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Can’t get Venture Capital Financing. Look at These Options

Many business owners try to finance their growing businesses by going to venture capital or angel funding groups. Although both financing options provide a great way to finance a business, they are usually hard to qualify for. And furthermore, they all require that you give up some business equity in exchange for funds. That, needless to say, can be a very steep price to pay.

There are some business financing alternatives that can allow you to finance your business, almost as effectively, without having to give up any equity. As opposed to venture funding or angel funding, these options are easy to qualify for and do not require the endless documentation and due diligence that venture money requires..

However, these can only help you if you meet the following criteria:

1. Your business is established and has commercial (not consumer) clients

2. Your business invoices between K and 0K per month

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These alternatives will help you if:

1. You need money to meet payroll, pay rent or pay supplier

2. Your customers pay you in 15 to 60 days

3. You need (or wish) your customers to pay you sooner

Your first option is called factoring (also known as invoice factoring). Factoring is ideal for businesses that cannot afford to wait 15 to 60 days to get paid by their clients. Factoring provides you with financing that is tied to your invoicing. Basically, the more your company invoices, the more financing you qualify for. This enables you to grow your company – many times exponentially – without having to give up equity.

Your second option is called purchase order financing. It works well for re-sellers, distributors, traders and wholesalers. Purchase order financing is ideal for business owners that have a large purchase order in hand, and who cannot afford to pay their suppliers to deliver the product. PO financing enables you to get a letter of credit, backed by the financing company, to pay your suppliers. This allows you to deliver on the purchase order and effectively make the sale. Usually, very little – if any – of your money is required for the transaction.

Both alternatives are easy to qualify for, take days (or a couple of weeks at most) to set up, and when used correctly allow you to grow your company exponentially.

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Alternative Venture Finance: Federal Grants and Loans

The two largest federal grant programs are run by the Small Business Administration (SBA), and by Small Business Investment Companies (SBICs).

An SBA loan, regardless of whether it is a direct loan from the SBA, or, as is more common, a bank loan guaranteed by the SBA, is essentially a bank loan. The benefit of it versus a traditional bank loan is the rate. SBA rates are typically much less than traditional business loan rates.

In most cases, in a guaranteed SBA bank loan, the SBA guarantees 90 percent of the loan will be repaid to the bank. As such, banks are at much less risk than in most other loans, and are a bit more flexible with regards to who they offer these loans. However, the SBA usually requires the founders of the company to personally guarantee the loans, which makes them risky should the venture collapse.

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Alternatively, Small Business Investment Companies (SBICs) are privately organized corporations that are licensed and regulated by the SBA. Small or emerging businesses which qualify for assistance from the SBIC program can receive equity capital and/or long-term loans from these companies. Essentially, these companies provide their own capital, which is supplemented by federal funds, to the companies they fund.

Interestingly, U.S. taxpayers benefit from the SBIC program as tax revenues generated from successful SBIC investments have more than covered the cost of the program. Likewise the program has created hundreds of thousands of jobs.

In summary, SBA and SBIC financing are viable alternatives to financing from angel investors and venture capitalists and should be considered in the capital raising process. Similarly to angel and VC financing, companies seeking SBA and SBIC financing need a strong management team and value proposition, and a highly professional and compelling business plan in order to raise the capital they need.

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5 Joint Venture Blunders You Must Avoid

Joint ventures are the fastest and most effective way to launch your business, explode your sales, and build your business to last. Creating joint venture relationships has many benefits, for instance when your company uses a joint venture marketing model you have low or no risk to your business structure. You can create new products with other companies and bring those products to market. You can open new markets and share data bases full of thousands of people and create high profit margins.

You know that joint ventures help you become sustainable through all economic cycles because you do not become dependent on a bank’s credit or small business loan. Your business does not have to purchase debt instruments of any kind or seek venture capital in order to grow, have explosive sales or open a new market.

Even with all these benefits to creating a joint venture alliance, things can go wrong, very wrong if you are just jumping into a joint venture without first knowing what do to, how they operate or where to learn about the joint venture process. Companies such as http://privatejvclub.info can help you meet and surpass your goals.

Learning how to do a proper joint venture is key. Here are 5 joint venture blunders you must avoid if you are going to be successful at building your joint venture empire.

