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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.

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A “Money Finder” is an individual or company who, for a fee, finds willing investors interested to invest in growing companies. The Finder formally links the Investors and Entrepreneurs with the purpose of creating a mutually beneficial financial arrangement.

Terms

Some terms used here may be unfamiliar. “Intermediary” and “Money Broker”, as used here, are other terms with the same meaning as “Finder.” “Entrepreneur” is an individual who seeks and assumes the risk of business growth, usually through direct ownership and management. “Angel Investor” is an individual with high net worth willing to take the risk of lending money to an Entrepreneur.

How does a Finder find willing Investors?

Finders spend many years building a reliable network of investors. The network is built through business contacts, successful business deals, and the personal reputation of the Finder. The Finder’s network is the heart and foundation of his own entrepreneurial business.

There are many types of Investors, including Institutional Investors, individual or Angel Investors, Venture Capital firm and Private Equity groups. New Investors are added to the Finder’s network on a regular basis, but not without considerable scrutiny, thought and analysis.

How does a Finder find worthy Entrepreneurs?

Many entrepreneurial businesses are ready and worthy of funding, but not all need the services of a Finder. Usually businesses using a Finder 1) need at least $1 million, 2) have a strong management team, 3) have a proven track record of growth and potential to continue, and 4) has the ability to generate revenue. Therefore, the Finder usually asks potential clients for information and documentation about their businesses. These include biographies and resumes of the management team, business plans, and financial statements. The Finder evaluates and analyzes the information to propose the best solution for the client.

How are Finders paid?

Finder’s fees are based on the amount of capital received. Usually, the fees are paid in cash or company stock or a combination. In general, the Finders fees are 5 – 10 percent of the amount of capital received with the higher percentage paid for smaller amounts raised. The Finder’s fees are often negotiable and always agreed upon before any services are provided.

Does a Finder need to be licensed?

The SEC, which regulates money-raising activities, sees a Finder as someone who’s acting as a promoter of the sale of securities and thus is required to have a Broker Dealer license. Ben Hendricks from Annacore Business Capital, LLC says” If they don’t have the proper license, then (a) they’re acting illegally and (b) any contract they sign with you is unenforceable, and therefore any portion of their fee that’s based on a percentage of the money raised is not collectable”

If you are an Entrepreneur looking for capital, take the time to ask the right questions before you hire any Finder.

Annacore Business Capital is a widely respected funding solutions resource. Our focus is assisting those emerging companies worldwide, which are seeking growth capital between $1 million and $25 million, to achieve their strategic business growth objectives. For more information about all of our funding options, please visit our website at http://www.annacorebusinesscapital.com or contact us toll free at 1- 866-767-9723.

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: cwbuecheler

Many start-up companies and even savvy business people are not aware of what it takes to find capital to launch their new idea or propel their business forward. There should be no shame in this because if you were an expert on it you would be in business finance and not the industry you are in. You are good at what you do so taking the time away from that can be detrimental to your business. One mistake 95% of business owners make is trying to learn and perform too much themselves, and not rely on outside help.

To structure a financial deal it takes good business planning and good business planning should involve financial planning and structuring. Unless you have a rich aunt or can self fund your project, you are going to have to sell yourself, your team, your idea, your business, etc to someone. Whether it is the manager at the bank, venture capital fund managers or private angel investors you usually only have one chance to make an impression.

In business financing, only 30-40% of deals are looked at seriously if they have collateral behind them and only 5-10% are taken seriously in the angel and venture capital world. The percentage of actual funding is even lower. These statistics are not to discourage you but to help you understand the importance of getting the right assistance. Raising money can become a full time job and if you are running a business you already have enough work to equal a full and part time job, so why add more to your plate than necessary. If you do there is a good chance that you are actually setting yourself and your business up to fail unnecessarily.

So understanding that raising capital is a full time job if done by you, what is the best way to ensure that you get the job done? The answer is hire it out and just oversee it as you would any other segment of your business that you are not an expert at. Take marketing for an example. Companies such as Coca Cola and Nike do not typically create their own commercials, brochures, logos, etc… , they have agencies that do it. You should take the same approach with financing your business.

