Bootstrapping is when you the Entrepreneur decide to go it alone using on the ground resources from personal savings to second mortgages. Equity Financing is when you the Entrepreneur decide to give up a percentage of the ownership of your company in exchange for needed capital.

Bootstrapping Early Sources:

1. Founders’ Capital

2. Savings

3. Credit Cards

4. Second Mortgage

5. Venture Leasing

6. Sales Revenue

Bootstrapping Later Sources

1. Lines of Credit

2. SBA Loans

3. Asset Backed Lending / Accounts Receivable Factoring, etc

4. Corporate Strategic Partnerships

5. Banks that Lend To Start-Ups

6. Government Grants (e.g SBIR, DARPA)

7. Company Earnings

Under Equity Financing, depending on the source one may have to give up 25%-75% ownership of the company. This is usually depending on the nature of the deal and what can be negotiated. Under Equity Financing you must also be aware that there are Early and Later Stage Sources.

Equity Financing Early Sources

1. All Bootstrapping Early Sources

2. Friends & Family

3. Angels

4. Angel Groups

5. Early Stage Venture Capital Firms

Equity Financing Later Sources

1. All Bootstrapping Sources

2. Venture Capital Firms

3. Corporate Venture Funds

4. Private Equity Firms

5. Private Placement Firms

6. Mezzanine Financing Firms

7. Investment Banks

8. Public Markets

In order to make a sound financial decision make sure your Business Plan is strong and paints an accurate picture of your business idea or project. Proformas and Valuation of the business must be honest and realistic. Angel investors and Venture Capitalist are only going to back ideas and companies that are going to surrender the safest and strongest (ROI) return on their investment.

Author: Doyle Roberts
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Institutional Investors refers to the group of financial organizations (such as investment companies, endowment funds, depository institutions, insurance companies, and pension funds) or high net worth individuals who invest in companies and businesses and fund their start-ups. Venture capital is meant to provide businesses a financial cushion. Equity providers are the last to take a call on a companys assets. Considering the low priority given to them and in the absence of current pay requirement, equity providers offer capital on high rate of returns.

Equity Funding Mode:

Majority of businesses prefer the equity funding mode. Such funding is provided the venture capitalists or institutional risk takers who could be large financial institutions or high net worth individuals. Such investors constantly look out for start-up businesses where they can invest their money. They prefer to invest in at least three to five year old companies that posses the potential of becoming large national players in the long run. Such venture capitalists check several potential investment options annually but may choose to invest only in few of them.

The venture capitalists may choose to participate in the management strategies of the company, in which they invested. They generally play a passive role in that companys management, however, are free to react if they do not find certain things in the management worthy from the investment perspective.

Generally, the venture capitalists do not prefer funding start-ups and financing companies in their early stages, as the level of risk associated with such companies is often high. However, there are exceptional cases, wherein, the entrepreneur has obtained such a funding pattern, if he has a proven track record in the business where he operates.

Securities Offerings:

Producing genuine securities offering before the investors, while seeking for their investments is must. Otherwise, your company may end up violating the Federal and State Securities Laws, which could have disastrous consequences.

Research the market well for the right contacts of private capital before structuring any deal. Check out the contract options available in the market carefully. The most popular options are royalty financing contracts, preferred stock, and short-term mortgage loan that has a tenor of three to four years.

It is advisable to enter into a contract with a trusted entity for fulfilling the securities offering procedure for the company, for the firms safety. Such a contract ensures that you, as an issuer, are not liable for any violation of regulatory compliance.

Author: Alexander Gordon
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For a few thousand dollars, consider using your credit cards or obtaining a new credit card account to fund the business. Use that card only for your business and you’ll have a way to keep track of your expenses as well.

Another avenue for finding money for starting a business is to use your home equity loan, especially if you need, say $5,000 to $10,000. The interest rate on home equity loans are usually much lower than credit cards, but be careful. If you can’t pay the money back or make the additional monthly payments you could lose your home.

