Written by Dave Lavinsky on Friday, July 16, 2010
Let’s say you’ve developed a new type of stethoscope.
Who should you approach to invest in your company?
- A local sports star?
- The owner of a local grocery chain?
- An executive at a local corporation?
- A doctor?
Well, if you answered all of the above, you are correct.
But if you want the best bang for your buck…or the most investment dollars per time you spend raising money, clearly approaching doctors is your best route.
Doctors would clearly understand the benefits of your new stethoscope and be the most prone to invest in you.
Targeting doctors to invest in your product is classic affinity marketing, or targeting people based on their established buying patterns or trends. Classic examples of affinity marketing include a university-branded credit card marketed to the university’s alumni. Or an insurance company working with a pet association to offer a pet insurance product.
You get the point. By targeting customers that have affinities (to their alma maters or pets in the above examples), you target folks that really understand and care about what you are offering.
In money raising, this is similar to “prospective customer financing,” which is asking your potential future customers to invest in your company now.
I’m a huge fan of prospective customer financing, because not only do you gain investors, but loyal customers who also help market your business through positive word of mouth.
So, how do you execute on affinity fundraising or prospective customer financing?
To begin, the best way to raise this type of money is through Crowdfunding. As you’ll learn in this Crowdfunding video, crowdfunding has tons of advantages. But in brief, crowdfunding will allow you to raise smaller amounts of money, and because it is neither debt nor equity, you avoid the legal and regulatory issues which will slow you down and cost you a lot of money.
Finally, let me give you some more examples of what to do:
Let’s say your venture targets the bird market. Well, you should be going on social networks, forums and websites serving this market. Join the conversation. Become a valued member of the community. And then tell other members about your venture, that you are raising money, and how they can contribute.
Or, let’s say your venture targets accountants. Do the same thing…..Find out where accountants congregate online. What accounting groups are there on LinkedIn? Where can you find them on Facebook? What accounting forums can you join? And once again, join the conversation. Become a trusted and valued member of the community. And then let your new friends know about your venture – something that will directly serve them – and how to contribute.
Once again, the best way to turn these affinity group members into investors is via Crowdfunding. So if you haven’t set up your Crowdfunding account yet, watch this video now.
Written by Dave Lavinsky on Friday, July 2, 2010
Last week, Vringo, a video ringtone company raised $9.2 million.
That’s a lot of money, particularly considering that Vringo only generated $20,000 in revenues last year.
What’s most interesting is how Vringo raised the money.
It didn’t raise the money from venture capitalists, angel investors, or any of the usual suspects. Which is particularly surprising since Vringo’s CEO and co-founder, Jon Medved, was formerly a venture capitalist himself.
And it’s surprising since Vringo had previously raised $17 million in venture capital.
So what did Vringo do instead?
Vringo decided to go public on the New York Stock Exchange.
Vringo sold 2.4 million shares at $4.60 per share for a total of $11 million. (The stock price has since decreased to $3.80 per share.)
In an interview with the New York Times, Medved sited a couple of key advantages of being a public company, including:
1. It gives credibility. This credibility is key to a small company, particularly if it is selling to big customers who might be skeptical of their ability to stay around long-term.
2. It helps with recruiting top management talent, particularly since the value of/likelihood of exercising employee stock options appears greater.
The huge negatives of going public however were the massive amount of time required to do the pre-IPO roadshow and the $1.8 MILLION in estimated offering fees.
That is a lot of money -- and unfortunately precludes most other entrepreneurs from taking this route. But, I would imagine that with the right law firm, these fees could have been dramatically reduced, to half that amount or less. But which would still require an entrepreneur to raise an angel round to fund the expense of going public.
According to Medved in his NY Times interview, when asked about whether he would recommend going public to other smaller companies, he replied: “I would certainly tell them to think about it, and not to rule it out. It’s a mistake to rule it out from first moment. Most people don’t even think it’s possible. We proved it’s not only possible, but it works.”
Next week, I will be unveiling an even more creative funding source than taking your company public. With this brand new source, you’re not going to raise $9.2 million (it works for smaller amounts of money). But, you won’t need to spend a penny on fees, you can raise the money really quickly, it’s practically foolproof, and you don’t ever have to pay the money back….pretty exciting stuff.
Written by Dave Lavinsky on Friday, June 18, 2010
If raising money was easy, would it be a bad thing?
Well, according to Bob Johansen, in his book "Get There Early," the tension between people with ideas and people with money provides the energy for innovation.