When hiring a consultant, hire one that you can present your concept, brainstorm with, and have them do the job for you. Business finance consultants are invaluable to help start-up companies as most start-ups have a concept or idea and are overwhelmed with all the things involved to get the idea to market. To create a successful start- up you have to have a plan and a solid one. It does not mean that the plan is set in stone and you have to follow all the things you say to the letter. Good businesses are flexible and use the plan as a road map, in which they may have to take a different route to make it work better. Consultants help you down the road faster and should be honest of how and when you might need to take a detour to be successful.

An example of this would be raising capital. Different investors want to see the same overall structure in a plan but each one could have a different emphasis. One might think the strength of the team is most important, another might fund on the return on investment time frame, and another could have an entirely different focus. Investors will look at things different than lenders and venture capital will look at things different than angel investors. A good business finance consultant will understand this and will also know what road is the best to take. They will also have different sources they can present your completed plan or prospectus to but allow you to seek out your own as well.

An established business will also benefit from a consultant as although you could be in business for years the market is ever changing especially in todays world and what was true yesterday or a few years ago is sure different today and probably will be tomorrow. A good consultant keeps up on what the reality of today is and plans for tomorrow.

No matter what industry you are in these are just a few reasons not to go it alone. Before you head down the wrong path or need some help making a detour, contact a business finance consultant today. Your business will be better off for it.

Want more information about business finance consulting? Venture Works Capital helps many businesses properly prepare for financing fro start to finish. Visit our website for more information. http://www.VentureWorksCapital.com

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: 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: 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: 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: David Boyle in DC

We’ve all seen the hype: “We’ll put your plan in front of thousands of investors!” “We’ll write you an award-winning online business plan!” “Only $3,000 for thousands of investors to learn about your company!”

I cringe every time I see one of these ads. Vultures are preying on honest business people who want to fund their businesses. Here are some ways to spot them:

1. “Only qualified investors see your business plan.” Yeah, sure. And who “qualifies” them? Have a friend try to sign up as an investor (that part is usually free). How is she “qualified”? Is there a background check? Does she submit a financial statement? Odds are that she will be asked to do nothing more than sign a statement that she has a certain net worth. That’s no “qualification” in my book. So who are these “investors”? Who knows. One could be your strongest competitor.

2. “You approve anyone who sees your business plan.” Okay. So what are you going to do to qualify the potential investor? Are you going to run a background check? ask for ID? ask for tax returns? or just be so happy that anyone wants to see your business plan that you jump on the idea? (That’s how these scams get away with charging thousands of dollars — too many entrepreneurs are desperate for funding.)

3. “It’s only $500 (or $300 or $100) to register.” What does it matter if it’s free? If it is diverting your time and energy and resources away from finding a viable investor, it’s not worth it.

4. “Your idea is great, but we need to put it into our format. This will only cost $800.” Don’t walk — run from these guys.

5. “Your idea is so great that we want to invest $2,000 in it.” (That’s after you spend $5,000 to put it into “their” system.) Do I really need to comment on this?

6. “Talk with a satisfied customer, or 2 or 3.” Here’s this entrepreneur who just got $2 million in funding, and he has nothing better to do than sell the web scam to you? Trust me, entrepreneurs who just get funded barely have time to eat, let alone talk.

7. “Look at all these written testimonials.” This is harder to disprove because the testimonials look so real — even the companies might be real. But unless the testimonials, and the companies, can be verified independently, I wouldn’t trust them. And I’ll lay odds that they cannot be verified independently.

There is one huge exception to this: ACE-Net (http://activecapital.org). This is more properly the Access to Capital Electronic Network run by venture capitalists, institutional investors and individual accredited investors. It was developed by the U.S. Small Business Administration’s Office of Advocacy to encourage the creation of a national marketplace for investors to find and invest in equity offers by small companies.

ACE-Net isn’t for all companies. Those seeking under $1 million will probably find the paperwork daunting. Those seeking over $5 million won’t qualify. There are special qualifications, and of course lots of forms to fill out — but nothing like the forms required for a formal initial public offering.

But for those who do qualify, it’s an amazing tool in raising financing. Spend some time with the website and the forms, and see if your local SBA office can put you in touch with another company that went through the process.

As with any investor tool, don’t rely exclusively on ACE-Net. Use it in conjunction with your personally developed targeted funding search. This, combined with an exceptional business plan, doesn’t guarantee success but it places your company head and shoulders above all the rest.

MaryAnn Shank

http://www.businessplanmaster.com/investors.html; http://businessplanmaster.blogspot.com

Ms. Shank is a seasoned business financing specialist.

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