You or your joint venture partner has never done a joint venture before.                                                            

Never think that because someone wants to do a joint venture with you that they have done joint ventures in the past with other businesses. If you have not done a joint venture before, then you need to educate yourself first about how to do a joint venture properly, the private JV club can help you with that at http://privatejvclub.info There are aspects about profits and responsibilities each partner shares in the joint venture process that you must know how to do, so that you are not taken advantage of nor taking advantage from.

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Not clearly outlining what each partner’s responsibilities are for the joint venture project.

Each joint venture partner has certain responsibilities for the joint venture project and it can slow the process down if there are uncertainties as to which company was responsible for what process. It is imperative that both parties understand what is expected of them. This keeps everyone involved feeling secure about what their role is and what they are to receive as well.

Not doing due diligence to make sure your partner is an ethical partner with a quality product.

Your data base has built a relationship with you. Your clients and customers trust you. When doing a joint venture someone may want to sell your data base and customers their product and split the profits with you. This is a very common joint venture. Make sure that you are protecting your clients. Make sure they are getting real value for their money. Make sure the product is delivered as stated in the joint venture. Not doing this kind of follow up can potentially harm your relationship with your database of cutomers if your database believes a marginal product has been delivered from your joint venture partner.

Offering too small of an agreement

When you are doing a joint venture you must make a win/win venture. If you are selfishly trying to use a partner’s very large data base, providing very little value for them, then your joint venture partner is most likely not going to do the joint venture with you. You, on the other hand must also benefit in such a way as to make it advantageous for you too. Negotiate a fair agreement with your partner and deliver what it is you have agreed to in the contract for yourself and your joint venture partner.

Committing to a long term Joint Venture without first building a relationship with your potential partner.

Before you enter into a long term joint venture, you must have built a relationship and have done your due diligence carefully. Make sure you understand your joint venture partner’s work ethic, commitment level and business ethics. Make sure you trust your joint venture partner’s integrity level. You must have this before entering into a long term joint venture relationship.

When both companies or parties understand how to do a proper joint venture they can have a long term, profitable, business building joint venture friendship. These are the colleagues that will be with you 15, 20 or even 30 years from now.

Also, you can join a joint venture club, like http://privatejvclub.info and they will provide you with instruction on how to do a proper joint venture. Then you can select from the large array of global entrepreneurs who have learned, are well versed and waiting to do the next joint venture with you. You can feel confident and secure in your ability to be a great joint venture partner.

In Chapter 8 of 11 in his 2010 interview with Capture Your Flag host Erik Michielsen, East African venture capitalist and conservation investor Josep Oriol shares why he believes East Africa is full of transformational investment potential. He cites three factors. One, given the small economic footprint, large impact investment opportunities exist. Two, modernization opportunities exist across existing resource constrained infrastructure, including public health and education. Three, East Africa development offers a promise of advancement that can promote cultural change. Oriol highlights how this can increase population hope and self confidence by shifting aspirations away from football stars and politicians to new careers options previously not understood or thought possible. View more videos at www.captureyourflag.com
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An Alternative To Venture Capital For The Healthcare Technology Entrepreneur

If you are an entrepreneur with a small healthcare technology based company looking to take it to the next level, this article should be of particular interest to you. Your natural inclination may be to seek venture capital or private equity to fund your growth. According to Jim Casparie, founder and CEO of the Venture Alliance, the odds of getting Venture funding remain below 3%. Given those odds, the six to nine month process, the heavy, often punishing valuations, the expense of the process, this might not be the best path for you to take. We have created a hybrid M&A model designed to bring the appropriate capital resources to you entrepreneurs. It allows the entrepreneur to bring in smart money and to maintain control. It combines the experiences of several technology entrepreneurs and with that of a traditional investment banker Merger and Acquisition approach and to create a model that both large industry players and the healthcare business owners are embracing.

