Cash for Impact

Here’s an email I received that I am passing on:

I am writing to you to invite you to a special StartupLounge-sponsored event, Startup Spring Fling 2012. We are on the host committee for this event, spearheaded by 151 Locust, a privately-funded, subsidized coworking space for tech companies. The name of the game of this event is FUN. The event runs from 4:30-10:30 pm in Avondale Estates on Friday, May 4th. We’ll have live music, a beer garden, food trucks, games, and a section of Avondale Estates roped off for our personal use. The goal is to offer an event that is not so much focused on pitching as it is on helping build relationships and startup fellowship in a relaxed environment.

There are no applications for this event. You pay up ($10 for 2 drinks and 2 food items), sign up and show up. We and others on the host committee agreed that it is important to put an event on the startup calendar in Atlanta that is open as well as fun. As you know, most of StartupLounge’s events have been invitation-only. Potential attendees had to apply to get in. This trend has continued with many of the more widely-attended and well-known startup networking events in Atlanta. We are delighted to offer this more inclusive opportunity, and if people like it, we’ll keep doing it in future years.

So that’s it. Many of you aren’t on the StartupLounge mailing list and I’ve singled you out as people that I think would have a great time, may reap some professional benefit, and whom I would personally love to see next Friday evening. http://startupspringfling.org/

Technorati Tags: 151 Locust, Atlanta, coworking space, Startup Lounge

Training Agenda

Where & When

Where: Ollivette S. Allison Life Learning Center
667 Fairburn Rd.
Atlanta, GA 30331

When: December 3, 2011
10:00AM-3:00PM

Technorati Tags: financial management, manage your budget, nonprofit Board, nonprofit financials

When you start a business with no money, you must have some skills, a ready-to-go product, or some other asset that you can leverage. For instance, you may start a residential painting business (okay, maybe not in this market, but bear with me as this is just an example!).  You may

Starting a business with no money is like buying a barren plant.

have stellar painting skills and a few people who said they’d hire you if you ever started a painting business. You go to these potential customers, tell them you’re in business, and one hires you to paint the interior of a  couple of rental houses. You ask for 25%  up front. You use that money to buy the initial supplies. Or you open a trade account with 30 day terms at Lowe’s, Home Depot, Sherwin Williams, etc., or obtain a store credit card and use that to buy the supplies. You get paid immediately upon completion.

You pursue your next painting job. You’ve decided you have strong selling skills and there are other painters who don’t who you can engage. You bring on 3 more painting jobs and subcontract out two of the 3 jobs. As before, you get 25% upfront and use that and store credit to purchase supplies. You get paid immediately upon completion and use those funds to pay the subcontractors.

You are growing quickly and need someone to help you manage the administration portion of your business. You use craigslist to find a part-time bookkeeper and elance to contract with a part-time virtual assistant. You continue doing this until you have enough money to bring on a painter or two full-time. With employees, you have a higher overhead cost but your overall cost per job is significantly lower because you now have steady, consistent painting jobs and  pay significantly less to employees than to subcontractors, even with benefits, workman’s compensation, etc. factored in. Along the way you’ve used money from sales to incorporate, obtain proper insurance, and complete other functions that protect you and your business.

This is how you start a business with no money. You have to quickly find customers or find a way to barter or convince others to provide a service or product to you until you can pay them at a later date. If you can ramp up quickly, you can often convince someone to extend you 30-day terms. (This is one form of supplier financing.) If you are an engineer starting a technology-based company, you may be able to convince friends who are also engineers or engineering students to work on your application for a predetermined time in exchange for a portion of (near) future sales or to get you to the point that you have a viable product that would attract angel or other investment.

These are all ways in which one starts a business with no money. When you start a business with no money, you must bootstrap. In other words, you must be very cost conscious and think more about what you need to run your business and provide your service or product, so as to identify non-monetary means to access these.  Remember, money is just a means to facilitate exchange between individuals and entities. Bootstrapping requires you to be more inventive and creative to obtain what you need, but this forces you to contain your costs and build only as demand necessitates and grow your business with care.

When you start a business with no money and bootstrap, you very often build an organization from the ground up which has strong financial and operational controls. This puts you ahead of the crowd since many small businesses have minimal infrastructure which often creates significant issues as those companies enter a rapid growth phase.