Look towards the heavens if you need an angel investor. Angel investors are private wealthy individuals who invest from $50,000 to $100,000. Most of the time the company they invest in is high tech and looking at a fast growth period. Angel investors will become involved in the day-to-day management of your company so keep that in mind.

Venture capital receives a lot of press and does invest billions of dollars, but, and it’s a huge but, only about 20% of the companies receiving venture capital are start ups. The average investment by a venture capital firm is in the millions, so it’s not appropriate for small businesses. Less than 1% of companies seeking venture capital successfully obtain it, that’s only about 4000 companies per year.

You might consider alternative sources of financing such as obtaining inventory through consignment, royalty financing, trade and barter or purchase order financing.

Many small businesses think that a grant from the government will be their saving grace. Unfortunately there are very few government grants available for businesses. Those that are awarded, are done on a competitive basis to established companies usually in the medical or technical fields.

However, grants or very low cost loans, are sometimes available through cities and states for the purposes of urban redevelopment, in blighted neighbor hoods or to increase employment.

Money for starting a business can be found in a number of places and should be one of the first tasks an entrepreneur should complete.

Author: Dee Power
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The questions that run through an entrepreneurs mind are nearly endless. Do I even need the money? Is my company fundable, regardless? How much do I need? How much should I try to raise? Whats the best time to start raising money? What type of investor should I approach, and what are their expectations? How should I go about approaching them?

I could fill up the rest of a page with salient questions an entrepreneur might have. This might be the most daunting process in the minefield of difficult steps to forming and building a winning high tech company.

So youre a new entrepreneur, with a great idea, a prototype, and a vague notion that you might need to raise some capital. Where do you go from here?

NO COOKBOOK FORMULA

Well, like most things that really matter, theres no easy answer. It depends on what type of company youre trying to build, your own control and risk/reward mentality, as well as the dynamics of your market.

For discussion purposes, Ill focus on an embryonic software company. Most of the discussion will be just as relevant to a later stage business, or an early stage manufacturing business. In a manufacturing business, youll need to raise more money to fund manufacturing in the ramp-up phase. But the initial fund-raising is very similar.

FUNDRAISING BASICS

First of all, lets quickly cover the various categories of capital sources. There are many variations and shades of gray with respect to funding sources, but the following are representative of the basic categories available to new software companies:

1) Self-funding

2) Friends & Family

3) Angel Investors

4) Venture Capital

5) Strategic Partners

Hopefully, these categories are pretty self-explanatory. Next, lets look at what TYPE of company the entrepreneur is trying to build:

A) Lifestyle Company

B) Solid Single

C) Home Run

A Lifestyle company is one in which you are often intermixing your personal life with your company life. There may be family members involved in the business, your write-offs and accounting are more aggressively aimed at reducing taxes than showing profits, and you arent interested in or planning to sell the company anytime soon. Solid Singles and Home Runs are similar to each other; the major difference is market size/opportunity.

Lastly, lets talk about what outside investors look for in a fundable venture:

I) Management

II) Market size/opportunity

III) Defensible differential advantage

The three items listed above are all crucial, but they arent equal in importance. Professional investors look for strong management teams, but if there are holes in the current team, it isnt necessarily fatal for many investors. Theyre happy to help you fill out the team. Many, in fact, prefer it this way. But having a large market opportunity and strong differential advantage are non-negotiable in the eyes of investors. They are looking for big returns. Its a long-held view among institutional investors that their own management time is the limiting factor in their own business. As a result, they dont feel they can afford to invest in solid little businesses. If you dont stack up as having big potential in both of these key areas, almost every professional investor will take a pass.

YOU HAVE TO LIVE WITH THEM, TOO

Another important consideration that many entrepreneurs fail to consider is how well potential investors fit with the companys management. Management teams are often so focused on getting the money that they fail to consider that you have to live with them, as well. Its a bit like getting married. You may be thrilled to attract the most prestigious investor (like the best looking potential spouse), but end up with business philosophy and personal conflicts that severely retard the companys development. This isnt a used car transaction, where the sale is made and the parties walk away. You and your investors are now intertwined, but may or may not have the same interests.

