Growthink Blog

3/2/08 Recap: Opportunity Costs, "Free" Business Models, Angel Outlook for 2008 -- and More


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This past week saw several interesting blog entries, articles, and reports from the world of entrepreneurship, management, and venture capital.

  • John Tierney of the NY Times wrote an excellent article on opportunity costs and decision making, regarding research on the risks associated with keeping too many options on the table. An interesting observation from Professor Dan Ariely of MIT: “Closing a door on an option is experienced as a loss, and people are willing to pay a price to avoid the emotion of loss.”

  • Chris Anderson wrote a fascinating article, The Rise of the “Free” Business Model. “Once a marketing gimmick, free has emerged as a full-fledged economy,” he writes, citing the success of Radiohead and Google as prime recent examples. Read the article here.

  • Thanks to Jeff Cornwall for pointing us to the Angel Capital Association’s outlook for 2008. Despite recent news about the slowdown in the U.S. economy, nearly half of angel groups expect deal flow to improve in both quantity and quality in 2008. However, angel groups’ expectations for positive exits in 2008 were not as optimistic. More information about the Angel Capital Assocation’s report can be found here and here.

  • Fred Wilson of Union Square Ventures wrote about the importance of conviction and discipline -- specifically, the importance of careful, deliberate planning in order to achieve conviction in one’s strategy, plus the necessary discipline to adhere to that strategy.

  • He also provided great advice on choosing board members, including avoiding “big names” and making sure you get people who have enough time to commit to the job – it’s not a “retirement perk,” he says.

  • imagine it! is a new documentary about Stanford students building companies solely from Post-It notes (available for download here, once you fill out the form). As Anthony Ha of VentureBeat wrote: “Watching the students at work is a great illustration of an important point: even if you’re facing substantial constraints, you can still produce something valuable.” (You can listen to him interview the executive producer of the film, Richard Tavener, here).

  • Is there such a thing as a “born” entrepreneur? Scott Shane examines whether a person’s genetic makeup could affect their inclination to start a business.

  • Michael McDerment of ThinkVitamin recently posted a great article with advice on How To Name Your Company. Evan Carmichael of YoungEntrepreneur.com also provided a few business naming tips of his own.

  • Mashable introduced us to Fundability – a website that matches startups seeking seed capital with investors. While many websites also serve this general purpose, Fundability claims to match startups with investors’ preferences with an algorithm. Entrepreneurs looking to find investors can use the service for a $50 fee (though there is a 30-day free trial).

  • Last week, Mashable also polled its readers, asking “What Would You Want to Invest in Online? Mobile applications, social networking, and online advertising topped the list.

  • Inc published The Nuts and Bolts of Entrepreneurship. A key insight from the article:
    “Real entrepreneurs grab an idea and start moving—and adapt their vision of the business as they go.”

  • And finally – courtesy of VentureCyclist – we got a laugh from VCWear.com’s venture capitalist parody t-shirts.

7 Entrepreneurs Whose Perseverance Will Inspire You


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Everyone knows that perseverance is important. You’ve probably heard the quote “If at first you don’t succeed, try again” or seen the commercial that talks about falling down 7 times and standing up 8. The lesson, of course, is that few people achieve anything great without first overcoming a few obstacles.

Preaching about the importance of perseverance is easy. Actually experiencing failure and continuing on undeterred; now that’s tough. But the 7 stories below prove that it can be done. These famous entrepreneurs exemplified perseverance. Maybe one of them will inspire you to overcome whatever obstacle is currently standing in your way.


Milton Hershey

Milton Hershey had a long path to the top of the chocolate industry. Hershey dropped out of school in the 4th grade and took an apprenticeship with a printer, only to be fired. He then became an apprentice to a candy-maker in Lancaster, PA. After studying the business for 4 years, Hershey started three unsuccessful candy companies in Philadelphia, Chicago and New York.