Technorati Tags: bootstrap, bootstrapping, financial control, start a business, start a business with no money

The Cleantech Open runs the world’s largest clean technology business competition.  They seek the best clean technology ideas from around the world. Share your idea and you could possibly win a prize package totaling $100,000 to help you fund your business start-up and grow your idea! Go to the sign up page.

How do you get started? Go to the contest page and select your country. Answer five questions. If your idea wins your country’s National Competition, you will then represent your country as a Global Ideas finalist at the annual Cleantech Open Awards Gala on November 10, 2011 in San Francisco. At the Global Competition you’ll have 5 minutes to present your idea to a crowd of 2,500 investors, entrepreneurs, sponsoring companies, corporations, members of academia, press, and others. The crowd will vote via text message for the “People’s Choice”.

Click here to enter the global competition.

Enter the US competition.

Technorati Tags: business start-up, CleanTech idea contest, CleanTech Open, small business competition

Here are some statistics on angel investors and angel investments from 2001-2010 compiled from the Center for Venture Research:

Angel Investment totals

• 2001: $30 billion
• 2002: $15.7 billion, a 47.7% decrease over 2001 (coincides with the telecom and tech bust)
• 2003: $18.1 billion
• 2004: $22.5 billion, a 24% increase over 2003
• 2005: $23.1 billion, a increase of 2.7% over 2004
• 2006: $25.6 billion, a 10.8% increase over 2005
• 2007: $26.0 billion, a 1.8% over 2006
• 2008: $19.2 billion, a 26.2% decrease from 2007
• 2009: $17.6 billion, an 8.3% decrease from 2008
• 2010: $20.1 billion, a 14% increase from 2009

 

Number of ventures funded by angel investment

• 2002: 36,000 entrepreneurial ventures received angel funding, a drop of 25% from 2001.

47% of those were in the seed and start-up stage; 33% early stage.

• 2003: 42,000 companies received angel investment, a 16% increase from 2002.

52% of the angel investment was in companies in the seed and start-up stage.
Yield rate of 10.3%

• 2004: 48,000 business startups et al were venture funded, a 24% increase from 2003.

Yield rate of 18.5%

• 2005: 49,500 entrepreneurial ventures received angel funds, a 3.1% increase from 2004.

55% of those angel funds were in ventures at the seed and start-up stage: early stage, 43%.
Yield rate of 23.0%

• 2006: 51,000 business startups et al, a 3.0% increase over 2005.

46% of the ventures were in the seed stage or were actual start-up companies.

• 2007: 57,120 ventures funded, a 12% increase from 2006.

39% of the angel investment were in seeds and startups; 35% in early stage; 21% in expansion stage.
Yield rate of 14%.

• 2008: 55,480 ventures funded, a 2.9% decrease from 2007.

Seed & startup, 45%; early stage, 40%; expansion stage, 14%.
Yield rate of 10%.

• 2009: 57,200 entrepreneurial ventures funded, a 3.1% increase from 2008

35% in seed and startup; 62% in early and expansion stage.
Yield rate of 14.5%.

• 2010: 61,200 ventures funded, an 8.2% increase over 2009.

31%  of the angel investment was in seed & startup; 67% in early and expansion stages.
Yield rate of 18.4%

Yield rate is defined as the percentage of ventures pursuing angel investment that actually obtain it. During the above period (2000 – 2010) the overall yield rate hit a high of 23.3% in 2000 while still in the tech investment bubble. Now the yield rate is a more stable and sustainable rate of ~10%. In any given year this will fluctuate based on investor sentiment, what’s happening in the IPO market, and what’s happening in the M&A market. When overall investor sentiment is high and the stock market is on a tear, numerous companies are going public via an IPO and the mergers and acquisitions activity is significant, the investment yield rate will typically be higher. Why? When investors have more options for cashing out of their investments sooner, they feel more confident about parting with their funds. Consequently, they invest in more of the companies that present to them.

Technorati Tags: angel investment, business startup, entrepreneurial venture, venture funded

Technorati Tags: microloan, microloan program, microloans, Samuel Adams, self-funded entrepreneur, small business advice

My former Junior Achievement (JA) Fellows group, ReZold, won is competing in the JA Fellows North American competition. I think they’re great and yes, of course, I am fully biased. But they would not have made it this far if others who are non-biased did not also believe this. You can view ReZold’s video on Facebook, http://www.facebook.com/video/video.php?v=2143084932317&oid=148917188468013&comments , and “like” them by clicking on the thumbs up icon at the very top of the comments immediately below the video.  To see the other JA Fellows contestants, go to the JA Company program page, http://www.facebook.com/pages/JA-Company-Program/148917188468013?sk=wall.