So ask yourself: Is this a good match?

Are you seeking a hands off investor, or someone that will get involved with the detailsproviding business guidance and contactsfor better or for worse? Many VCs, for example, have successful business backgrounds and networks that can make them invaluable as advisors. Theres another group, however, that dont have the background or skills to run a company. Yet their arrogance leads them to believe they are eminently qualified to drive even the most strategic of decisions. Are they going to be so involved that it will take up much of your scarce management time that is needed to build the business? On the other hand, are the investors so busy that you wont be able to get their attention when you need them? Which type do you want on YOUR board?

Its true that the money that you raise is a commoditybut the people relationships that come along with it can make or break your company. Early stage fundraising, taken as a whole, is NOT a commodity function.

THE LIFE STYLE COMPANY

Now lets look at the simplest case study. An entrepreneur has conceived a software business using his knowledge of a particular, very specific, vertical market. Its a market he knows well, and theres almost no direct competition. Unfortunately, the market, while attractive to him, is not large by software category standards. Yet the market is plenty big enough to support a very profitable company, particularly since there is almost no competition. Hes proven to himself that he has a solution that the market will embrace, allowing the building of a business. Yet he thinks he needs a little additional capital, to ramp it to the point of the business being self-supporting using its own cash flow. What should he do?

This is the classic example of a lifestyle company in the making. Sophisticated outside investors will have no interest, unless its for personal/hobby reasons. And since there is little competition, and as a result, little time pressurefund it yourself. Take out a second mortgage, use lines of credit, or get an SBA loan. If you really have to, raise some money from supportive friends or family members.

This example makes up the great majority of software companies worldwide. There are many, many solidly profitable software businesses that will never be on the radar screen of the investor community. These companies often exist quite nicely, enjoying solid and relatively stable profitability with revenues in the $1-10M range. Thats finethe problem lies when the entrepreneur doesnt know what he has, or wont accept it. He thinks his baby needs to grow up to be a fast-growing player. But its generally the case that the market is too small. There is little need to be distracted by trying to raise funds from outside investorsand its fruitless to try. It will only be a waste of time for the company and investors. And if by some chance it IS funded, there will end up being a lot of turmoil and hard feeling when the company doesnt meet the lofty expectations that were needed to sell the funding deal. Ive seen many great little companies screwed up in the attempt to become something theyre not.

THE SOLID SINGLE

Now well examine the next step upthe solid single. This opportunity often presents as a bigger vertical than the life style company is attacking, or possibly a horizontal, yet still niche, product. These are often the situations where the most difficult strategic decisions reside. And in fact, the great majority of software companies who seek outside funding probably fall into this category. The market size is just on the edge of what the professional investors will consider. And while there is a differential advantage, its not at the level that youll be able to knock their socks off in your slide-show pitch. Theres worrisome competition, but its not over-crowded, with 75 venture-funded companies. Whats a management team to do?

This is a tough call. Every situation is a little different, but my general advice is to work your way up the 5-part funding tree discussed earlier. Fund it yourself as long as its not crippling your progress. Then do a round starting with Friends and Family, as well as Angel Investors that are easily approachable via your immediate network. Once you go through this funding, hopefully youve built a rapidly improving business with good growth prospects.

It is at this point you may be able to attract money from a VC or private equity firm that has a later stage, more conservative risk/reward profile than the typical early stage VC. Professional investors might see in your company one that may not be a 10X return, but one that may be a 2-5X return in a shorter timeframe, with less risk. And this later funding may work to your benefit, because the opportunity in front of the company may be such that you need to manage dilution of your stake carefully, to ensure that at the end of the day, its been worth your while. A strategic partner may be even a better fit here. Often a company in this situation may be able to attract funding because their product is important to the prospects of a larger partner company, filling out a total solution or providing a key technology the larger company cant quickly or easily replicate. In this situation, the company may even get a richer valuation that the Home Run scenario which well look at next.