Hershey was not about to give up, so he moved back to Lancaster and began the Lancaster Caramel Company. His unique caramel recipe, which he had come across during his earlier travels, was a huge success. Hershey, who was always looking ahead, believed that chocolate products had a much greater future than caramel. He sold the Lancaster Caramel Company for $1 million in 1900 (nearly $25 million in 2008 dollars) and started the Hershey Company, which brought milk chocolate -- previously a Swiss delicacy -- to the masses.

Not only did Hershey overcome failure and accomplish his goals, but he also managed to do it close to home. Hershey created hundreds of jobs for Pennsylvanians. He also used some of his money to build houses, churches, and schools, cementing his status as a legend in the Keystone State.

Persistence is key. But it also helps if you have a solid business plan from the beginning. If you need assistance with your business plan, contact a Growthink business plan writer today.

 
Steve Jobs


You always hear about a “long road to the top,” but perseverance isn’t limited to the early stages of a person’s career. Oftentimes, failure can occur after a long period of success.

Steve Jobs achieved great success at a young age. When he was 20 years old, Jobs started Apple in his parents’ garage, and within a decade the company blossomed into a $2 billion empire. However, at age 30, Apple’s Board of Directors decided to take the business in a different direction, and Jobs was fired from the company he created. Jobs found himself unemployed, but treated it as a freedom rather than a curse. In fact, he later said that getting fired from Apple was the best thing to ever happen to him, because it allowed him to think more creatively and re-experience the joys of starting a company.

Jobs went on to found NeXT, a software company, and Pixar, the company that produces animated movies such as Finding Nemo. NeXT was subsequently purchased by Apple. Not only did Jobs go back to his former company, but he helped launch Apple’s current resurgence in popularity. Jobs claims that his career success and his strong relationship with his family are both results of his termination from Apple.

Are you building the next Pixar or Apple?  Get expert business planning advice from a Growthink business plan consultant.


Simon Cowell


Nowadays, Simon Cowell is a pop icon and a very wealthy man. But early in life, Cowell faced his fair share of struggles. At age 15, Cowell dropped out of school and bounced around jobs. He eventually landed a job in the mail room of EMI Music Publishing. Cowell worked his way up to the A&R department, and then went on to form his own publishing company, E&S Music.

Unfortunately, E&S folded in its first year. Cowell ended up with a lot of debt, and was forced to move back in with his parents. But he never gave up on his dream of working in the music industry, and eventually landed a job with a small company called Fanfare Records. He worked there for 8 years and helped the company become a very successful label. From there, Cowell spent years signing talent and working behind-the-scenes before launching the “American Idol” and “X-Factor” franchises that made him famous.

Even though he is rich and successful, Cowell continues to work on new projects. This kind of dedication no doubt helped him overcome his early roadblocks.

Thomas Edison

When he was a young boy, Thomas Edison’s parents pulled him out of school after teachers called him “stupid” and “unteachable.” Edison spent his teenage years working and being fired from various jobs, culminating in his termination from a telegraph company at age 21. Despite these setbacks, Edison never deterred from his true passion, inventing. Throughout his career, Edison obtained 1,093 patents. And while many of these inventions -- such as the light bulb, stock printer, phonograph and alkaline battery -- were groundbreaking, even more of them were unsuccessful. Edison is famous for saying that genius is “1% inspiration and 99% perspiration.”

One of Edison’s greatest stories of perseverance occurred after he was already wildly successful. After inventing the light bulb, Edison began a quest to find an inexpensive light bulb filament. At the time, ore was mined in the Midwest, and shipping costs were incredibly high. To combat this, Edison opened his own ore-mining plant in Ogdensburg, New Jersey. For roughly a decade, Edison devoted all his time and money to the plant. He also obtained 47 patents for inventions designed to make the plant run more smoothly. And after all of that, Edison’s project still failed thanks to the low quality ore on the East Coast. 

But as it turned out, one of the aforementioned 47 inventions (a newly-designed crushing machine) revolutionized the cement industry and earned Edison back nearly all of the money he lost. In addition, Henry Ford would later credit Edison’s Ogdensburg project as the main inspiration for his Model T Ford assembly line, and many believe that Edison paved the way for modern-day industrial laboratories. Edison’s foray into ore-mining proves that dedication and commitment can pay off even in a losing venture.

