. He is explaining how his Vacupractor works and I am thinking (having seen or heard it all from start up companies), oh come on. He says he has this molded plastic shell that is about the size of your back. He tells me that you spray the device with water and then lay down on it. You then pick up your legs and slowly lower them and this creates a vacuum suction as the air is expelled. The device sticks to your back almost like a hard contact lens sticks to your eye. He explained that the suction stretches your back muscles and gently aligns your spine. Given that I was ready to eat spiders, I asked him to send me the Vacupractor.

My back had been OK for a few months so the thing sat in the box for a couple of weeks with little attention from me. I then strained my back again in my next event and I was feeling the beginning of another bout of back pain. I got home and got out the device and sprayed it with water and followed the instructions to expel the air and create the vacuum. I laid on it for about 15 minutes and could feel my back muscles relax. When I got off it, the pain was not completely gone but was considerably reduced. The next morning I got on it again and as I worked that afternoon I suddenly realized that I was not thinking about my back because the pain was totally gone and the start of a potentially long and painful lower back pain bout had been avoided. I couldn’t believe it. I called Russ to tell him about my experience and he said that is pretty much what he hears from other users.
photo credit: Marco Gomes

I was so grateful that I told Russ that I would try to help him with his marketing and sales. We still do not have that solved, but in terms of the other elements for a start up succeeding our entrepreneur has several things going for him:

Huge potential market

Totally unique solution to a painful problem

Cost competitive – the device costs less than 1 chiropractor visit

The potential for a big word of mouth viral marketing boost

Good product gross margins

I don’t think Russ consciously thought about the Business 101 issues when he started. He was a back pain sufferer and an inventor and he had an unmet need because none of the existing products solved his problem. He set out to create a lower back pain remedy for himself and when he got the solution, he thought, wow, I really have something here and there must be a huge market for it. I think he is right. Now if he can figure out how to generate meaningful sales with a limited marketing budget, he has a chance to turn a great product into a great business.

Here is an examples of a business idea that did not pass the Business 101 start up test. I was contacted by a software company that had built the best system for managing the sourcing of clothing to overseas contract manufacturers. They spent $1.5 million in development before doing any research on the competitive landscape. It turns out that for them to be reasonably profitable, they would have to sell the software license for a minimum of $50,000 per company license. The competitive systems in the industry, although not as robust as this one, had 85% of the functionality. They charged a monthly license fee of $300 per month. Our guys were priced way out of the market and literally shut this division down.

What an expensive lesson that should have been avoided before the start. If you are thinking of creating a company, make sure the economics are in your favor before you start. Are your margins going to be high enough to make the company viable? Another huge oversight by these very optimistic entrepreneurs is they figure like in Field of Dreams, if you build it they will come. Save that one for the field of fiction. In business, if you sell it they will come. Even the best ideas and the best products will die if you are not able to achieve meaningful distribution in a cost effective fashion. Go through this little exercise before you start. Who is in my space? How do they sell their product? Is it through a direct sales channel? What does it cost for a salesman to sell the product? What volume can a salesman reasonably expect to sell in a year? What revenues and profits are generated by a salesman at 100% of quota? What is the company’s cost for a salesman at 100% of quota? Does it make economic sense?

The Internet has been a game changer for start-ups with very few barriers to entry. These companies are very easy to start, but almost impossible to scale without some big funding. The sad truth is that the guys that are starting these businesses and getting the funding are guys that have done it before. A great article was recently published in Fortune Magazine about the original founders of Pay-Pal. Well these folks have made investors a lot of money before and the odds are very good that if they did it once, then they can do it again. That theory has been validated with these wizards founding Digg, LinkedIn, Slide, Mozilla, Technorati, and having a significant investment in Facebook.

The VC’s line up to give these guys money. For others it is a painful process of endless meetings and presentations and no money. As a start up company, you have many things going against you. Make sure you are not blinded by your great idea. Think about the market demand, your competition, your margins, your sales and marketing, and getting your company to break even. Do not get distracted trying to attract VC financing at this point. If you can generate enough sales to fund your operations through bootstrapping, you have passed a big test of market validation. If you now need financing to take the company to the next level, then the professional investors will start to listen.