Junior Achievement logo

This past year I volunteered with the  group that came up with, ReZold until I resigned in late January due to a heavy travel schedule. I had been with the group since October and had many returnees from the previous year, for which I was also a volunteer. I didn’t think it was fair for people to count on me when I couldn’t say definitively whether I’d be there or not. C’est la vie. Anyway, my former group created ReZold after several weeks of trying to do another product. The initial product, which also used recycled and reclaimed materials, took more time and effort than initially anticipated and had way too many variables. I thought this was an excellent real-life learning situation for them. (i.e., You get a great idea for a product or service offering but when you go to implement it you continually encounter roadblocks. Finally you say there must be an easier way…and then you find a product or service that serves the same need but is infinitely easier for you to provide.)

More great news: My former group, ReZold, went on to win the “innovative” category in the city wide JA Fellows competition. And they were ranked among the top three companies for the Atlanta metro area so my former group. This is why ReZold is heading to Washington, DC for the North American competition. There’s a wonderful article about them in the Atlanta Journal Constitution, Young Entrepeneurs Tout Summer Vocation.

I’ve blogged before on how effective the Junior Achievement (JA) Fellows program is at introducing high school students to business ownership and management and fostering entrepreneurship from an early age. It really is a great hands-on entrepreneurship training program. I’ve even written how the JA Fellows program can also be advantageous for volunteers who are just starting out as entrepreneurs or who work for large companies and are considering entrepreneurship. The JA Fellows program walks you through the entire process from raising capital through selling stock to unwinding and liquidating the business. It’s a superb program and I’m happy to call myself a (former and returning) volunteer.

Technorati Tags: entrepreneurship training, JA Fellows, JA Fellows program, Junior Achievement, ReZold

Join the IPO Party (Eric Markowitz, Inc.com) is a great article about a resurgence in the tech IPO market that feeds into previous blogs about how IPOs were not dead, how they are increasing. Here’s an excerpt from the article:

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Is the IPO pipeline bursting? With favorable market conditions and investor appetite, companies are lining up to go public—168 of them, to be precise. That’s the largest backlog since 2000, and The New York Times‘s Dealbook questions today whether all the fervor is creating a dangerous crush—and that valuations could become unhinged from reality. While there’s little indication of the market souring, it’s clear that investor interest is driving up initial valuations—30 percent of offerings have exceeded price expectations this year, according to Renaissance Capital—and that some companies’ stocks quickly deflate from their first-day gains.

In the first three months of this 2011, “venture-capital investment in consumer tech companies nearly tripled to $874 million from $310 million a year earlier.” This is according to a Wall Street Journal article.

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I personally don’t think the tech IPO market or venture capital market is overheating.  It is typical for tech companies with a sizable following to have a big runup on the day they are listed from all those individuals and companies who could not get in at the pre-IPO price.  The fact that only 30% to have deflated is a good sign. In the heydays of the runups, the numbers were closer to 70%. I won’t discuss how the market performed at its peak compared to the subsequent downturn several months later. (If you followed the market, you know it was ugly.)

Here’s another excerpt from the same Join the IPO article: “The shift away from business-oriented technology start-ups has been gathering steam over the past few years,” The Journal notes. “Venture investment into such companies was $11.9 billion in 2010, down 35 percent from $18.4 billion in 2006.”

Although, venture capital investment in B2B is down from 2006 to 2010, read another way, the B2B venture capital market is still doing okay, at $11.9 billion in 2010.

How can the New York Times Dealbook say the tech IPO market for start-ups is overheating when one segment (B2B) has had a 35% drop off? And that segment (B2B)  is STILL multiples higher than the other segment (B2C), even after the drop in B2B startup investment and the nearly tripling in B2C startup investment.