 

Are you starting a new business?  Get expert strategic advice from Growthink's professional business plan consultants

 


George Steinbrenner


Before “The Boss” assumed ownership of the New York Yankees, he owned a basketball franchise called the Cleveland Pipers. The Pipers were part of the American Basketball League, and in 1960, under Steinbrenner’s helm, the franchise went bankrupt.

When he eventually took over the Yankees, Steinbrenner’s struggles didn’t end. Most baseball fans will remember the team’s drought in the 1980s and early 1990s. As the team suffered, Steinbrenner was often criticized for his executive decisions, which included questionable trades and frequent changes to the Manager position. Though his methods were controversial, Steinbrenner stuck to his guns, and it paid off. The Yankees made an impressive six World Series appearances from 1996-2003, and remain Major League Baseball’s most profitable team year after year.

Steinbrenner is known for his shrewd business tactics, but he’s also not afraid to put his money where his mouth is. The Yankees have the highest payroll in baseball, and they’ve been in contention every year since the mid-90s. Even when the Cleveland Pipers went bankrupt, Steinbrenner offered to pay back the team’s investors, a promise he eventually made good on.

Steinbrenner has been quoted as saying, "I never wanted anybody to say ‘I went down a path with George Steinbrenner and lost money.’"

J.K. Rowling

J.K. Rowling, author of the Harry Potter books, is currently the second-richest female entertainer on the planet, behind Oprah. However, when Rowling wrote the first Harry Potter book in 1995, it was rejected by twelve different publishers. Even Bloomsbury, the small publishing house that finally purchased Rowling’s manuscript, told the author to “get a day job.”

At the time when Rowling was writing the original Harry Potter book, her life was a self-described mess. She was going through a divorce and living in a tiny flat with her daughter. Rowling was surviving on government subsidies, and her mother had just passed away from multiple sclerosis. J.K. turned these negatives into a positive by devoting most of her free time to the Harry Potter series. She also drew from her bad personal experiences when writing. The result is a brand name currently worth nearly $15 billion.

 

What about you? Are you starting a new business?  If you need help with your business plan, contact Growthink's professional business plan writers

 


Walt Disney

As a young man, Walt Disney was fired from the Kansas City Star Newspaper because his boss thought he lacked creativity. He went on to form an animation company called Laugh-O-Gram Films in 1921. Using his natural salesmanship abilities, Disney was able to raise $15,000 for the company ($181,000 in 2008 dollars). However, he made a deal with a New York distributor, and when the distributor went out of business, Disney was forced to shut Laugh-O-Gram down. He could barely pay his rent and even resorted to eating dog food.

Broke but not defeated, Disney spent his last few dollars on a train ticket to Hollywood. Unfortunately his troubles were not over. In 1926, Disney created a cartoon character named Oswald the Rabbit. When he attempted to negotiate a better deal with Universal Studios -- the cartoon’s distributor -- Disney discovered that Universal had secretly patented the Oswald character. Universal then hired Disney’s artists away from him, and continued the cartoon without Disney’s input (and without paying him).

As if that wasn’t enough, Disney also struggled to release some of his now-classic films. He was told Mickey Mouse would fail because the mouse would “terrify women.” Distributors rejected The Three Little Pigs, saying it needed more characters. Pinocchio was shut down during production and Disney had to rewrite the entire storyline. Other films, like Bambi, Pollyanna and Fantasia, were misunderstood by audiences at the time of their release, only to become favorites later on.

Disney’s greatest example of perseverance occurred when he tried to make the book Mary Poppins into a film. In 1944, at the suggestion of his daughter, Disney decided to adapt the Pamela Travers novel into a screenplay. However, Travers had absolutely no interest in selling Mary Poppins to Hollywood. To win her over, Disney visited Travers at her England home repeatedly for the next 16 years. After more than a decade-and-a-half of persuasion, Travers was overcome by Disney’s charm and vision for the film, and finally gave him permission to bring Mary Poppins to the big screen. The result is a timeless classic.