Dave Kauppi is the editor of The Exit Strategist Newsletter, 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: Valdo Raps

Its no secret most entrepreneurs have limited resources as it pertains to how and where to secure capital infusion. It is these limitations, which precludes small businesses from moving past level one in business and on to a more lucrative future.

There are numerous loan programs and lending institutions servicing small business owner’s nationwide. The problem is not getting the money, it’s how and where to find it. If more business owners knew how and where to secure capital, there would be a larger number of businesses growing and succeeding than those that are dissolving-today.

When our government enacted laws and policies to protect and support our economic system, which is the mainstream source for derived goods and services supplied by the business community, it included providing capital infusion to businesses for the continuity of our economy’s stability and growth. Today there are various resource centers, which provide an array of business development services such as the Small Business Development Centers (SBDC), Service Corps of Retired Executives (SCORE), Women Business Centers (WBC), and Veteran Business Opportunity Centers (VBOC). Take advantage of them, they can be viable to the success of your business.

First things first- you must do your research. You should know: the different types of lenders; what loan programs they offer; how much they will lend you and what is their criteria; what other financing options are available to you and what are their lending policies.

To get you started. There are four types of lenders (1) Traditional Lenders- larger chain banks; strict criteria; larger loans; preferred SBA lender, (2) Third-Party Lenders- community sub-lenders which offer smaller loans and partner with traditional lenders to process loans ranging from $100,000 to Millions, (3) Private Lenders- provides in house financing, offer smaller loans; lower interest rates; flexible criteria and accommodates start-ups, and (4) Investors- require a higher interest rate on their return; part ownership of the business; some will provide management support and have access to viable resources.
It’s very important to know whom you are asking money from. It’s like the term we use “know your competitors inside and out”, well the same principle applies here. Why? to compare financial products that best accommodates your needs. You want to secure the best deal at the best rate. I always recommend my clients prepare a Where’s The Money Strategy. Having this kind of strategy helps you identify your financial need, compare loan products, determine which lender best suits your need and which lender offers the best deal.

Now you might be saying, “there’s no money available, lenders are not issuing credit to anyone right now”, yes there are still some cash flowing lenders out there. Traditional lenders might have tightened their reigns, however private lenders, local community banks and some third-party lenders are still in the business of lending money. Although we are currently in an economic downturn, they have not been inflected in such away as the traditional banking institutions, which allow these lenders to remain strong and more vital to the business community.

Did you know the Small Business Administration has loan programs designed to meet the financial needs of all aspects of the business industry ranging from $5,000 to Millions? There are six programs used widely to address these needs. The Community Express Loan, Patriots Express Loan, SBA Express Loan, and CAP Lines which is an umbrella of five additional programs (1. Seasonal Line of Credit, 2. Contract Loan Program, 3. Builders Line Program, 4. Small Asset Based Line (SABL), and 5. Standard Asset Based Line. Then there are the two most common loans 7a and 504.

I recommend contacting your local VDEC center and visiting the Jewish Free Loan Associations website www.jfla.org and Accion at www.accion.com, if you are in need of a small capital infusion- $15,000-$25,000 today.

As a business strategist for many years, working with small businesses and lenders, I’ve discovered faults and weaknesses of the lending industry, which has made the borrowing process for minorities and women challenging. In my new book “Where’s The Money? Accessing Capital”, outlines specifics about how and where to secure capital infusion for start-ups and existing businesses.

Visit my website to learn more about the Wade Institute http://www.wadeinstitute.org and my ebookstore for newly released books http://store.wadeinstitute.org

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: star5112

“Get an introduction to the venture capitalist.” It’s good advice. It just isn’t always possible, or even likely. Many outstanding entrepreneurs with equally outstanding financing proposals simply don’t have The Introduction.

Unsolicited, and un-introduced, financing proposals are typically tossed into the dog pile or slush fund or circular file. In most venture capital firms it is the job of a new member of the firm, typically someone with a freshly scrubbed MBA, to weed through that pile, toss out unlikely candidates and pick out any projects that are worth looking at. So the first barrier is a young, ambitious, very well educated, inexperienced person who wants to make a good impression on the partners in the firm.