THE HOME RUN

Lastly, theres the classic Venture-funded company, the one with Home Run potential. These are the companies that VCs are out seeking to fund. These are the hot young companies that you often read about in the newspaper or trade journals. A high profile engineer, or someone else well known has started the company, with some cache in their field. The technology of the company appears to have breakthrough potential. The market is new, expected to grow to be very large, and is very newsworthy. But the competition is expected to be very intense, both from established players and a spate of new startups. This is obviously a very different situation than the two discussed above.

In this situation, youve got to go get the money. Time is of the essence. Getting established in the market early is crucial, and economies of scale usually become important as well. So a company in this situation typically needs to raise as much money as possible, as early as possible. All the steps are compressed here; and the time between funding rounds may be only a few months in extreme circumstances. Its best, if possible, to skip the more casual funding sources and go very quickly to where you can raise large amounts of money very earlythe VCs, and possibly strategic partners. Care needs to be taken on how you approach VCs, however. Unless you know them personally, never approach them directly. Its one of the peculiarities of the VC community, and considered perverse by most people outside the VC community. The VC community has their reasons, although their rationale is certainly arguable. But no matter–it’s one of the rules of the game. Always approach them through a service provider (Accounting firm, Law firm, etc.), or another entrepreneur who has been successfully funded by the VC firm in the past.

Until you can get a commitment from institutional investors, however, take money from wherever you can get it, within reason. Self-fund, friends and family money and Angels may all come into play if there is a delay in getting the institutional money to buy in. Dont worry very much about dilution in this case. The choice is often one of potentially ending up with a small, valuable percentage of a company with a large market cap, versus a large percentage of a failure. As you can see, the advice in this scenario is almost the complete opposite of what Ive recommended in the two previous examples.

A STRATEGIC DECISION

But its all fund-raising, right? Why such different advice?

The advice varies because fund-raising is one of the most strategic activities facing an early stage high tech company. Many entrepreneurs view raising capital as a generic operational activity, like choosing a bank or leasing office space. It’s viewed as just a necessary evil, because every business needs money to survive and prosper. This discussion was intended to demonstrate that raising money should be viewed as one of your most important strategic functions–a decision that is taken with an eye for its effect on your competitive position, no differently than choosing the best technology platform to adopt, or what marketing mix to use to outflank your key competitor.

I know that there are many of readers out there who have run the fundraising gauntletgive us the benefit of your wisdom! Contact me with the info. below.

Author: Phil Morettini
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To determine the appropriate balance between the capital debt (borrowed money) and venture capital (invested money), two points should be considered. In the case of debt capital, if for any reason you cannot pay loans on time, it is very easy to be forced into bankruptcy. Moreover, the venture capital appears to involve less risk but presents another problem: the control. Unlike lenders, investors have the right to intervene in the management of the company. While most venture capital is obtained, there is greater ownership ceded to others.

It is needless to say the project funding source that is the safest and least expensive is that of the owner. Your own sources of funding may come from your savings or properties. If you decide that you want to share participation you may opt for other financing sources.

There are very few opportunities of not having to invest any money in the company staff. How to start a business involves risk, creditors and investors expect the listing owner, share the risk. But there are exceptions. If you have good ideas and a lot of talent and skills that will help the company, they can help you do project funding or replace the capital entirely.

On the other hand if you are planning to use only your personal resources for project funding, it is necessary to reconsider. Instead of putting money directly into the company it may be better to use as collateral for commercial loan. This not only increases the credit for the company, as the interest paid on the loan is tax deductible, and the loan can be considered almost free of charge.

Another popular source of project funding is family and friends. They can help you create your own business when you borrow money from them but in a concept of a loan payable in the short term. You need to consider taking a few measures in order to avoid problems with your investors.

In order to avoid misunderstanding for those kinds of loans, you need to specify things in writing and try to formalize things as much as possible: what is the duration of the loan, what interest you will pay and when you will pay.