He further states that if this dilemma were solved, that creative energy would dwindle.
Now, I don’t necessarily agree with this, because the reason why entrepreneurs go into business is NOT to raise money.
Rather, that majority of entrepreneurs go into business for other reasons. For example, according to a recent survey by Grasshopper, 44% of entrepreneurs started their business since they “saw an opportunity to make something great.” Eighteen percent started their business “to fulfill my life dream.” And 7% started “to help others/give back.”
But, raising money is a necessary evil for most entrepreneurs.
And, I do agree that if it were too easy to raise money that it would be a bad thing. Why? Because there would be too much competition.
I often give my barber example to explain this. I grew up in a small town called Rockville Centre in Long Island, NY. The town had about 30,000 residents and two barber shops.
Well, what if raising money was too easy and 8 new aspiring barber shop owners each opened up stores. That would make 10 barber shops in one small town. Clearly the market couldn’t support that. And most likely virtually all the barber shops would go out of business (and the last one standing may not have been the best one, but the one with the most money in its coffers).
So, if raising money was too easy, there would be too much competition.
But, should raising money be as hard as it is? Clearly not.
And it isn’t if you invest in learning how to raise money. I see raising money as similar to someone passing the bar exam. Passing the bar exam is not about knowing what’s wrong and right (which is what the law should be about). It’s about doing your homework and understanding how things work. It’s the same thing with raising money.
Written by Dave Lavinsky on Friday, May 28, 2010
For many years, I had a poster on my wall with a quote from Calvin Coolidge, the 30th American President. Coolidge believed persistence was the most important attribute you can have.
Written by Jay Turo on Monday, March 29, 2010
In 2002, the CEO of Integreon, Liam Brown, sat in Growthink's offices in Los Angeles.
Integreon was just getting started and had 4 employees.
In the subsequent months, we worked with Integreon on its strategy and to developed its business plan.
The rest, as they say is history.
After raising rounds of capital and growing like gangbusters, Integreon is now a global provider of outsourced research, legal and business Knowledge Process Outsourcing (KPO) services. It currently has 2,000 employees and offices throughout the world.
And just today, the company announced that it raised another $50 million in expansion capital.
But the big amount is not what excited me most when I heard about the raise. It was the one tiny phrase in the press release that most others probably missed: "a substantial minority stake."
I like when the $50 million investment only accounted for a "minority stake" in the company. It means the company is worth over $100 million, and probably much more than that.
Yes, the right strategy and business plan can produce amazing results!
Written by Dave Lavinsky on Thursday, March 11, 2010
A couple weeks ago, Growthink hosted the "Startup Success Secrets" expert teleseminar series.
We assembled an impressive group of entrepreneurship experts, including Ken Yancey (CEO of SCORE), Ryan Allis (CEO of iContact), and Bambi Francisco of Vator.tv, among others.
If you don't recall, Vator.tv is an online community that allows entrepreneurs to showcase their ventures and communicate with customers, partners, and investors. I fully recommend that you register at Vator.tv.
But that’s actually NOT why I’m writing today...
Today, I'm writing to you about Vator's upcoming "Splash" showcase, where you'll have an opportunity to pitch Silicon Valley.
We're excited to say that we secured a 25% discount for you to attend the "Splash" Showcase, which will showcase 10 promising startups, and the hottest companies in commerce and social networking, as well as blue-chip venture capitalists.
On the evening of May 13, Thursday, in San Francisco, 10 seed- to early-stage companies selected by their peers will have the opportunity to pitch an audience of nearly 400 people including the Silicon Valley elite. These 10 companies will also have a high quality video of their presentation produced.
In addition, Tony Hsieh, CEO of Zappos, will talk about how he built and sold his company to Amazon for $1.2 billion, and Gurbaksh Chahal, CEO of gWallet, will talk about being a serial entrepreneur since the age of 16, and selling two companies for a combined $340 million. Additionally, venture capitalists from Founders Fund, August Capital, Mayfield and LightSpeed Ventures will be present.
You can reserve a 25% discounted ticket or pitch table below when you use the discount code "Vatorgrowthink" here: http://vatorsplashmay.eventbrite.com/
And here's where you can submit an early-stage company to pitch: http://vator.tv/competition/vator-splash
Written by Troy Centazzo on Tuesday, January 5, 2010
If you're even considering selling your midsize company in the next couple years, here's the bottom line: you should start the process now.
