Growthink Blog

New Capital Raising Articles on Growthink.com


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We just published a new series of capital-raising articles on the Growthink website, within our new "Capital Raising Resource Center." 

 

Angel Funding Articles



Bank & SBA Loan Articles



Creative & Alternative Financing Articles



Grant Articles



Venture Capital Articles

 

Stay tuned! In the coming weeks and months, we'll be adding new articles and videos.

 

Are there any specific capital-raising topics you'd like us to cover?  Let us know by leaving a comment below.

 

Are you an entrepreneur looking to find angel investors for your deal? Learn proven networking, presentation, and negotiation tactics from Growthink's Angel Investor Guide


The Creative Fundraising Strategy That Became a Successful Business


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I'll be the first to admit that this fundraising strategy isn't for me. But I have a wife and kids, so maybe, a few years back, I would have given this one a shot.

The strategy: renting out the extra space in my apartment or house to travelers on a budget.

For three entrepreneurs, this fundraising strategy took on a life of its own. The three entrepreneurs, Joe Gebbia, Brian Chesky, and Nathan Blecharczyk, used this creative fundraising strategy (renting out the extra space in their apartments) to generate revenue after they quit their jobs to become entrepreneurs.

But, interestingly, they found the strategy so successful, that that turned it into a business that is now thriving.

The business, Airbnb is essentially the "eBay of space." It works like this...People list their apartments and houses (if they aren't going to be home), and even spare guest rooms, futons, and couches on the site and set a price per night.  And then travelers who are looking for a place to stay search the listings for an accommodation that's right for them.

So, real estate owners and renters earn money, travelers get a discount, and Airbnb earns a 10% fee on all transactions. A true win-win-win. As you might imagine, Airbnb is doing very well, and is now in over 1150 cities in 82 countries.

My takeaways/lessons here are two-fold: first, if you have extra space or are traveling, you should consider listing your space on Airbnb to generate some revenues to invest in your business. Second, as this company illustrates, you can never be too creative in coming up with ideas to fund your business.

If you want to see a brief video of the Airbnb team, including their story of how Barry Manilow's drummer is one of their top users, here is a cool clip:

 

 

 


An Interview with Brette Simon, Partner at Jones Day


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The other day, I had the pleasure of interviewing Brette Simon.

Brette is a partner at Jones Day, a top tier law firm with offices in New York, Los Angeles, Silicon Valley, and several major international cities.

Brette advises companies and investors in private equity and venture capital financings, and is on the Venture Capital and Private Equity Committee of the American Bar Association.  She is also a member of the Los Angeles Venture Association.  And Brette was recently recognized by The Deal - a popular venture capital and private equity publication - as one of the top 13 dealmakers in the country. Very impressive.

So, naturally based on her background, I thought Brette would be the perfect person to interview about the legal aspects of raising capital.  I was right.

Brette started the interview by discussing the advantages and disadvantages of certain forms of incorporation, and noted that a C-Corporation is what most venture capitalists prefer. She did note, however, that there are many nuances with regards to the corporate structure with regards to tax treatment, so the choice of your type of entity could become more complex.

We then shifted topics and discussed how entrepreneurs can protect their business ideas and intellectual property. To this, Ms. Simon discussed non-disclosure and confidentiality agreements. She also made the key point that entrepreneurs must make sure to get their employees, consultants and vendors (and everybody else who may be working with them) to sign PIIAAs (Proprietary Information and Invention Assignment Agreements), in order to make sure that the company owns all the intellectual property that is being created.

Ms. Simon went on to discuss other items that can help protect one's intellectual property such as patents and staging diligence.

We then discussed several other key topics including:

* Some of the main laws and regulations that entrepreneurs need to know about and act in accordance with when raising capital
* The documentation needed to raise capital
* What you should be focusing on when you look at a VC's term sheet
* Misconceptions that entrepreneurs often have about the legal process
* The right time for the entrepreneur or management team to hire legal counsel during the process of raising capital

I really enjoyed conducting this interview. Brette Simon obviously knows the legal issues with regards to raising capital inside and out and is a wealth of knowledge!  This is definitely information that all entrepreneurs must know when raising funding, particularly venture capital.