The capital raising activities in the technology space led us to the conclusion that new product introductions were most efficiently and cost effectively the purview of the smaller, nimble, low overhead companies and not the technology giants. Most of the recent blockbuster products have been the result of an entrepreneurial effort from an early stage company bootstrapping its growth in a very cost conscious lean environment. The big companies, with all their seeming advantages experienced a high failure rate in new product introductions and the losses resulting from this art of capturing the next hot technology were substantial. Don’t get us wrong. There were hundreds of failures from the start-ups as well. However, the failure for the edgy little start-up resulted in losses in the – million range. The same result from an industry giant was often in the 0 million to 0 million range.

For every Cephalon, Epic Systems or Idec Pharmaceuticals, there are literally hundreds of companies that either flame out or never reach a critical mass beyond a loyal early adapter market. It seems like the mentality of these smaller business owners is, using the example of the popular TV show, Deal or No Deal, to hold out for the million briefcase. What about that logical contestant that objectively weighs the facts and the odds and cashes out for 0,000?

The dynamics of this market, suggested a merger and acquisition model commonly used by technology bell weather, Cisco Systems, could also be applied to a broad cross section of companies in the healthcare sector. Cisco Systems is a serial acquirer of companies. They do a tremendous amount of R&D and organic product development. They recognize, however, that they cannot possibly capture all the new developments in this rapidly changing field through internal development alone.

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Cisco seeks out investments in promising, small, technology companies and this approach has been a key element in their market dominance. They bring what we refer to as smart money to the high tech entrepreneur. They purchase a minority stake in the early stage company with a call option on acquiring the remainder at a later date with an agreed-upon valuation multiple. This structure is a brilliantly elegant method to dramatically enhance the risk reward profile of new product introduction. Here is why:

For the Entrepreneur: (Just substitute in your healthcare technology industry giant’s name that is in your category for Cisco below)

1.The involvement of Cisco – resources, market presence, brand, distribution capability is a self fulfilling prophecy to your product’s success.

2.For the same level of dilution that an entrepreneur would get from a VC, angel investor or private equity group, the entrepreneur gets the performance leverage of “smart money.” See #1.

3.The entrepreneur gets to grow his business with Cisco’s support at a far more rapid pace than he could alone. He is more likely to establish the critical mass needed for market leadership within his industry’s brief window of opportunity.

4.He gets an exit strategy with an established valuation metric while the buyer helps him make his exit much more lucrative.

5.As an old Wharton professor used to ask, “What would you rather have, all of a grape or part of a watermelon?” That sums it up pretty well. The involvement of Cisco gives the product a much better probability of growing significantly. The entrepreneur will own a meaningful portion of a far bigger asset.

For the Large Company Investor:

1.Create access to a large funnel of developing technology and products.

2.Creates a very nimble, market sensitive, product development or R&D arm.

3.Minor resource allocation to the autonomous operator during his “skunk works” market proving development stage.

4.Diversify their product development portfolio – because this approach provides for a relatively small investment in a greater number of opportunities fueled by the entrepreneurial spirit, they greatly improve the probability of creating a winner.

5.By investing early and getting an equity position in a small company and favorable valuation metrics on the call option, they pay a fraction of the market price to what they would have to pay if they acquired the company once the product had proven successful.

Let’s use two hypothetical companies to demonstrate this model, Big Green Technologies, and Mobile CRM Systems. Big Green Technologies utilized this model successfully with their investment in Mobile CRM Systems. Big Green Technologies acquired a 25% equity stake in Mobile CRM Systems in 1999 for million. While allowing this entrepreneurial firm to operate autonomously, they backed them with leverage and a modest level of capital resources. Sales exploded and Big Green Technologies exercised their call option on the remaining 75% equity in Mobile CRM Systems in 2004 for 4 million. Sales for Mobile CRM Systems were projected to hit 0 million in 2005.

Given today’s valuation metrics for a company with Mobile CRM Systems’ growth rate and profitability, their market cap is about .26 Billion, or 3 times trailing 12 months revenue. Big Green Technologies invested million initially, gave them access to their leverage, and exercised their call option for 4 million. Their effective acquisition price totaling 9 million represents an 82% discount to Mobile CRM Systems’ 2005 market cap.

Big Green Technologies is reaping additional benefits. This acquisition was the catalyst for several additional investments in the mobile computing and content end of the tech industry. These acquisitions have transformed Big Green Technologies from a low growth legacy provider into a Wall Street standout with a growing stable of high margin, high growth brands.