That does not mean you should officially list your business for sale. It means you as the business owner should start some of the "behind the scenes" efforts (that is, preparation) that will enable you to maximize the value of your company during a sale and enhance the terms you'll negotiate as early as possible.
We certainly understand: you've been growing and leading your company for years, not working to sell it. You've been building it to last, not flip. The principals at Growthink have been in your shoes. We've started and grown businesses ourselves. And we've sold them too. We've learned lot of lessons along the way during our collective 100 plus years of start-up and business advisory experience.
But only about one of every three or four businesses successfully reaches a closing after they are listed for sale.
That's a discouraging statistic, but one that can be overcome. And consider, too, that various sources note that up to 75% of all business owners are planning to sell their businesses within five to ten years, creating a massive inventory of available businesses competing with you for buyers' attention.
Why should you care?
What's one of the key differences between those business owners who execute a successful sale of their company on good terms and those who fail to close?
Simply knowing the process well in advance, focusing on a few essential actions as early as possible, and taking a comprehensive approach that is integrated into your overall business management and planning process.
Growthink's approach is unique and designed specifically for business owners. Unlike accountants, lawyers, business brokers and other intermediaries, we believe in a comprehensive approach to optimizing the chances of selling a business for the highest price and on the best terms for the owner.
We recommend you focus on three distinct initiatives months (or years) before you officially offer the company for sale:
1. Enhancing Your Business Plan to Increase Your Value - and Sales Price. Since 1999, we've helped 2,000 clients build their business plans and strategies. We'll show you how to achieve a value for your firm that includes its future growth opportunities, not only its past performance. Consider why the stocks of some public companies in a certain sector command a premium price to others in the sector - it's because investors believe in the future prospects of that company compared to the others. You should work on developing that premium value for your company through maximizing your business strategy - a process you're probably already doing anyway.
2. A Complete Process. These include all the steps involved in selling your business, from beginning to end (and even after the close). Steps include improving your financial statements and records and thinking about future capital gains, estate and other tax issues as early as possible.
3. Creative Financing and Transactions. You don't have to sell your business to your first bidder through a straight asset or stock sale. We'll teach you a variety of structures to choose from, including tax efficient sales to your existing partners, recapitalizing the company so you keep a continued role, and selling to another company in your industry, among others. All options offer advantages and disadvantages. You'll learn why and what type of approach might be right for you.
Experience has shown that only a relative few midsize businesses start the sales process early and focus on a comprehensive approach. Quite frankly, these business owners have a better chance of a successful outcome that those who don't plan.
We encourage you to learn the basics - whenever you think you'll sell your business.
Online Seminar - Thursday, January 7th at 1 PM PDT/4 PM EST
Join the expert Growthink team businesses for 45 minutes, and learn key lessons that will benefit you whenever you decide to sell your firm. The official Growthink "Bottom Line Guide to Selling Your Business" will be provided to seminar attendees.
Thursday, January 7th at 1 PM PDT/4 PM EST
During the online seminar, we'll also disclose the top mistakes owners make when selling their businesses (the land mines to avoid), as well as government actions that may be coming soon and affect your sales process (yup, think capital gains taxes).
Sign up here.
Join the expert Growthink team and two entrepreneurs who recently sold their businesses for 45 minutes, and learn key lessons that will benefit you whenever you decide to sell your firm. The official Growthink "Bottom Line Guide to Selling Your Business" will be provided to seminar attendees.
Seminar Fee Waived for this Program. Strictly First Come, First Serve
Since our webinar system is limited to 200 registrants, sign up right away to attend via the link below.
Sign up here.
Look forward to your participation,
The Growthink Investment Banking Team
Written by Growthink on Friday, December 18, 2009
Looking for venture capital? Or looking for great insights to grow your business?
Well, we've scoured a year's worth of great blog posts from hundreds of venture capitalists and industry experts, and are pleased to present you with our 50 favorite posts of 2009.
Some great information is included in these posts, and savvy entrepreneurs and investors will heed this advice.
And we'd love to hear your comments...what posts did we miss?