I think the IPO market is just heating up. There has been a lot of pent up demand from the last several years when media darling tech companies’ best bet of cashing out high was to be purchased by an eBay or Yahoo or other very large media or related entity. (Think MySpace’s purchase by News Corp. for $580 million in 2005 for one.) And a strong tech IPO market will translate into a strong venture capital market.  Why? The quicker venture capitalists can cash out and the higher their multiples at cash out, the greater their overall portfolio performance and the more companies they look to to fill the gap left by the exiting companies. In addition, as more companies go public, the risk profile of investing in start-ups decrease, making VCs less wary of investing in earlier stage companies.

It’s the job of the financial news to continually extol doom and gloom. Who would read if it was all happiness? But pay attention to the facts that are given, not the slant that the journalist injects. I have a BS in Industrial & Systems Engineering and had to take a lot of statistics classes to get that degree. It’s amazing how you can manipulate stats and data to make a point. So read between the lines and draw your own conclusions.

One last point. You will note that the IPO market is strong for B2C startup tech companies and that the investment level for venture capitalists in B2C start-ups is increasing. The investment level in B2B startups will continue to drop until the IPO market for B2B companies increases. That’s what you call in statistics a direct correlation.

Any thoughts? Please share.

Technorati Tags: B2B startup, B2B venture capital, B2C startup, tech IPO market

This is a great article that discusses 4 business incubators in 4 states – Ohio, California, Missouri, and Hawaii. There are other incubators in others states and this is a good, in-depth cross section of what is available. Check it out. – Tiffany C. Wright

Business Incubators for a Variety of Niches
By Gwen Moran |   Entrepreneur Magazine – May 2011

A growing number of specialized, market-specific business accelerators are helping entrepreneurs around the country get their businesses off the ground .

The dizzying array of sights, smells and sounds that welcomes visitors to North Market in Columbus, Ohio, makes it tough to know where to go first. No less than 35 food-related businesses populate the bazaar. The scent of fine cheeses directs shoppers’ attention one way, competing with the aroma of delicious-looking baked goods from another nearby vendor. Fishmongers, butchers and produce sellers line the aisles, and the second-floor mezzanine has seating for those who can’t wait to sample their delicious finds.

Read the rest of the article on Entrepreneur.com.

Technorati Tags: business incubator, business incubators, entrepreneur, small business start-up

I conducted a workshop earlier today at the Stepping Up to Business Conference. It was targeted at small businesses and business start-ups seeking financing.  I thought my workshop went well after a slow start due to A/V issues (and a restroom port of call). My topic: Writing a Business Plan / Financing Proposal. I received some really good feedback. I number of attendees told me “Great job!” or that they really enjoyed the session. I’m glad. I aim to please. Finance can be fun, or at least interesting and I try to make it so. If any of the attendees/participants read this, thank you for coming.

In conducting the workshop I took the top-down approach. (I mean, I do consider myself a strategic advisor and highly strategic so this makes sense, right?) There are a number of websites offering business plan templates and a number of software programs out there that purport to help you write your business plan. However, I’ve had a number of business owners tell me they couldn’t get started or the plan they wrote using these seemed too perfunctory. These plans templates are good. Some are great. But it’s like many things. Garbage in, garbage out. If you spend time down in the weeds focused on the details, you miss the whole point of a business plan which is to view your business from on high…and all the things that influence and impact your business.

I focused on writing an Executive Summary. Honestly, no lender or investor wants to see your 20, 30, or 40-page business plan UNTIL they’ve decided that they will seriously consider lending to or investing in your business. And even then, if you are pursuing smaller sums of financing, they may not wish to see it believing the Executive Summary sufficient. You want to interest an investor in your business? Give him or her a copy of your 1-page company profile. If they express further interest, then provide them with an Executive Summary 3-5 pages in length. Give them an in-depth business plan before they are sure of their interest and you will likely run them off. Or they’ll take it and get back to you when they finally get around to reading it. Which will be….a looonnnggg time from now. (Again, all this assumes you didn’t know the investor from Adam. If you were introduced by a source credible to the investor, he or she will be much more receptive to your long business plan. But leading with the Executive Summary is still optimal.)

I will spend the next few blogs responding to some of the questions posed by the attendees. I assume that if one person has the question, others have the same or very similar questions.

You’ll also be happy to know (for all my adoring fans out there – Hah!), that the conference organizers video-taped all the workshops, panels, and keynote address. They will make the video of my workshop available to me. And I will then make it available to you. Until then, stay tuned for more.

Technorati Tags: small business conference, stepping up to business