Getting out of the Dog Pile

About 90% to 95% of the proposals in the dog pile are tossed. Some of the top reasons for tossing proposals at this stage include:

Sloppy appearance. Loose pages held together with a paper clip, smudges on the pages, yucky colors – these are all quick “toss me” clues. This is typically the very first thing that the reviewer notices, so the appearance has to be commanding.

Too little information. A 1-2 page summary is very nice IF it has been specifically requested by the venture capital firm and IF it really does include the information requested by that venture capital firm. A generic 2-page summary sent to 200 venture firms is pretty much a waste of time. A 50-page dissertation on a new patent is equally ineffective – it just doesn’t provide all the information that a venture capital firm needs. The length of the proposal is considerably less critical than the quality of the information provided. Rarely can sufficient information be provided in less than 20 pages, and rarely is it acceptable to present more than 30 pages. And all of the pages – no matter how many pages there are — must be responsive to the needs of the specific type of venture capital firm.

Too much information. There’s a myth with some truth to it: When confronted with a huge pile of proposals to read, the reader will toss them up in the air, and the heavy ones that fall to the bottom of the heap will be read last. A financing proposal with three binders attached, with everything from incorporation documentation to copies of patents for competing companies, is too much. Like Scheherrazade’s stories, the financing proposal entices the reader to want more. Dumping everything in the venture capitalist’s lap before ever meeting him gives the venture firm no reason whatsoever to ask for more. In fact, presented with such an overwhelming glump of information, most venture firms would be extremely leery about asking for more.

Wrong format. There is a structure to a financing proposal: the beginning (the cover sheet, the Front Page and the Table of Contents), the middle (the guts of the information divided into logical sections), and the end (absolutely essential attachment, such as copy of critical patent). Omitting sections, or writing in the format of a novel, does little but confuse the issue. Leave the creativity to the presentation itself and keep the structure pretty basic.

Information that is too technical. Scientists and engineers waft poetic about inventions that are all but incomprehensible to everyone else. While it is safe to assume that the venture capitalist is intelligent (and he is!), remember that the first line of defense is someone who isn’t terribly experienced. So explanations really help. Pretty basic explanations help even more.

Lack of a concise Summary Page, with specific funding needed specified. The Front Page, or Summary Page, contains very specific information: the industry, the status of the company, the amount of money needed, the type of funding requested, and The Hook. The Hook is a brief note of whatever it is that distinguishes this company/invention/concept from the thousands of others on the market. Lacking ALL of this information on the Front Page, most venture capitalists won’t go further.

Lack of information on the principals. It is axiomatic that venture capitalists invest in people, not in ideas. There are tens of thousands, if not hundreds of thousands, of patents languishing in the Patent and Trademark Office. There are very few unemployed skilled leaders. Make certain the venture capitalist knows how truly talented your management team is.

Wrong level of investment or wrong industry for venture capital firm. Venture capital firms receive dozens of business plans every day that are simply inappropriate for them. Venture capital firms specialize. Some like small startups; some only invest in mezzanine stage companies. Some prefer investments under $2.5 million; some will only invest over $2.5 million. Some specialize in communications or biotech or energy. Find out what the venture capitalist wants before sending the proposal – you will save yourself a bundle in printing and shipping costs, not to mention the time saved in going after the true targets.

Accentuate the Positive

There are some things you can do that act as a catalyst in getting your proposal noticed (in addition to having a great business plan, which I assume you do have).

First, address the plan to a person, not to the company. In your research, you learned about which partners sat on which boards, which ones gave speeches at which industry event. Use that knowledge now to target the proposal to just the right person.

And, perhaps most importantly, in your cover letter tell why you are sending this business plan to this lender/investor at this point in time. Perhaps it’s because they funded a company that will be a major supplier of yours. Perhaps an associate recommended that firm. Perhaps you heard the principal speak at a convention. The fact that you got his name out of a book doesn’t count. Make the reason real.