Big Green Technologies’ profits have tripled in four years and the stock price has doubled since 2000, far outpacing the tech industry average. This success has triggered the aggressive introduction of new products and new markets. Not bad for a million bet on a new product in 1999. Wait, let’s not forget about our entrepreneur. His total proceeds of 9 million are a fantastic 5- year result for a little company with 1999 sales of under million.

This model combining the Cisco hybrid acquisition experience with a traditional investment banking merger and acquisition process provides a vehicle to fund interesting healthcare technology companies. The small entrepreneurial firm looking for the “smart money” investment can be matched with the appropriate growth partner or the large industry player looking to enhance their new product strategy with this creative approach. This model has successfully served the technology industry through periods of outstanding growth and market value creation. Many of the same dynamics are present today in the healthcare industry and these same transaction structures can be similarly employed to create value.

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How To Assure Failure In a New Venture

by: Geoff Ficke

One of the great benefits we enjoy about the consulting work we do is having the opportunity to review the inventiveness of hundreds of entrepreneurs each year. It truly is amazing how many of these creative talents push the envelope of novelty. There is no such reality as the oft stated: “I have seen it all”. None of us have seen it all, as the volume of freshly executed innovative products and concepts being nurtured, is never ending. 

And yet, so few of the projects we review ever make it past our initial critique and pre-product development criteria. They will never become widely distributed products, successfully sold in the contemporary marketplace. There are many reasons for this. One reason seems to occur more than most. 

Many entrepreneurs become so enamored of their vision and perceive the markets will have positive acceptance for their item that they suspend rationality. We have a term for this malady: “falling in love with the product”. Love is a wonderful emotion. However, it can blur rational thought. The process of gaining purchase into hyper-competitive markets and successfully commercializing new products requires a steady, realistic, but passionate vision. Total commitment to detail and identifying an unfilled market niche, one with scalability, is essential to successfully selling to retailers and consumers. 

Very early in my career as an entrepreneur, I made the mistake of “falling in love with my product”. I had created a unique cosmetic accessory product. I was able to bootstrap distribution into almost all of the major department stores in the United States. Then I expanded and sold the product internationally through country specific distribution agreements. Seeing your novel product creation on store shelves in the world’s finest emporiums, such as Marshall Field’s, Bloomingdale’s, Macy’s, Nordstrom, Preciados, Harrod’s and Selfridges was more gratifying than can be described. 

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However, I did not spend enough time building my Company. I was a single product business. Initially sales were lucrative, re-orders were positive. I was attempting to handle sales, marketing, product development, operations and logistics. I was too close to my product to recognize my shortcomings and the limit of my resources. 

Nevertheless, I had penetrated a difficult, sophisticated market. I was a real entrepreneur. I had achieved a modicum of success and had gained the knowledge necessary to launch more companies and products in the future. I learned from my mistakes. 

Most of the new product submissions we receive come from first time inventors. Every entrepreneur is a novice at least once. They believe they have identified a need, created an answer to that need and are prepared to sell their item for millions of dollars to big box retailers or investors. It almost never works out that way. Here are a few anecdotal examples that prove this point. 

Items like the “arm mitten” are too narrowly positioned to ever achieve mass- market scale. The “arm mitten” is a patented product that is a simple sleeve the driver of a car places over their left arm, to protect the arm from sunburn. Air conditioning, high speed driving with windows closed for wind noise mitigation and safety glass treated with UV inhibitors all posed massive hurdles to the potential for “arm mitten” success. 

Consider the “beach boot” for negotiating sandy terrain. This boot, equipped with tank-like tracks attached to the sole and a miniaturized motor roll the wearer over the sandy beach surface. Why walk over sand when you can roll? Why walk barefoot when you can ensconce your feet in hot, sweaty boots at the seashore? Not much upside here! 

The “insomniac helmet” was a sleep aid, sort of. There is a small battery powered motor humming in the helmet and the unit massages your head with rubber fingers until you fall asleep. The straps utilized to attach the “insomniac helmet” to the users head look like preparation for capital punishment. Now I like a neck massage as well as the next guy, but this Rube Goldberg contraption would make falling to sleep a nightmare.