In a fitting twist of fate, The Disney Company went on to purchase ABC in 1996. At the time, ABC was owner of the Kansas City Star, meaning the newspaper that once fired Disney had become part of the empire he created. And all thanks to his creativity (and a lot of perseverance).

 

Are you starting a business, or looking to grow your business?

The first step to success is to create your business plan.

Click here to download Growthink's free business plan template

 

 


The U.S. Hispanic Market: Untapped Opportunity for Los Angeles Business


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The U.S. Hispanic market, combined with the number of successful small businesses in Los Angeles, means that regardless of the fluctuations of the stock exchanges, opportunities continue to germinate on our doorstep.

Companies that create products and services for the U.S. Hispanic Consumers will continue to enjoy impressive growth, increasing revenues and expanding markets.

Our optimism on the potential of U.S. Hispanic consumers to be promising partners to enterprises astute enough to provide a range of solutions—from credit cards to Internet connectivity—which embrace the needs and aspirations of U.S. Hispanics, is based on three powerful trends which have transformed 44.3 million U.S. Hispanics from a group long ignored by the majority of American businesses into an empowered and emerging market.


1. The U.S. Hispanic Economy – An Emerging Market Right Here At Home

Together, 44.3 million U.S. Hispanics constitute their own sizeable, secure and financially empowered domestic emerging market that the 245,000 businesses based in greater Los Angeles businesses should be serving today. U.S. Hispanic consumers possess several important advantages typically seen in consumers in foreign emerging markets: rapidly rising incomes, which are fueling a surge in demand for consumer goods and services.

The average age of U.S. Hispanics is a young 27.4 years, giving this group the advantage of time to build wealth—and for companies to develop lifelong loyal customer bases – loyalty being a hallmark of the Hispanic consumer. In 2007, Hispanic consumers will spend $800 billion dollars, a figure that is on track to reach $1.5 trillion by 2012.

And this particular emerging market enjoys an additional asset that consumers in foreign emerging markets can as of now, only dream about: U.S. Hispanics are creating economic opportunity in a nation where laws governing employment, financial transactions, private and intellectual property are strongly enforced. These advantages provide entrepreneurs with a level of security crucial to making investment decisions, which develop new products, expand capacity and provide high levels of services to their customers.

Clearly all companies—here in Los Angeles and throughout the U.S—must develop strategies and services appealing to a group, which is moving en masse, from aspiration to affluence.


2. Capital: The Cornerstone of Success

Providing entrepreneurs who are leading early and middle stage companies with access to the appropriate types of investment capital – especially in the $2 million to $5 million range – and the advice critical to building successful businesses — rather than a slowdown in consumer spending—presents the greatest challenge to growth.

Even those beginning stage companies with deep and proven knowledge of their markets have difficulty raising the investment capital needed for establishing a strong consumer presence and market share. Growthink’s expertise in providing capital and counsel to early and expansion stage companies has been vital to the success of Los Angeles-based, early stage enterprises such as Authenticlick, a developer of fraud detection software and Xcom Wireless, a creator of wireless routing technologies.

Growthink’s involvement with both companies was comprehensive. First we helped each enterprise identify a profitable but unrecognized opportunity to serve their target markets. Then, working with their leadership teams, we developed a business structure adaptable to potential changes in the target market and a range of capital solutions, which transformed Authenticlick and Xcom from promising ideas into thriving, venture-backed enterprises.


3. Plan and Prosper Now

Between 2005 and 2006, fifty-percent of the people added to the U.S. population were of Hispanic origin. Today 13.1 million Hispanics call California home. By 2050 Hispanics will make up twenty-four percent of America’s population.

Can you name one business that succeeded by ignoring one-quarter of its potential customers? Neither can we.

For Los Angeles businesses, Hispanic consumers present a rich opportunity for growth—and a vital shelter from the possibility of recession we’re seeing in the statistics and signals coming from Washington and Wall Street. Business cycles are a natural component of free markets. But so is opportunity. And the opportunities available to Los Angeles companies embracing the potential of the domestic U.S. Hispanic market will only grow stronger, more diverse and profitable.


