RSSAll Entries Tagged With: "venture capital"

5 Low Risk Ways to Fund Future Business Growth

Funding growthHere at BizBest, a common concern I often see from business owners and start-up entrepreneurs is where the money will come from to fund future growth. For some, that might require outside investors, which in turn can mean giving up partial ownership or control.

But most businesses can grow successfully by using one or a combination of other financing approaches that don’t require major commitments or outside investors.

The idea is to prepare and position your business for growth so you don’t miss out on growth opportunities when they arise. A big part of that is not only keeping your current balance sheet in shape, but also lining up potential funding sources.

It starts with understanding the different options, and that alone can be challenging. For example, an American Express survey found that 34% of business owners believe – incorrectly – that a business “term loan” (funded immediately for a set term and amount) and a “line of credit” (which you open and tap as needed) are essentially the same. And nearly 40% believe it’s a good idea to apply to as many lenders as possible when seeking a loan, when the opposite is true. (Multiple applications can harm your credit rating.)

Here are five ways to position your business for all the future funding you’ll need:

1. Reinvest your profits

The best source of “venture capital” for an existing business is money you’re already generating. This is “patient” capital that builds value in your business without debt and without giving up shares to others.

Many entrepreneurs miss growth opportunities by spending profits in unproductive ways. Others take the opposite extreme, pumping every penny into the business while taking nothing for themselves.

Both can backfire. If you do need to seek a loan, lenders will prefer that you pay yourself a reasonable salary. They want to know the business can be profitable even if those running it get paid.

2. Tap into trade credit

“Trade credit” is a way to put off payment for goods and services your business purchases from suppliers and vendors. You may find vendors more than willing to sell on credit to a growing business – and even to a startup – if you can strike a long-term deal to buy from them.

And from your perspective, trade credit is also one of the safest forms of business borrowing. Bank debt is dangerous because payments are still due even if sales drop. But if sales drop so will your orders, so your level of trade credit drops too.

Trade credit may also be more readily available than bank or other types of loans. And it lets you spread payments over months or even years with little or no down payment and generally favorable rates.

3. Line up a credit line

The time to establish a line of credit is when you have the ability to qualify for one and might not really need it.  Having a line of credit can help you grow by providing ready financing when opportunities arise. A line of credit is also vastly preferable to using credit cards that carry much higher interest rates and other onerous terms. But use your credit line cautiously. Lines are meant to be tapped as needed, then paid off so they are available again the next time.

Establishing a credit line is cheap, you only pay interest on what you borrow and you can use the line for almost anything. Start small – basically with whatever size line a lender is willing to provide.  The important thing is to get a foot into the bank financing door. Once you have it, put it to use and pay it off diligently and always on time.

4. Expand your banking relationships

If you have accounts with only one big bank, consider opening additional accounts at a regional or community bank (or vice versa). That will give you more options when it comes time to look for loans, lines or other services to support your growth plan.

5. Consider alternative sources

A few options include credit unions you may be eligible to join, accounts receivable financing (also called “factoring”), and so-called “peer-to-peer” lending. Peer-to-peer (or person-to-person) lending is handled online through a variety of web-based services that function as intermediaries, including Prosper (www.prosper.com) and Lending Club (www.lendingclub.com).

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.  Follow @140Main

Why You Should Join Startup America Partnership

The Startup America Partnership is new and largely unknown, but this independent, private-sector coalition of corporate tech titans, advisors, financing firms, mentors and sundry service providers won’t be undiscovered for long.  Any business owner or entrepreneur – from startup (newly created), to rampup (initial growth stage), to speedup (going like gang busters) – should be ready to tap this free resource when the help starts flowing.

The way in will be through a free Startup America membership (via application) that isn’t yet available, but will be soon.  So sign up now to be notified by email when details on the membership application process are released.    

The group’s mission is mighty:  To inspire and accelerate high-growth entrepreneurship in the U.S. with services, product discounts, special access, resources, connections and “insider information” from a start-studded lineup of business power hitters.   It’s not a loan or grant program, do ditch that thought. Because Startup America is still starting up itself, most of what’s coming is still in development.  But here’s a sampling of what’s coming:   

  • Google will provide up to $100 million worth of online advertising to Startup America Partnership member companies to over the next year.
  • Intuit will offer special discounts on its flagship products and services, including QuickBooks Online, Intuit Payroll Services, QuickBooks Merchant Services and Intuit Websites. Value: $37 million
  • Angel Capital Association (ACA) and Angel Resource Institute (ARI) will double the number of high caliber investors in angel groups across the country, increasing annual investment by $1 billion.  Qualifying Startup America Partnership member companies will be matched with angel investor mentors to build their success in starting and growing their businesses.
  • Salesforce.com will provide products and technology to power Startup America Partnership member companies. This includes CRM, a collaboration platform, a resource catalog built on Force.com, and a workflow engine to connect entrepreneurs with resources from private-sector partners.    
  • The National Venture Capital Association (NVCA) will create the NVCA / Startup America Partnership Network, providing access to its 400 venture capital firms, 4,000 investors and thousands of venture-backed company CEOs via events around the country; and will provide access to StartUpHire.com, a free online jobs board for member companies.
  • American Express OPEN will provide special access and advantaged pricing for products and services to help businesses attract and retain customers and improve cash flow. Estimated value: $125 million
  • Cisco will provide training (through intermediaries trained and supported by Cisco) to approximately 6,000 entrepreneurs within 50 cities by January 2014.  Estimated value: $3 million.
  • Ernst & Young (EY) will provide access to EY professionals and the firm’s Entrepreneur Of The Year (EOY) network as advisors and mentors, plus on-line resources and other analytical tools.  Estimated value: $7.5 million.
  • First Data, a major electronic commerce and payment processing firm, will offer discounts on processing services including credit and debit acceptance as well as point-of-sale terminals to Startup America Partnership member companies.
  • HP will offer discounts on laptops, desktops, workstations, Palm smart phones, tablets, printers, wireless routers, servers and more to Partnership members.  Estimated savings for startups will be $100 million over three years.   
  • IndieGoGo, a platform for raising money online via “crowd sourcing,” will offer a 50% discount on campaign fees on the site and feature members on the company’s website.
  • LinkedIn will provide a special platform for Startup America members to build an identity and grow a network. LinkedIn will also contribute training, services, and products to members.
  • Microsoft will offer its BizSpark program to all qualified software startups.  BizSpark provides access to Microsoft software free for three years including support, training and access to Windows Azure, Microsoft’s Cloud Services Platform.  Participants are also connected to a global network of 700,000 mentors, partners and investors. 