The “cup o golf” was the proposed answer to every duffer’s hope for improving the golf swing. A steady head is crucial to a fine golf swing.

The “cup o golf” was a little cup, attached to the bill of the cap. The cup contained a little ball tethered to a string. When the head dropped or moved the ball rolls out of the cup, and dangles annoyingly in front of the golfer eyes, thus conveying that the swing was imperfect. Some players, using the “cup o golf”, could take nine hours to play a round, and they wouldn’t be good company in the clubhouse bar after the experience. 

Another example of an inventor’s blind love in their product was the “dad saddle”. This item took the papoose pouch that parents use to carry infants on their backs to new heights, or lows. The “dad saddle” was invented to enable dad’s to carry 10 or 12 year olds on their back without perpetrating excessive lumbar damage. The “dad saddle” is a leather waist strap that the bigger pre-teen can stand on and hold onto padre’s neck. Cool! Bonding forever! 

Each of these items is patented. Each of these inventors, and thousands more, spent considerable time, energy and some capital on their ideas. They had really “fallen in love with their invention”. Unfortunately, the inventor’s view of their product is irrelevant in the long run. The marketplace is the final and only arbiter that counts in measuring whether offerings are truly novel, commercial products. Sales equal confirmation of entrepreneurial assumptions about products.  

Successful entrepreneurs must treat their inventions as if they are always works in progress, because they are. They will know what the product’s strengths are. These are usually obvious. Aggressively seeking out the flaws in the concept and addressing and improving these weak spots are essential to achieving success. If you are “in love with your product” you will find it much more difficult to edit, redesign or change direction as needed. If this is so, you will fail.

If you have a product or idea you would like to discuss the possibilities of commercializing, contact Geoff  Ficke at Duquesa Marketing at 859-567-1609.

www.receivablesxchange.com – Nic Perkin, President of The Receivables Exchange, discusses the economic impact of the long overdue, revolutionary, 21st century online marketplace to buy and sell accounts receivables. The platform facilitates the access to working capital for small and midsize companies. Perkin spoke at a press conference highlighting The Receivables Exchanges closing on million in Series C financing from leading venture capital firm, Bain Capital Ventures.
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Noida Real Estate: A Profitable Venture for Builders

The flourishing retail sector, knowledge parks, residential integrated townships, increasing IT hubs, Metro train, Taj Express Highway, growing telecom industry and manufacturing units have moved the residential demand and prices forward in Noida over the last few years. A close proximity with Indian capital, accessibility of international airport and a number of big names in corporate sector, IT industry, Warehouses, Pharmacies, etc are alluring people to invest into the Noida real estate market. Now, Noida real estate market is witnessing a number of ongoing infrastructure developments. Today, the entry of several builders, developers and infrastructure companies in Noida real estate is observing the growth of this NCR city and adding spice to its popularity.

A number of leading and prominent builders and infrastructure companies such as Jaypee Greens, Ansal API, Parsvnath Developers, Omaxe, Unitech, Gaursons, etc have been building a series of residential apartments, shopping malls, etc to endow people with safe and healthy environment, round the clock security, 100% power backup, health clubs, parks, luxurious accommodation and entertainment options. These builders in cooperation with Noida Land Authority give their huge attention and interest towards Noida real estate in order to transform it into well-organized and modern city. The city is flooded with a number of new projects such as:

•    2, 3 and 4 bedroom apartments in Gaur Grandeur in sector 119, Noida by Gaursons
•    2 and 3 bedroom apartments in Pavilion Heights in sector 128, Noida by Jaypee Greens
•    3 Bedroom apartments in Unitech Grande in sector 96, Noida by Unitech

Apart from these projects, there are a number of other projects in different sectors that are ready to sale. These new luxury apartments pull the attention of people from all parts of the country to invest here and make property. This NCR city hosts to a huge amount of professionals in different sectors, businessmen and students that congregate here in search of better job opportunities, good infrastructure and above all well lifestyle at affordable rates. When it comes to search for your desired apartment, there are a number of online brokerage firms providing online search tools to find properties in Noida and other nearby cities. Above all, investment in the Noida real estate market is a wise decision since, infrastructure development and growing industries are bound to give a good profit in the future.

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