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April 29, 2004
Starting a Business
Financing Tips for First-Time Entrepreneurs
Posted by Carole Matthews at 9:42 AM
Venture capital investments might be going up, but first-time entrepreneurs shouldn't bank on getting a piece of the pie. Many business owners who lack a proven track record as business owners are still finding financing hard to come by, notes Lawrence Gennari in his Boston Business Journal column, "New at the game? Financing tips for first-time entrepreneurs."
Here are a few of his few basic rules emerging businesses should follow when trying to find first-time financing:
Recognize the odds. Venture financing frequently is not the answer. He cites Inc.'s 2003 Inc. 500 list as an example: of the 500 companies that made the list, approximately 2% cited VC as a source for start-up capital.
Pursue parallel sources. Tap VCs, angel investors, friends and family, etc., simultaneously.
Plan to fund to benchmarks. Many entrepreneurs seek more than they really need to start-up. Seek to fund milestones, not the entire lifespan of your business.
Develop a strategy beyond serendipity. Introductions get your foot in the door, but don't ignore having the right fit with potential investors.
Surround yourself with experience. Advisers, directors, etc.
Avoid simple business plan mistakes. Don't forget the basics: size of target market, logic and soundness of revenue model, and experience of management.
Recognize the value in rejection. Feedback is priceless, regardless of whether you secured the capital.
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While your tips are great. I think you should push people towards more strategic financing. A lot of small business would be better served by establishing vendor financing, which means that they pay their vendors on a periodic basis instead of when they receive goods and, or services.
Another over looked source of revenue is receivables and payables planning. By negotiating longer payable terms, and speeding up receivables many small business will be able to avoid taking out loans.
Is it easier to negotiate with business partners or the banks? I will take the business partners because you are putting money into their pockets!
Nice -;)
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