To listen to excerpts of this interview click the blue triangle on the player below.


To listen to the full interview and/or read the transcript, click here.


Creative Transformation - From Idea into a Business


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Starting a venture and launching a product/service is not an easy task as can be testified by the thousands of individuals that start a business every year.

Yet many of these individuals overlook what I term, "Creative Transformation," the thought process, emotions, and actions needed to take one's idea and transform it into a viable business.

Often reality is not representative of what we think/dream in our heads. This predicament is often seen in start-ups in which entrepreneurs have a great idea but when developing that idea into a business the results may be a venture that is not representative of what they thought.

What causes this discontinuation?

Each case is different, but for a majority of cases a mix of a misguided thought processes, escalated emotions, and ineffective actions may lead to an unsuccessful venture. A recent client of mine, Alex Wagenheim, has experienced Creative Transformation and exemplifies how an entrepreneur can overcome it.

Alex Wagenheim is an ambitious and true entrepreneur by heart who has identified an unmet need in the small business market: the need for simple and efficient software. Alex's first major obstacle as an entrepreneur was being able to articulate his idea and vision into words so that our consultants could help him craft a business plan.

Alex went through a thought process where he had to analyze his idea and determine the value proposition that his service would provide to his potential customers. This thought process was a struggle as different variables had to be considered such as existing technologies, the market needs, and the level of sophistication of the customer base.

Each of these areas revealed more questions that needed to be answered and from there Alex experienced emotions of excitement when he discovered a large market for his venture.  But he became apprehensive when he realized that in order to launch his venture properly a large amount of work would need to be completed. Alex stayed optimistic and decided to curtail his frustration and create a plan of action.

Overcoming emotions and creating a plan of action is often the breaking point for many entrepreneurs. When the thought process, emotions, and risks are all negative it is typical for an individual to abandon their idea. Plans of action are abandoned and what is left is just an idea of what could have been.

At the onset of Creative Transformation, Alex realized that he needed help to develop his venture and service. The emotions he was feeling prompted Alex to react and seek the consulting advice of experts.

With Growthink's help Alex was able to transition smoothly through Creative Transformation and execute on the proper actions that will increase the success of his business. Creative Transformation was not a breaking point for Alex, but was the catalyst that prompted him to search for help from professionals.

Alex is currently completing a market survey for his target market and will develop the first beta of his software in the near future.


The Obama Stimulus - $17 Billion to ONE Tech Sector


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Aren't you sick and tired of watching Washington spend all of YOUR money and YOU not seeing any of it?

Wonder where all of the stimulus money has gone?

Well, try this on:  The Obama stimulus commits $17 billion in federal funds to reimburse medical practices for implementation of electronic health records systems and their use.

This involved doctors getting paid up to $44,000 each to transition their practices to the new technology.

And even before the government began throwing money at the sector, it was a $4 billion business growing at 23%/year

Why Should You Care?

Well, if you're interested in capitalizing on one of the fastest growing and most dynamic technology sectors out there, and one about to see turbocharged growth driven by federal dollars, you should care.

Meet an Industry Pioneer

I would like to invite you to an exclusive opportunity to meet, via web conference, the CEO (and Stanford MBA) of one of the fastest-growing and innovative companies in the industry.

He will talk about which companies and technologies are best positioned to profit from the stimulus money, how "cloud computing" applications are beginning to see real adoption rates, and what has been driving the record revenue months his company has had this quarter in this tough economy.

Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc


P.S. I know too many otherwise intelligent business men and women who have been listening to all of the negative drivel that passes as business news out there, and sitting on the sidelines and missing opportunities.

Don't be like them.


Capital Raising Bootcamp - Registration Now OPEN


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I’m excited to announce that today is the first day of registration for the Capital Raising Bootcamp!

