To make your new venture succeed -- whether you are creating a new product, constructing a hotel, or developing a community center -- you must convince investors and/or management to fund your initiatives.

Feasibility studies play a critical role in this early planning and fundraising process.

A feasibility study is a detailed investigation and research analysis of a proposed venture or development project. The purpose of a feasibility study is to determine whether it is technically and financially feasible to move forward with a new project.

An effective feasibility study demonstrates the following:

• That your ideas are sound


• That there is a need for your venture


• That your execution plan is practical

To help you navigate through the feasibility study development process, we have just released a special report titled:

13 Costly Feasibility Study Mistakes – And How To Avoid Them


In this free report, you will learn:

• The key mistakes to avoid when conducting a feasibility study


• The important difference between “data” and “intelligence”


• How entrepreneurial over-confidence can doom a feasibility study

Click here to download the report.

We just released a white paper titled "The 9 Secrets of Pre-IPO Investing." It provides tips and advice for those looking to make early stage investments in private companies.

We're releasing the report in the midst of strong "angel" investing activity in the United States. According to the University of New Hampshire's Center for Venture Research, in 2006, there were approximately 234,000 active individual angel investors and approximately 49,500 private companies which received funding from individual investors.

Early stage angel investment can produce stratospheric returns on investment. Our report cites the famous example of Google's first private investor, Andy Bechtolsheim, who wrote a $100,000 check to Google in 1998 when it was an early stage private company. That $100k investment grew to be worth $1.5 billion.

And, according to more than 20 years of data collected by Thomson Financial, early and seed stage private company investing has over the long-term, outperformed all other investment classes -- with average annual returns of over 20.6%.

The report provides an overview of pre-IPO investing, including its benefits and risks, and key advice for successfully investing in early stage private companies, including:

- How to Find, Evaluate, and Profit from Early Stage Investment Opportunities
- How to Position Yourself to Earn Outsized Returns
- How to Mitigate Your Risk Through Diversification and Investment Monitoring

To download the report, please follow this link: The 9 Secrets of Pre-IPO Investing.

Last week, several theater chains and studios announced they were nearing an estimated $1.1 billion financing deal to upgrade cinemas to digital technology. This investment is expected to boost attendance and save Hollywood billions of dollars in various annual print and delivery costs.

"We're hopeful that in the second quarter we will get it all arranged," said Travis Reid, chief executive of Digital Cinema Implementation Partners (DCIP).

DCIP is a joint venture between Regal Entertainment Group, Cinemark Holdings Inc and AMC Entertainment Inc.

Growthink assisted in the development of the strategic business plan for the joint venture.

Read more about DCIP and digital cinema technology here and here.

It's always said that access to funds is the life blood of any company. Going out and securing outside financing to help grow a business is an important step in the life of an emerging organization. Keep in mind, the process of commercial borrowing is best done in preparation for needing the capital, rather than when the request is made in a dire situation. Here are some necessary tips to keep in mind when preparing to seek a loan.

1. Bookkeeping – Install accounting software so you can produce up to the moment financial reports including Balance Statement and Profit Loss Statement. These reports will give the Lender a snapshot of the current financial condition of the company. It also assures that you know enough about accounting to understand the internal cash flows.

2. Customer Credit – Show you have a process in place to check the credit of all your customers. Learn how to avoid issuing credit for more than they are qualified. Sales to customers are what business is all about. Knowing the difference between a solid customer and a bad credit is crucial to long term stability.

3. Borrowing Amount – Know how much capital the business requires to operate. Whatever the business does, whether provide a service or sell a product, you must be aware of the profit margin on these activities. You should have a solid business plan in place with budgets where you can determine the potential short fall and take precautions through financing.

4. Purpose – Your business plan needs to be able to show a purpose for using the capital. This must be very specific. The more details you can provide on where the loaned money will be employed, the better the Lender can determine the viability of your plan. By admitting potential problems and offering contingency suggestions, your business plan will have added dimension.

5. Repayment – In the business plan, give a reasonable timeline for the repayment of the loan. Preparing cash flow Performa will show the road map to ultimate success and profitability. Again, incorporating contingency budgets will help to mitigate potential risk.

6. Team – Make sure the owners, managers have strong bio’s and thorough knowledge of the industry. The Lender must have confidence that the operators of the business plan can perform based on their experience.

7. Loan package – Do your homework, and put all this together with your business plan into a binder so a lender can easily see who, what, where, how this company will deal with a loan. By being pro-active through the entire process you will become a more attractive prospective client to a Lender, and therefore will have some bargaining leverage with regards to the terms of the loan. It’s always a good idea to get involved with a professional to help you through the process.

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Guest post by Creative Capital Associates, a leader in account receivables financing.

Learn more about commercial financing here.

The Angel Capital Association last week released the results of its survey regarding prospects for the startup and angel investment marketplace in 2008. Key results from the survey include:

• Nearly half of angel groups expect deal flow to improve in both quantity and quality in 2008


• A majority of angel investors expect investment activity to either continue at the same level or increase somewhat in 2008 versus 2007, in spite of the prognostications for an overall slowdown of the U.S. economy.


• 81 percent of organized angel groups planned to invest in between three and nine companies in 2008, with 12 percent of these groups forecasting that they will invest in ten or more companies.