1. Ed Sim (Dawntreader Ventures)Inspirational video for entrepreneurs
"Without a bigger sense of purpose, it is hard to be an entrepreneur and stick through the inevitable tough times that will come your way."2. Josh Kopelman (First Round Capital) Board Transparency - and the Implicit Web
Discusses the repurcussions of accessible data and the necessity of transparency with your Board of Directors. 3. Jeremy Liew (Lightspeed Venture Partners)Why the Economics of Social Gaming are So Attractive to Investors
Trend to watch for in 2010: Social Gaming, this article tells you why. 4. Seth Levine (Foundry Group)Want more jobs? Support Entrepreneurship
Levine recommends taking the steps included in his blog article to boost the economy and create jobs. 5. Chistopher Allen (Alacrity Ventures) Community by the Numbers, Part III: Power Laws
What defines the success of a community and how can we predict this?6. Fred Wilson (Union Square Ventures)Some Thoughts on Email After Dealing with 500 Emails
An inside peak into VC email response.7. Bill Gurley (Benchmark Capital) What is Really Happening to the Venture Capital Industry
VC Bill Gurley takes readers through an overview of the ups and downs of 2009. 8. Paul Graham (Y Combinator) Startups in 13 Sentences
If VC Paul Graham could tell startups 13 things, these would be them.9. Dave Hornik (August Capital) Innovation Doesn't take a Vacation in an Economic Downturn
Innovation isn't dependent upon finance. 10. Brad Feld (Foundry Group) VC Behavior in Board Meetings
Advice on putting the phone down, and paying attention at board meetings.11. David McClure (Founders Fund)Startup Metrics that Matter
This vlog teaches new entreprenuers what metrics really matter in the early stages of their development.12. Erick Schonfeld (Techcrunch) Venture Funds Raise Only $1.6 billion in 3rd Quarter. Most of That Went to Vinod Khosla
A quarterly overview on VC funds raised from Q3 2007 - Q3 2009. $750 million of the $1.6 billion raised went to Khosla ventures. 13. MG Siegler (Techcrunch) The Cost of FriendFeed: Roughly $50 million in Cash and Stock
A successful exit for a small social media startup; FriendFeed was purchased in August 2009 for $50 million. Highlights the payout for initial investors.14. Steve Fredrick and Don Rainey (VentureBeat) Venture Capital 2009: The Year in Review
Highlights included 3 venture-backed IPOs in Q3 2009, an expanding start-up world and the reduced cash required to start companies.15. Marc Andreessen (Andreessen Horowitz)Introducing Our New Venture Capital Firm Andreessen Horowitz
Announcing a new $300 million fund for technology startups. Investing between $50,000 and $50 million, this blog post outlines EXACTLY Andreessen Horowitz's requirements. 16. Laura Grimmer (VentureBeat)5 Ways VC firms Can Stop Shooting Themselves in the Foot
Excellent advice for VCs looking to grow their business and expand the pipeline of deals. 17. Peter Rip (Crosslink Capital)What's Broken - Venture Capital or Venture Perceptions?
Refutes the idea that venture capital is the worst place to be because the "old model doesn't work."18. Rick Segal (JLA Ventures)The "Take the Deal or Not" Debate
Questions every person should ask themselves before they take a deal with a venture capital firm.19. Mike Hirshland (Polaris Venture Partners) More on the Founder/CEO Question
When should the founder step aside as CEO for the greater good of the company?20. Jeff Bussgang (Flybridge Capital Partners) Should Entrepreneurs Be More Like Teenage Girls?
Recommendations for a growth mindset and success for reaching goals as an entrepreneur.21. Tim Oren (Pacifica Fund)Silicon Valley's Dirty Little Secret
What are the long term social and political impacts of Silicon Valley? Some insightful thoughts into Silicon Valley culture.22. Eric Friedman (Union Square Ventures) 99.99% (Or It's Totally Going to Happen But Isn't Signed Yet)
Until a contract is signed - it's not a done deal.23. Mike Speiser (SutterHill Ventures) Better Incentives Can Improve Online Advertising
Publishers should incentivize advertisers to create good content. Brings up the idea of ad content that enhances, rather than diminishes, user experience. 24. Matt McCall (DFJ Portage Venture Partners) Do You Need to Be in the Valley?