Remember that we your close contacts become sources project funding, you need to stipulate the conditions that will regulate their participation:

Are they or are they not allowed to participate in the decisions that you company takes?

Can the investor sell its participation to others if needed?

What is the method that will be used to divide earnings?

Author: Wade Henderson
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These numbers are not made up. They are actual numbers from actual reported venture capital funding. I get these notices emailed to me day after day, rain or shine.

I’m not personally looking for business financing – but the entrepreneurs who read my website are. These numbers are a constant reminder to me that companies – lots of companies – are getting funded every day.

And these numbers just reflect the reported venture capital funding. There is probably double that amount from angel investment and unreported fundings, and millions more from the $16 billion pool that SBA has this year.

All in all, it’s a lot of money. That’s a lot of companies and banks and groups and individuals actively investing in small business.

So how come you’re still looking for financing?

Perhaps you aren’t presenting your company effectively.

Or perhaps you haven’t located the right lender.

It’s also possible that your concept just isn’t very good, but I doubt that. The fact that you are reading this article means you are a serious entrepreneur, with a serious business.

So where do you go to find all these investors? Here are some starting points:

For standard business financing, talk with the local office of the Small Business Administration. It’s a new agency, with new programs and services, and lots of money to lend. Although much of the focus of the SBA is on minority business enterprises, the SBA still has a lot to offer non-minority companies.

Also talk with your local banks. (That was plural “banks”, not “bank”.) Talking with a number of local bankers will rapidly bring into focus the wide ranging priorities of the various banks, and where your company fit in.

As for venture capital and angel investors, there are several options.

One option is to go to online sources. There are a number of online services, such as VFinance, that sell the names and addresses of possible investors. It’s not expensive, perhaps $2-5 per name. The idea is that once you get the list of 200 or 2,000 names in hand that you will contact each with a written executive summary or business plan, and then wait to hear from one of them. This is a very passive approach, roughly akin to throwing paint on the wall and hoping that something will stick. If you are like most entrepreneurs, patience is not your strong suit, so sitting and waiting for a response is not quite your cup of tea.

Another option is to go to one of the many directories of venture capital firms. These directories typically include addresses, phone numbers and emails, along with the geographical areas of interest and the types of investment that each is seeking. Most businesses can narrow down their list of prospective investors to several hundred venture capital firms this way. And again you are faced with the prospect of sending out written material for each one, and waiting for a response.

A third option is to take a more proactive approach. Identify your best prospects yourself from a number of reliable sources. Get introductions where possible. Learn everything you can about your target investors, and then go after it. Typically a phone call is the first contact, not an anonymous executive summary. Knowing that you are calling your best prospects, you know too that they are open to hearing from you. You have names, you have investment histories, you have everything in hand to make a real connection with the target investors. Then go do it.

Getting your company financed is one of the hardest things you will ever do as an entrepreneur. It can be hugely frustrating, disappointing and genuinely discouraging. But lots of entrepreneurs do it. And so can you. Get the Nos out of the way and go for Yes! The exhilaration of the handshake sealing the deal is unlike any other transaction in business.

No one knows when this amazing window of financial opportunity is going to close. Spiffy up your business plan and go for it. Now.

Author: MaryAnn Shank
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In Boston.com, Mark G. Heesen has brought up a new concept when he was expressing his opinion about the evolving dynamics of the VC business. He said I see a bifurcation in the VC industry. Youre going to have your bigger funds investing internationally. But youre going to also start a lot of very specific funds being targeted to a region or a technology. Were starting to see this, and its only going to grow.

Bifurcation is irreversible.

As trend and technology are the only two tools that VCs can rely on, regional or technological focus for VCs is an acceptable strategy. They can focus, which will pave the way to better perceive the region or technology over time in order to grasp what is possible.

It is also totally understandable that capital owners will look for greater, smoother opportunities which requires less-perspiration to double, sometimes to quadruple their investments. And, apparently, international markets are greenfield opportunities.