To register your spot, go here.

And here are a couple of important updates about the Bootcamp.  

Update #1: I realize it’s the middle of summer, and many of you have probably planned vacations – or may even be on vacation right now (lucky you!).  To account for this, I’ve decided to provide recordings and transcripts as an added bonus when you register, in case you have to miss all or part of one of the sessions.  

Update #2:  I’ve decided to add an extra day to the Capital Raising Bootcamp curriculum, to allow for questions-and-answer time.  I’m going to dedicate this 4th day (Friday August 7th) entirely to Live Q&A.  

So, now, the finalized Capital Raising Bootcamp curriculum/schedule is as follows:

Day 1: Tuesday, August 4th:  Essential Overview of Raising Capital
Day 2: Wednesday, August 5th:  Venture Capital and Angel Funding
Day 3: Thursday, August 6th:  Debt, Grants, and Creative/Alternative Financing
Day 4: Friday, August 7th: Questions and Answers

(Each session runs from 2:00pm EST to 3:30pm EST).

Remember: There are only 50 spots available.  

We are putting a strict limit on registration in order to make the experience as valuable as possible for each participant – and, most importantly, to allow enough time for each person to have his or her questions answered during the Q&A time.  

To register go here.





CleanTech Nation: Why Investments Have Risen 477%


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You've likely heard all of the hype regarding Cleantech.

How the Obama stimulus plan fuels $83 billion into the sector.

How cleantech investment today is more than 477% greater than what it was in 2005.

How Vinod Khosla, arguably the world's most famous and well- respected venture capitalist, last week raised another $1 billion - including $150 million of his own money, to invest in it.

Wind. Solar. Geothermal. Water treatment. Smart grid. Fuel cells. Carbon capture. If you have turned the TV on at all over the past year, you've probably heard about all of these.

And here is one you probably haven't heard - Bio-friendly pesticides

Who cares?

Well, if you're interested in capitalizing on one of the great arbitrage opportunities of our time, you should care.

Because bio-pesticides, an environmentally friendly option to synthetic chemicals, is the perfect storm about to happen.

We're talking about a $70 billion+ industry, where new, effective and safe pesticide products are gaining traction.

One where governments worldwide are mandating -  through strict, new regulation - a fast transition from the old, synthetic-based products that have been damaging our health and the environment for far too long.

An industry that includes dozens of completely under-the-radar, private companies.  And cash - rich big boys, like DowAgro and Monsanto - on acquisition sprees.

Meet the Industry Leader

I would like to invite you to an exclusive opportunity to meet, via web conference, the CEO of one of the fastest-growing and most dynamic companies in the industry.

He will talk about the super-fast growth his company is currently experiencing, and how they relate to his public offering and acquistion plans.

If you're interested in learning how money is really made in emerging technology, then this is a presentation you don't want to miss.

Capital Raising Bootcamp Preview


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Here is a video that explains precisely why raising capital is so important to your business.

And, importantly, it includes details regarding why it’s critical that you understand how to raise capital from multiple sources, even if you currently are only seeking one particular type of capital...

Near the end, I reveal a fantastic (and perhaps my favorite)  tip, which is the single most controllable factor that you have to improve your success in both fundraising and successfully growing you business.

 


Creative Business Finance: The Story of the Chihuahua & The $1.5 Billion Man


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I'd like to tell you brief story about a Chihuahua who was taken along on a safari vacation. The story is important as it probably holds the answer to your capital-raising needs.

On the first day of the Chihuahua's trip, the Chihuahua wandered off too far and got lost in a bush. Unfortunately, within minutes, the Chihuahua encountered a very hungry looking leopard.

Realizing he was in trouble, but, noticing some fresh bones on the ground, the Chihuahua started to chew on them, with his back to the leopard. As the leopard was about to leap, the Chihuahua smacked his lips and exclaimed loudly, "Boy, that was one delicious leopard. I wonder if there are any more around here."