Addresses the age old question of whether entreprenuers in the tech space need to be in Silicon Valley to succeed. 25. Stu Phillips (Ridgelift Ventures) Venture Capital - Time for V3.0
Stu Phillips raises an important point - VC2.0 which began with the Internet and resulting bubble - is out. A new system needs to be created.26. Jason Caplain (Southern Capitol Ventures) Include Sales in your Strategy
Entreprenuers need to connect with their buyers early on; sales is an integral part of EVERY company. 27. Jason Mendelson (Foundry Group) Senator Dodd - Making it harder for small businesses to get funded
A VC outlook on the legislation changes proposed that will alter the ability for companies to get financed. 28. Nic Brisbourne (Esprit Capital Partners) Financial Forecasts in a Business Plan
"Any business plan that has financial forecasts under year 1, year 2, etc. rather than 2009, 2010, etc. is too early stage for us." Brisbourne urges entrepreneurs to be precise in their projections and have a definitive timeline for revenue.29. Albert Wenger (Union Square Ventures) Hiring: Lack of Diversity Becomes Self-reinforcing
Historical hiring practices may affect the ability to bring on diverse, younger talent.30. David B. Lerner (Totius Group, Columbia Venture Lab)Getting from Zero to One in Your Startup: Founder Compensation Should be Slim to None
An important point for every founder to konw - your investment is on the back end - not from annual salary.31. Larry Cheng (Fidelity Ventures) Succeeding with a Potential Single Point of Failure
Two success stories of companies who exited in spite of single point of failure possibilities.32. Raj Kapoor (Mayfield Fund) Prediction: Social Nets Will Make More Money Off-site vs On-site their Websites
Interesting take on how social networks will continue to monetize.33. Will Price (Hummer Winblad) Now
The importance of being present in the moment AND enjoying it.34. Howard Morgan (First Round Capital) UNI- Acquired Tastes in Food and Investing
Morgan talks about business plans that excite him as a potential user - not as an investor.35. Mark Suster (GRP Partners) How to (re)Approach People (Advice on the Eve of LeWeb)
"Business etiquette tips for dealing with VCs and Corporates at Conferences"36. Christine Herron (First Round Capital)
What's the Secret Success of Mint.com? The Real Numbers Behind Aaron Patzer's Growth Strategy
How much does it take to get started? When should you raise money? Interview with Mint.com CEO opens up and answers these questions.37. Fred Destin (Atlas Ventures) The Arrogant VC: A View from the Trenches (full length version)
Destin posts the answers to "tell me why VCs are disliked by entrepreneurs"38. Rob Day (@Ventures) Conventional Wisdom and Cleantech Venture Capital
Day clears up what Cleantech is, and in which firms "Cleantech VCS" invest.39. David Feinleib (Mohr Davidow Ventures)
When You Are the Product
A reminder that, regardless of the technology or device, when pitching investors you are pitching yourself.40. Bijan Sabet (Spark Capital)
Creating an Operating Plan for 2010
Advice for any year really, on creating an operating plan that works.41. Phillippe Botteri (Bessemer Venture Partners) Impact of the Recession on SaaS Sales & Marketing Productivity
How has the recession affected SaaS? Not much.42. Andrew Parker (Union Square Ventures)
How does Microsoft's Bing plan to compete? By paying customers not to compete.43. Mark Peter Davis (DFJ Gotham Ventures) Bootstrapping vs. Venture Funding
The pros and cons of two finance methods for startups.44. Allen Morgan (Mayfield Fund) Co-Founders vs. Early Employees
Quick thoughts on the differences between the co-founders and early employees. 45. James Chen (CXO Ventures)
Don't Bite the Hand that Feeds
This lesson applies to both business and government: Don't bite the hand that feeds you.46. David Aronoff (Flybridge Capital Partners)
Why do companies fail?47. Max Bleyleben (Kennet Partners)
The Hunt for Growth Is On
Tech success is creeping into Europe and other markets as the US emerges from recession.48. Jason Ball (Qualcomm Ventures Europe)
Pitch your startup: VCIC 2009
2009 awards have been given, but 2010 awards are just around the corner.49. Don Rainey (Grotech Ventures)
The 7 Troublemakers you meet in a Startup
7 personality archetypes an entrepreneur can expect to meet when starting a company. 50. Peter Haas (Founder, AIDG)
In Social Enterprise, Force Yourself to be an Entrepreneur First
Ten rules for starting an international service organization.
Written by Dave Lavinsky on Friday, December 18, 2009
This video reveals a common mistake entrepreneurs make when shopping for capital.
Written by Dave Lavinsky on Wednesday, December 16, 2009
This video will help you raise capital more confidently and quickly.
It's a simple formula, and may sound counter-intuitive, but it's very effective.
And if you enjoyed that video, you may be interested in my new online training course, Secrets to Raising Capital, where I give you step-by-step instructions on exactly how to raise 40 different types of capital to grow your business.
Click here to learn more.
If you want to raise capital,
then you need a professional
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to watch the video.
"The TRUTH About
Most entrepreneurs fail to raise
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The Internet has created great
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