The problem is, though, there is a high probability that international markets are not ready for such a huge shake-up. To make the story more scary, if not done correctly, global venture capitalism may lead to an infant mortality that will stop dumping of money to the international entrepreneurs when the need and opportunity is there in the future.

Timing is everything. John Cook, in his Venture Capital: Venture capitalists who miss and tell article discussing a meeting held by six Seattle area VCs. When they were talking about duds, Seattle VC Keith Grinstein, co-founder of Malibu Networks, said Malibu Networks had promising technology. But it entered the market about two years too early, a problem that led to missed sales targets, higher capital needs and other problems. Two years ago, we couldn’t find a customer, Grinstein said. Today, I read the paper and there must be 100 of them out there. It just kills me.

The fact of the matter is, global presence desire of VCs is no different. People are everywhere, ideas and willingness to take them to the next level under the roof of a business too. However, today, VCs should think twice before making promises to the international market as the equation does not only include ideas and entrepreneurs like their incumbent regions but also governments, bureaucracy, lacking intelligence, missing work ethics and many other risks.

However, there are decent tools in hand for assessing those risks. Global Entrepreneurship Monitor (GEM) delivered by GEM Consortium and Global Competitiveness Ranking and Global IT Report from World Economic Forum some of many that tell the gravity of any countrys investment readiness. Once it is satisfactory, other material to be used is Political, Economic, Social, and Technological (PEST) analysis before making any steps. PEST is a framework of macroenvironmental factors. The PEST factors combined with external microenvironmental factors can be classified as opportunities and threats in a Strength, Weakness, Opportunity and Threat (SWOT) analysis, both of which, will give VCs a rough groundwork about how investable the company is.

No matter how low-hanging fruit an opportunity is, being cautious needs to be the king. Systematic approach is a neccesity in global presence, not an option.

Until the global market is ready, the most workable idea sounds like covering overseas through partnerships. Partners need to be reputable vendors of the industry that VCs are planning to invest. A mutual benefit should exist. Also the partner vendor needs to have experience in the region. Forcing established vendors to a journey together for a hot startup, no doubt, will make VCs hand stronger.

The fact is, that is signaling a mission statement change for VCs. Joint effort with incumbent vendors is a new thing and some venturers may not enjoy this landscape of doing business. Though, the rules of global success are stiff and non-negotiable.

Author: Burak Fenercioglu
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In fact, in June 2005, Pasadena, CA-based solar company, Energy Innovations, raised $16.5 million in venture capital led by Mohr Davidow Ventures. At around the same time, Nanosolar raised $20 million (also led by Mohr Davidow Ventures), solar startup HelioVolt, based in Austin, TX, secured an $8 million investment from New Enterprise Associates, and Kleiner, Perkins, Caufield & Byers led a $16 million investment in Miasol, a thin-film solar firm.

The current focus on energy investments, and particularly “clean energy”, will hopefully be a true win-win; investors will make a good return on their investments and our environment will be positively impacted. In fact, The California Clean Energy Fund (CalCEF) was recently launched to “make attractive investments, but also to provide an engine of economic growth while reducing California’s dependence on fossil fuels.” Soon after this $30 million fund was launched, it announced agreements with three leading venture capital firms: Nth Power, Draper Fisher Jurvetson and VantagePoint Venture Partners.

While some of the venture capital firms are new to the energy space, Nth Power is not. The firm began investing in 1997 and has over $250 million under management, with investments in energy intelligence, power reliability, distributed generation and related services. Other traditional energy VC firms include EnerTech Capital, founded in 1996.

In the foreseeable future, energy and clean energy investments seem promising. Not only must alternatives to high oil and gas prices be combated, but nearly 20 states have already set goals for the percentage of energy sources that must come from renewable sources. As a result, there are many, many buyers for energy products; the challenge is for entrepreneurial companies to invent them.