Making the Second Cut

Depending on the size and culture of the venture capital firm, the initial reader, a mid level associate or even top partners may make the second cut. Criteria here focus on the specific needs of the venture capital firm, such as:

Emphasize symbiotic relationship with existing portfolio companies. Any company that can demonstrate a strong relationship to a successful existing portfolio company, or provide a means of creating profit in existing portfolio companies, is way ahead of the game. Not only will the venture capital firm be well aware of the industry, but it will welcome the influx of influence on the bottom line of its other companies as well.

Create strong ties where slender threads exist. So an Advisory Board member and the venture capitalist went to the same graduate school. It’s a slender thread of connection. But that graduate school needs to be listed prominently in the bio of that Advisory Board member. (As an aside, contact the department chair or known professors to see if there is a direct introduction available somewhere.) Create a database of all advisory boards, schools, publications, companies and associations that all of your key people, contacts and potential investors have. Cross reference those to everything you can discover about the venture capitalist. There probably are slender threads that can be brought to the forefront.

Demonstrate an in-depth knowledge of the industry and its profit structure. It never ceases to amaze me how many people think they know the retail business without ever having sold so much as a pair of shoes. The same holds true for every industry. Each industry has its quirks and foibles. Each industry has unique profit centers and modes of operation. Each industry has its true leaders and its falsettos, those who talk loud but don’t truly know anything. Nothing can beat actual experience in the industry.

The Final Cut

The top 2-10% of the proposals remain in contention here. About half of the entrepreneurs will be invited to present a dog and pony show. While the early stages of elimination are driven by industry standards, at this level it gets very personal. The selection process here caters to the needs of the specific venture capital firm at that specific point in time, and can change from day to day, or from week to week.

You can do everything absolutely right and be eliminated here. Perhaps the other companies in their portfolio have hit snags that haven’t reached the public yet. Perhaps the venture capital firm is in the midst of over committing to certain industries. Perhaps an IPO that was previously scheduled got pulled back, so the venture capital firm doesn’t have the money it expected to have.

Perhaps there truly is something amiss in your financing proposal that one of the partners picked up on.

The one consolation is that, if you have reached this high, you will likely get a call from someone at the venture capital firm expressing some type of explanation for not proceeding. At the earlier levels of elimination you probably heard nothing at all. Listen carefully to what the venture capitalist has to say, and proceed accordingly. And be encouraged. You ARE in top contention, even if this is not quite the right firm.

Look at your financing proposal again – this time from the perspective a first reader, and then from the perspective of a top partner in a venture capital firm intent on making money. Revise. Target. Send it again.

MaryAnn Shank, a recognized expert in the business plan field, devoted many years to sifting through business plans to find the real gems. She regularly contributes to http://www.businessplanmaster.com with advice to emerging entrepreneurs.

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: JUCCCE

When we purchased Rockford Ball Bearing Corporation out of bankruptcy in 2006, the venture capital market was flush with cash. This spring we sought an additional round of funding for our expansion. Venture Capital is never easy to find, but especially during these difficult economic times it is getting harder. New strategies need to be implemented to find capital.

There are several ways to prepare for VC interviews for funding. Three steps should be implemented out of the gate. These are verifiable and true options:

First, explore your accounting records, tighten up the ship. Cut as many overhead items that are reasonable without gutting your research and development budget.

Next talk with your employees, make sure that their advice is being heard by management. VC firms will start by talking with your employees at all levels. They will rely more on this feedback than your managers may be.

Last, review your business plans, take an objective look. See it through your worst critic’s eyes. What would they change?

The founder of our company Joseph Malik sold Malik Bearing Company to The Harvey Family in 1975. Malik Bearing was renamed Rockford Ball Bearing in 1982 when The Harvey Family had to reorganize the company during the protracted recession of the 1980′s. The due diligence was dinner and a hand shake. Today’s VC firms spend much more investigative time talking with suppliers and customers, reading industry reports and analyzing your firm against industry benchmarks.

The ball bearing industry is a tough business, as tough as the balls we mill. The margins are tight. Venture Capitalists seek the highest and best return for their investment dollars, and it matters not which industry they deploy their currency into. Leverage is a friend to returns of rising businesses but the enemy of gamblers who treat a manufacturing company as a casino. The Harvey Family over leveraged Malik Bearing Company and had to lower debts to get back on a positive stable business path again.