Top 7 Myths About Starting a Business


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From our experience consulting to entrepreneurs, start-ups, and small businesses over the past ten years, we've gained much exposure to the realities of starting and growing businesses.  We thought it would be interesting -- and hopefully instructive -- to lay out some of the myths and assumptions of aspiring entrepreneurs.

7. It Is All Dependent on Hard Work. Hard work is an absolutely necessary, but not sufficient, condition for starting and growing a business. It is the given, but without a solid business plan and compelling value proposition for customers and partners, all of the hard work in the world will be for naught. The world is filled with over-worked, over-stressed, and not terrible successful small business people who struggle not because of lack of appropriate effort, but rather for lack of appropriate planning.

6. If Your Product or Service is Compelling Enough, Customers Will Beat a Path to your Door. Unless you are building a business based upon intellectual property and/or technology that provides and creates such a competitive advantage and compelling customer value proposition, the early success of your business will be based as much on your ability to market and sell your product and service as it will on the product or service offering itself. Remember: in a capitalistic marketplace there is NO distinction between value and perceived value.

5. If Your Product or Service is Compelling Enough, Investors Will Beat a Path to your Door. Those that identify themselves as prospective investors in earlier-stage, small companies are mostly INUNDATED with investment opportunities. As such, no matter how good and unique your business opportunity, there is always a strong, initial prejudice AGAINST investment that needs to be overcome.

4. It Is All About You. The myth of the charismatic, "do and be everything" entrepreneur is just that -- a myth. Any and all companies of value are great teams much more than they are the by-product of a highly talented individual. The best entrepreneurs and business leaders inspire the mission, values and philosophy of a company by their own example. This inspiration is then communicated to all of the business' stakeholders -- employees, customers, investors, partners, vendors, and its wider community.

3. The Government Is Your Friend. We are constantly astounded by the regulatory and paperwork maze that a startup company needs to negotiate and constantly monitor to both start and maintain a business. It is a significant time, money, and energy drain that detracts from the main value creation intent of a new business. Our best advice in this regard -- as resources are available -- is to find competent legal and accounting counsel, to both advise upon and outsource the regulatory burden, so you can focus on business-building.

2. The Government Is Your Enemy. Having said the above, in the mixed economy in which we live, government revenue opportunities, on a local, state, federal, and international level, have never been greater for small business. While slow, meandering, and confusing to approach, governments have much to recommend them as clients and customers, not the least of which is that once sold, government clients pay well and are not bad debt risks. A somewhat trite but very important credo to remember when selling to governments, even more so than in business, is that "it is not as much what you know but who you know."

1. It Is Only Worth Doing If You Become the Next Google. The vast majority of small businesses will always remain just that -- small businesses. The odds of starting a business and have it become the next Google or a publicly-traded company are very, very small. While we would never discourage entrepreneurs for aiming for the stars, it is also important to have success metrics grounded in probability. An expectation of a minimum of 2years of very, very hard work with little financial return but with a lot of learning (and some fun hopefully as well) involved is a good starting point. From this first milestone, then and only then should there start to be an expectation of significant wealth-building. Find that balance between the long term vision and the Monday morning action plan -- and success, while not guaranteed, is very likely.

 

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About Growthink

Since 1999, Growthink's business plan experts have assisted more than 1,500 clients in launching and growing their businesses, and raising more than $1 billion in growth financing.

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New Year's Resolutions For The Entrepreneur


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The tradition of making a New Year's Resolution dates back to ancient Babylonian culture, when the most popular resolution was to return borrowed farm equipment. Today, many are still using New Year's Resolutions as their way of setting business goals.

If you're an entrepreneur -- or even if you aren't -- here are eight New Year's Resolutions that could lead to success in 2008.

#1) Don't be afraid of new things.

In 2008, you will see a lot of new websites, new software, new companies, and old companies offering new products and services. Get rid of the mentality that some of these new offerings don't affect you. Rather, try as many new products and services as you can. Make predictions on which you think will work. Watch to see which ones DO work and refine your strategic thinking accordingly.

#2) Find someone you hate, or someone you love, and follow them.