AOL co-founder Steve Case chairs the partnership and the Kauffman and Case Foundations are founding partners, providing initial funding and strategic guidance.  

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

World’s Richest and Largest Business Plan Contest

Graduate level student-entrepreneurs at universities worldwide are percolating new ideas and pitching them to business plan contests to a record pace.  For a few, the result is money — and gobs of it.  For example, the Rice Business Plan Competition (RBPC) — the world’s largest — will award more than $1 million in prizes to aid new startup businesses at the 11th annual competition at Rice University April 14-16.

Forty-two teams were selected from more than 500 entries, an application pool that was more than 20 percent higher than last year. They were chosen based on their executive summaries to compete in six categories: life sciences, information technology, energy and clean technology, green technology, renewable and recycling, and social and other. The teams will have 15 minutes to present business plans and the top six will vie for the big prize valued at $400,000.

The Rice University Business Plan Competition is the world’s largest and richest graduate-level business plan competition. It is hosted and organized by the Rice Alliance for Technology and Entrepreneurship which is Rice University’s flagship initiative supporting entrepreneurship. The competition aims to give collegiate entrepreneurs a real-world way to fine tune their business plans and elevator pitches and perhaps generate funding. Judges evaluate the teams as real-world entrepreneurs seeking startup funds from early stage investors and venture capital firms.

2011 Rice Business Plan Competition teams

Business NameUniversity
AluseraUniversity of Gothenburg, Sweden
Amma Healthcare TechnologiesRice University
Antenatal Screening KitJohns Hopkins University
Arctic SandMassachusetts Institute of Technology
Are You a Human?University of Michigan
Black LocusCarnegie Mellon University
BOSS MedicalJohns Hopkins University
C5 BioMassachusetts Institute of Technology
CamGaNUniversity of Cambridge, England
ClearBrook ImagingThe University of Texas at Austin
cycleWood PlasticsUniversity of Arkansas
DeepScanThammasat University, Thailand
Diagenetix Inc.University of Hawai‘i at Mānoa
EternoGenUniversity of Missouri
Exciton SystemsUniversity of Illinois at Chicago
Fiddlers’ GreenRice University
GreenCoatThe University of Texas at Austin
Hemova MedicalJohns Hopkins University
iLumi Lighting SolutionsThe University of Texas at Dallas
InnovatorsIndian Institute of Technology
JanusUniversidade Federal Minas Gerais, Brazil
NeuvelNorthwestern University
OsteoceneBaylor College of Medicine / Rice
PK CleanMassachusetts Institute of Technology
PulmoCADWashington University in Saint Louis
Purisorb Inc.Dalhousie University, Canada
QR Code CityBrigham Young University
Quantitative Insights The University of Chicago
ReGenerate Solutions University of Michigan
ReGreen TechnologiesGeorgia Institute of Technology
RhoManiaCarnegie Mellon University
Sahara BotanicalsUniversity of Oxford, England
San + CONorthwestern University
Secure InfoShareGeorgia Institute of Technology
ShuaTech Chemical SystemsLouisiana Tech University
SmartershadeUniversity of Notre Dame
Somatis TechnologiesUniversity of Southern California
StaticFlow AnalyticsUniversity of Washington
SulicoLondon Business School, England
TiFiberUniversity of Arkansas
TitinGeorgia Institute of Technology
TNG PharmaceuticalsUniversity of Louisville

Prizes this year include the $150,000 Investment Grand Prize from The GOOSE Society of Texas, the $100,000 Waste Management “Think Green” Investment Prize, the $100,000 DFJ Mercury Tech Transfer Investment Prize, and $100,000 Opportunity Houston / Greater Houston Partnership Technology Prize, the $100,000 Opportunity Houston / Greater Houston Partnership Life Science Prize, the $100,000 Kleiner Perkins Caufield and Byers (KPCB) Prize for CleanTech Innovation, and the $75,000 OWL Investment Prize.

In 2011, applications increased nearly 20% from the previous year.  More than 100 corporate and private sponsors support the business plan competition. Venture capitalists and other investors from around the country volunteer their time to judge the competition, with the majority of the 250+ judges coming from the investment sector. More than 100 past competitors have gone on to successfully launch their business and are still in business today, raising in excess of $327 million in funding.

“Great ideas are just that – great,” said Brad Burke, managing director of the Rice Alliance. “But, taking that novel idea ensuring it holds a competitive advantage in the market, conducting market research and identifying opportunities, demonstrating management capability, financial understanding and investment potential are what develop that great idea into a venture and hopefully a financially successful business.”

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.