The Venture Capitalists knew this history and we worked hard to offer a better road forward for our business, they agreed and funded us $42 million for our expansion plans.

Michael Malik has run Rockford Ball Bearing Corporation since 2004, he has a MBA from Harvard University and has been a venture capitalist and business development executive in numerous industries.

photo credit: rachie lea

All businesses start with “the big idea”. The person with the idea often times does not have all of the start up capital that they need to turn this multi-million dollar idea into a reality. The first place that many business owners start to seek funding is from friends and family. This first level of funding is sometimes known as “FFF,” or Friends, Family, and Fools. Jokes aside, there is absolutely nothing wrong with this as a place to start.

Funding that you receive from friends and family does have its drawbacks. If the business should fold and you cannot payback these people back you risk losing those relationships. Also, this type of funding is usually limited. Where do you go next?

Many people might say that the next step is to go to the bank. This is a wise choice, but banks are typically going to want to see two years worth of financial statements at a minimum. This is often difficult for a start-up company to provide; hence the phrase “start-up”. Also, if the owner or owners have less than perfect personal credit, it will make this even more difficult.

So what does that business owner now do? There is no substitute for building the separate credit of the business. You can see results within three to four months. You can build upon those results to seek larger sources of funding. The business owners that I assist have seen great results using this process. They have gone on to acquire large credit lines, equipment leases, and vehicle financing. While a business owner is building the credit of that business, they often require an infusion of capital between the initial family and friends investment and the bank investment. That is where an angel investor would come in.

An angel investor is a person who invests in start up businesses. They are taking on a very high risk investment; most new businesses fail within two years. As a result, the investor is looking for an ownership percentage in exchange for the money invested. This is not to say that this investor will always have some ownership interest in the business. Approximately 90% of time, once the loan is paid back, the ownership interest is returned to the owner. While temporarily sacrificing a percentage of ownership may not appeal to some, it may be the road to success.

When a business owner decides to seek an investment from angel investor they must prepare a business plan. The plan presents the potential angel investor with something that outlines several different facets of the business with everything from financial projections to management profiles. A business plan is something that any business will need in order to seek substantial funding. An angel investor will invest anywhere from $25,000 to $3,000,000. As you can see, there is a very wide spectrum. There many factor which will influence the investment amount.

I titled this article by asking whether an angel investor is a savior or a sinner. Ultimately they can be both: They are asking for a stake in your business; however they are offering a way for your business to succeed. The most important thing to remember is that an angel investor can be the solution to the problem of intermediate funding allowing for the dream to become a reality.

Hazen Martin
hazen@fasttrackcredit.com

http://www.fasttrackcredit.com

photo credit: pshutterbug

Let’s face the facts. US economy is going though one of the worst crisis ever. The European economy is better, but not significantly so. Developed economies are too small fries, and so not seriously worth considering. Or are they? Some of them, heavily dependent on exports to the US and Europe (like China) could suffer as long as the western economies suffer.

There’s one market that is doing well. In fact, the markets have started bouncing back. Foreign Institutional investors have started buying into. many of them see India as among the if not the best investment opportunity today. That is India. Because, it’s a growing economy, and its growth is more due to internal factors rather than external. Risk factors are very low and returns prospects from equity investment are very high. and there are so many funding opportunities in the sunrise sectors of the economy.

If you study the inflation-adjusted yield from investment opportunities in the western economies over the last decade, it is close to zero or only slightly positive.

But if you study the inflation-adjusted yield from investment opportunities in the India economy over the last decade, it is well over 10%. And chances are that it is going to start making very high RoI in the next one year period. Particularly, projects that are good investment opportunities are going to do exceedingly well.

So, intelligent angel investors & private equity investors will do well to start investing in futuristic projects in India.

Richard Runion is an ePublisher with a wide variety of interests. He is aware of good private equity/ angel investment opportunities in India, through his Indian business partner. Interested investors may contact Rich at http://www.geostarpublishing.com/investment.php.