Many people are motivated more by hate than by love. Find someone who is really successful that you don't like and use them as a benchmark. If that scoundrel can be successful, so can you. Follow that person, and when they succeed, force yourself to succeed as well. Or, if you prefer, follow the career of someone you admire, and each time they succeed at something, emulate them by working harder in order to succeed yourself.

#3) Develop a NEW To-Do list.

Look at your To-Do list, and you'll find that it probably has things on it from a year ago. Delete those things. Create a new list of only the things that MUST be done in order to be successful in 2008. Create a plan to achieve those things.

#4) Talk with your current and prospective customers.

Entrepreneurs often develop the mindset that their ideas are great and will work. They often don't like getting feedback from customers and prospective customers, because it might be negative and burst their bubble. Go out and talk with customers. Even if they HATE your idea, they may spark you to come up with another idea that they LOVE.

#5) Organize.

Organization sucks. But once you do it, you'll save time each and every day. Organize your email inbox and your filing cabinet so that you have easily accessible folders and can find everything quickly and easily. This will save you many, many hours in the coming year; hours that could be used to create new products/services and better fulfill on existing ones.

#6) Make sense of something that doesn't currently make sense.

For some people, words from a Shakespearean play seem like gibberish. For others, a world renowned painting looks like paint that a child could have splattered on a canvas. Find one thing that you have avoided for years, or something that you have discarded as unimportant, or that just doesn't make sense to you. Analyze it. And make it make sense to you. Even if you end up interpreting it in a different way than others, that's OK. What's important is that the process will train your brain to look at problems and situations differently, and give you an improved ability to overcome obstacles.

#7) Keep a blog, diary or other method of tracking your progress.

We've all heard the saying that you can't improve what you can't measure. Measure your progress in 2008. Our lives today are so incredibly busy, and every day, each of us is working on numerous projects. Track your progress on each important project. This will allow you to see what you've accomplished, come up with ways to ensure that your goals are completed on time, and help you to forego the non-critical tasks that eat up your time.

#8) Do it and do it on time.

How many ideas did you have in 2007 that you never found time to execute on? How many phone calls or emails did you want to make (or send), but you didn't find the time? I just did the math; there are 525,600 minutes in a year. That should be enough to accomplish the key things!


The Greatest Time to Be an Entrepreneur


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Amidst the daily deluge of negative news regarding current business and economic conditions, it is important to look at the big picture: namely the very bright, long-term outlook for business and entrepreneurship in our global, Internet age. A recent interview with Ted Leonsis – the current Chairman of Revolution Money - a new Web 2.0 payment platform and credit-card service and Vice Chairman Emeritus of AOL (and one of the key executives that fueled AOL's Internet rise in the 1990's), drives this point home.

"It's the greatest time to be an entrepreneur," was Ted's core theme at a recent Wharton Entrepreneurship Conference. Leonsis also made a number of prescient points regarding our current "three-screen world" – a world in which entertainment and commerce play out on computer screens, TVs, and mobile phones:

  • In this new world, consumer expectations are "off the charts." They want everything "great, fast, and free."

  • Today's consumers are a study in contradictions. They have a lot of purchasing power, but little leisure time. They are real estate rich (though increasingly less so), with less cash. Family life is more fractured, and people are overscheduled and on the move. They are watching less TV and living life online more and more. Only 25% of 30-year olds now read newspapers daily. Circulations are in long-term decline at the New York Times, USA Today, the Washington Post and the Wall Street Journal.

  • In contrast, consumers now see the Internet as a "routine and indispensable part of their work and home life, spending 23% of their time hooked up to the Web, compared to seven minutes a day" in 1993.

  • North America now accounts for just 16% of worldwide Internet users, down from 35% in 2000. "If you're building products and services just for the U.S. market, you're giving up 80% of the market," Leonsis says.

  • Leonsis drives home the point that entrepreneurial opportunity has never been greater than it is right now, but by no means is it easy. "While it's never been easier to launch a new world-class business," investor and marketplace expectations are intense. "If you can't grow 25% month over month, we don't think you know what you're doing." If a startup doesn't take off fast, "you fall behind very, very quickly."