Author: Dave Lavinsky
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During the last thirty years, merchant bankers have drafted and polished to perfection the requirements for investing successfully in high-growth private companies. Lo and behold, those principles happen to be the same as the elements of tribal marketing. How come?

Like in any business riddle, the answer is already contained in the question: both venture capital firms and tribal entrepreneurs aim at a rapid multiplication of invested capital. What are the characteristics that identify the potential of a business to grow at a compound rate of 15% per year and beyond?

1.- PEOPLE IN PAIN. It is not difficult to sell dental services to someone suffering from a horrible toothache. You are bound to do well if your new product or service addresses an urgent unsatisfied need, but there are not that many of those. Failing real pain, a strong emotional desire will do. Satisfying entrenched passions is the card played by tribal marketing, which is equivalent to the old venture capital dictum of seeking customers with maximum pain.

2.- PEOPLE IN TARGET. You won’t hit targets that you can’t see or reach in a relatively efficient way. Before investing in a private venture, merchant bankers check if the customers of that business are, to a good extent, a homogeneous group. Is your product or service aimed at a group that you can easily reach, such as trial lawyers, paediatricians, or school teachers? Starting your own parade is an expensive marketing method. The most successful tribal marketers find an ongoing demonstration, approach protesters, and sell them T-shirts favouring their cause.

3.- PEOPLE IN TOUCH. The best markets are those where customers sell themselves. If your product or service delights ophthalmologists, they will tell their colleagues during their next conference. If you use such strategy, customers will find you on the web without your having to spend much on advertising. Investment bankers always search for this factor of “spontaneous marketing” when considering funding a new product or service. Tribal marketers often go beyond this level and they actually provide themselves an internet forum for customers to talk to each other.

4.- PEOPLE IN GROWTH. “How are you going to grow your company year after year?” is one of the toughest questions that a businessman must face when trying to obtain funding from a merchant bank. If your venture is destined to become a one-trick pony, your growth prospects will be too limited to justify a substantial commitment from professional investors. Tribal marketers use the clever approach of searching for items that can please their existing customers, instead of developing random new products which would require massive marketing efforts.

In essence, the answer is in the method. It is a matter of throwing away what doesn’t work and focusing on the little cream that floats on skim milk.

* The highest barrier to success in venture capital investment is caring too much for a product, to the point of becoming blind to the market.

* The most difficult aspect of tribal marketing is forgetting about what you want and making the effort to understand other people.

Mental flexibility is as profitable as it is demanding. Alternatives might look sweet and comfortable in the short-term, but ultimately, death ensues through marketing asphyxia.

Author: John Vespasian
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Not banks.

Not family.

And definitely not loans from other non-banking organizations.

However, I recently heard something that made me think twice about exactly what kind of investor financing is best.

You see, while it’s true investor financing means you don’t have to pay any interest (after all, they are investing money, not loaning it), not all investors are made of the same stuff.

In this case, I learned about a dirty little trick many of the more “unscrupulous” venture capital firms will play on people. And that is to sort of “string you along” when you ask for money.

In other words, they will keep saying you will get the money you need next month or next week or whenever.

But in reality, they have no intention of giving you anything until the last possible minute.

Why?

Because, as any con man knows, when it comes to giving someone money, the longer they wait to give it to you…the more desperate you’ll be.

And the more desperate you are, the more they can ask from you in return.

In the case of venture capital firms, it will usually be getting more stock (and thus, control of your company) for their money.

Its a terrible thing for them to do. But many venture capital companies do it and so, you should be careful if you use one.

But really, this shouldn’t be a problem for 99% of people who buy a business.

Because if you are buying a smaller business, venture capitalists generally won’t bother with you anyway (that’s where “angel investors” come in to play).

And if you are buying a larger business (worth, say, $5, $10, $15 million or more) there are plenty of private investors — with more money than they can spend — who will give you whatever financing you need if what you are doing makes sense to them.

Anyway, keep this article in mind when thinking about how to finance a business you want to buy, especially if you don’t want to use a bank or other creditor.

Author: Michael Senoff
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