The leopard stopped mid-stride, and slinked away into the trees.

"Phew," said the leopard, "that was close - that evil little dog nearly had me."

A monkey nearby saw everything and thought he'd win a favor by setting the leopard straight.

(Fortunately, the Chihuahua saw the monkey go after the leopard, and guessed he might be up to no good.)

When the leopard heard the monkey's story, he felt angry at being made a fool, and offered the monkey a ride back to see him get revenge.

As the leopard and monkey approached, the Chihuahua once again turned his back and pretended not to notice them. And when the pair got within earshot, the Chihuahua said aloud, "Now where's that monkey gone? I sent him ages ago to bring me another leopard..."

The moral of the story is that the Chihuahua survived because he was creative, and because, the second time, he planned ahead.

The same is true when it comes to financing your business. While most entrepreneurs are extremely creative when it comes to coming up with unique business ideas and marketing plans, they tend lack creativity in the area where they need it most - fundraising.

Remember, without adequate capital, even the best business and marketing ideas will fail.

Fortunately, I am just about to release Growthink's "Definitive Guide to Creative & Alternative Financing Sources."  The report gives you a detailed overview of the twelve most common types of capital used to start and grow business. And then, it provides twenty-eight (28) creative and alternative sources of financing that resourceful entrepreneurs have used to more easily finance their businesses.

One of the stories in the Guide is one of my favorites...the one about Kenneth Cole. Well before global retail sales of Kenneth Cole products reached $1.5 Billion last year, Kenneth Cole was a struggling entrepreneur with no money.

But he believed in himself and his designs, and used his creativity not only on his products and his marketing, but on his financing plan. Cole's plan was this - to find a struggling shoe manufacturer in need of customers (because the economy was weak then like it is right now) to manufacture his shoes on consignment. That is, Cole would only have to pay for the shoes AFTER he sold them.

Well, Cole was able to easily find the manufacturer who financed his business buy giving him hundreds of thousands of dollars of shoes. The rest, as they say, is history.

If you are seeking financing for your business, and you have not devised a creative plan to raise capital, I urge you to learn these great, creative financing ideas and use them to raise money for your business.

I will be releasing this report later this week. But I prefer it if you start right now. Take out a sheet of paper and write down your creative ideas to raise capital. Then, later this week, I'll give you 28 more ideas so you can complete your list, figure out which sources you are most comfortable raising money from, and begin financing and really growing your business.

Portfolio Theory and Angel Investing


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One of the most exciting trends in angel investing and private equity over the last 6 months has been the application of traditional

Some of the most interesting investment research over the last 6 months has been the application of traditional portfolio theory and hedging  techniques to angel and private equity investing. Research compiled by the National Venture Capital Association, by the Kaufman Foundation for Entrepreneurial Activity, and by the Entrepreneurship in the United States Assessment, highlight a number of both subtle and startling insights.

When compared to other asset classes, there is relatively little correlation between various private equity investing sectors. In other words, while the share  prices of publicly traded aerospace and software companies, for example, will move up and down more or less together, the success probabilities of that hot drug development company and that wind energy startup are reasonably uncorrelated.

Why is this important? Because it creates a far greater hedging opportunity than is available in public stocks, whereby the investment combination of the wind  startup and the drug development company has disproportionately less risk for the expected return.

The research also shows that the smaller the size of an equity financing deal, the less correlated is the success probability of that deal with the equity markets as a whole. A subtle, but critical point that had made a HUGE difference in investment returns over the past 10 years. Try on these two facts:

1) The venture capital industry as a whole - with average financing sizes over the past 10 years of greater than $8 million/deal - has returned ZERO percent to investors during that time frame.

2) In contrast, the average return on private equity classified as "early, or angel stage" had an average annual return during that same period of a whopping 32.9%! (Thomson/Reuters).

I talk about more about the application of portfolio theory to private equity and angel investing in the video below:



For our Friday live deals call, click here: www.growthink.com/livedeals

 


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Blog Authors

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