 

Just as significant, Leonsis says, is the "happiness business," which involves "getting out of the I, I and I, and really seeing where you want to fit into the bigger world."

At Growthink, we echo Ted Leonis' sentiments that business and entrepreneurship are and can be the best drivers of positive transformation in the world, and that Internet technologies and the global economy are and will accelerate this transformation to dizzying speed.

For more on Ted Leonsis, click here and here.


Federal Government Financing Alternatives


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Entrepreneurs and small companies often overlook two ripe sources for capital: federal grants and loan financing.

But instead of trading equity positions in their companies for thenecessary capital, entrepreneurs and small companies who pursue fundingfrom the Small Business Administration (SBA) and from Small BusinessInvestment Companies (SBICs) donít have to deal with an equitycomponent to their transactions. However, similar to individual ìangelîinvestor and VC financing, companies seeking SBA and SBIC financingneed a strong management team and value proposition, and a credible andexciting business plan to consummate a financing transaction.

That's because an SBA loan, regardless of whether it is a directloan from the SBA, or, more commonly, a bank loan guaranteed by theSBA, is essentially a bank loan. The benefits of it versus atraditional bank loan are that it offers a lower borrowing rate and asomewhat greater ease of attainment for startups and smaller businesses.

In most cases, the SBA will guarantee that 90 percent of the loanwill be repaid to the bank. As such, banks are taking on less risk andcorrespondingly are more flexible with approvals. The SBA does usuallyrequire that the founders of the company personally guarantee the loans.

Alternatively, Small Business Investment Companies (SBICs) areprivately organized corporations that are licensed and regulated by theSBA. Small or emerging businesses which qualify for assistance from theSBIC program can receive equity capital and/or long-term loans fromthese companies. Essentially, these companies provide their owncapital, which is then supplemented by federal funds, to the companiesthey fund.

In a testament to the great "multiplier" value of small businessinvestment, U.S. taxpayers benefit from the SBIC program as taxrevenues generated from successful SBIC investments have more thancovered the cost of the program. Equally impressive, over the last 20years, small businesses have created roughly three out of four net newprivate non-farm U.S. jobs, with a significant percentage of thesebusinesses initially seeded/funded by these government loan programs.


Market Research - Tips & Ideas


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The tremendous clutter of 21st Century communication creates unique challenges in being heard above the noise when attempting to gather market research data. This is especially true when attempting to gather data via telephone surveying and/or email surveying on a stand-alone basis. For traditional telephone surveying, advanced voicemail and caller ID technologies have significantly reduced the percentage of connected market survey calls.


Nine Business Plan Pitfalls


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In our experience of assisting with their business plans more than 1000 startups, small businesses, middle market and Fortune 500 companies, we have noted the following common business plan pitfalls:

Pitfall #9: Not Including Successful Companies in the Competitive Discussion.


Analysis Paralysis


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Does anyone do "early-stage investing" anymore? When we present deals to "early-stage" investors, we find their criteria to be more in line with the milestones of more established companies, and it sometimes seems like early stage is a non-entity.

I was encouraged by the news of Battelle Ventures and Allied Minds Inc., posted in The Deal here. The author mentions how both firms operate under unique structures which allow them to do true early stage investing in "pre-seed" technologies sourced straight out of research institutions and universities. Battelle only has one LP, the Battelle Memorial Institute, while Allied Minds raises money from shareholders in exchange for future equity with no specified time horizon. Perhaps these "special" circumstances allow them to take on more "risky" investments without having to answer to large numbers of LP's.

It makes me wonder if the traditional VC model actually works. What if traditional VC's could take the handcuffs off and get dirty with raw technologies and mad-scientists out of some futuristic research lab? What sort of companies would we start to see hit the marketplace and how frequent? What about timing issues and market relevancy?

"The greater the level of involvement and business expertise focused on early stage innovation, the more and higher quality of innovation we will see coming out in the marketplace" - Lesa Mitchell- VP for advancing innovation, Kauffman Foundation.

Amen.


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