• The issues of investment exits through acquisitions or public offerings is more mixed for 2008 – with a majority of angel investors surveyed believing that exit activity will either stay the same or decline in 2008 or decline.

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.

We were thrilled to see that Dakim has raised $10.6 million in Series C financing, in a transaction led by Galen Partners.

Dakim is an innovated provider of brain fitness technology to improve the quality of life for Alzheimer's patients.

Growthink assisted Dakim in the drafting of their business plan, and in assessing the market for non-drug Alzheimer's-related products and services -- so we're especially proud of the company's success. We're happy that we've been able to play a role in their growth.

Excellent post on PureVC (www.purevc.com) regarding the key elements of a due diligence (or background materials) binder for a company seeking financing. The short list of the key elements for the binder are:

1. Background of the company
2. Background of management
3. The Company's Business plan
4. Audited and unaudited financials since company inception
5. Management discussion of company performance
6. Capitalization Table
7. Leases
8. Employment agreements
9. Purchase or sale agreements
10. Previous letters of intent

The post goes on to discuss issues of confidentiality - which and to what detail of the items above to make publicly available and which to disclose only after confidentiality agreements have been executed. A good workaround is to have shortened, publicly circulable versions of the above, with sensitive detail withheld until under non-disclosure. The full post can be seen here.

Pointing to our theme here of both markets and the regulatory environment adjusting favorably for the small cap public and the private company investment markets, today the SEC reduced the holding period for Rule 144 restricted stock from one year to six months.

The change will greatly help smaller public and private companies raise capital by easing the liquidity concerns of outside investors in these companies. Liquidity concerns are one of the biggest, if not the biggest, challenges to overcome in securing investment in private placement transactions.

Quite simply, this change is great news and in our view will be part of a theme we will see over the next few years to ease the regulatory burden on smaller company financings.

Read the article here on the change.

Raising capital for a startup or small business is without question one of the most challenging aspects of growing a business. The stories are manifold of entrepreneurs and small business owners becoming both frustrated and discouraged by the amount of time it takes to secure capital, the rejections they endure, and the lack of linearity and progress checkpoints over the course of the fundraising process. Complaints we hear repeatedly from entrepreneurs regarding fund raising include the following:

• The Stress and Frustration of "Maybe." It is common for a prospective investor - either an individual investor or a venture firm - to show enthusiasm for an opportunity upon initial review and then to leave the entrepreneur in limbo - forwarding neither a definitive "no" nor a definitive "yes" to the investment proposition.
  
  Here the golden rule is in effect - namely those that have the gold make the rules. While investors expect you as the entrepreneur to provide a very specific timeline in regards to growth metrics and return on their prospective investment, this expectation is too often not reciprocated in regards to an investment decision.

• Lack of Urgency. A great challenge in raising capital for a private company is the lack of natural urgency. Because there are so many more sellers of private company stock than buyers, attempts by the seller to create urgency by setting time periods within which the investment must be consummated and/or limiting the amount of stock that can be purchased are often viewed by buyers as simply sales techniques and are not credible. The mindset among investors is often if it is an attractive opportunity today then it will still be an attractive deal next month. This is especially true for emerging company investments, for which the most likely exit is via a sale of the business or a public offering, events most likely to occur 3-5 years or more in the future.

So how can an entrepreneur level the playing field, mitigate the balance of power and accelerate the fundraising process? Here are three quick ideas, gleaned from Growthink's nine years of fundraising experience.

• Have a Realistic Time Frame. In our experience, most entrepreneurs vastly underestimate the amount of time required to raise capital, as well as the number of rejections they are likely to receive. We offer our clients the 90-day rule: be prepared to spend a minimum of 90 days of virtual full-time effort on the process. At the end of this 90-day period, reassess. You will have either raised capital during this time, have a number of promising prospects, or have received feedback regarding the investment proposition such that you should be able to place a probability/likelihood of success if you continue your efforts. If you decide to continue, do so for another 90 days. Most importantly, once committed to the process, do not waiver or get side-tracked by strategic re-analysis. In the end, capital-raising is greatly a numbers game - most prospective investors will pass on your deal, but it only requires one prospective investor to say yes to be successful.
  
  
• Consider Bridge Financing Structures. Especially when raising larger sums of money (more than $500,000), think about creating convertible bridge financing structures such that the investor that comes in now receives their position at both a discount to the to-be-determined financing round valuation and/or receives some pre-determined rate of return once the larger investment is secured. Convertible financing structures such as these help on two fronts: they create an incentive for investors to act now versus waiting and they usually can close in shorter time frames.
  
  
• Be Irrational. Classic microeconomic theory contends that there is no such thing as an above average investment opportunity. All ideas - when subjected to competitive and market analysis - can be analytically deconstructed to a point of unworkability. Quite simply, the very undertaking of fund-raising for an early stage company is an irrational proposition. Embrace, rather than resist, this reality. With enthusiasm and persistence, appeal emotionally rather than just intellectually to prospective investors. While they may never admit it, the "gut" decision of investors is influenced more by these "soft" factors than it is by analytical and rational review. Have and communicate unwavering faith in your convictions and world view and avoid the analysis morass endemic to our information-overloaded world.