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With the market for early-stage capital beginning to bounce back, I'm once again fielding calls from entrepreneurs wanting to know how much of their company to give away to investors to raise the money they need to launch their businesses or take them to the next level.
Unfortunately, there's no easy answer to this question. An established business with sales, profits and cash flow may sell for five to 10 times earnings before interest, taxes, depreciation and amortization. But it's a lot harder to put a price tag on an early-stage venture that consists of a business plan, a web site and the founder's hopes and dreams. As a result, negotiations between start-ups and prospective investors often turn into angry arm-wrestling matches that end with both sides walking away empty-handed.
You may find this hard to believe, but there's some evidence that venture capital is facing the same kinds of threats that the big music labels found themselves struggling with just a few years ago.
It seems that VC's, and the things they bring to entrepreneurs, just aren't as important as they once were. And there is new competition making it harder to build and run a successful VC firm.
Who's raising the alarm about the future of venture? Well, it seems, the venture capitalists themselves.
How should a government promote entrepreneurship? This column argues that providing support programs for targeted sectors or companies is akin to "picking winners ex ante." A far better approach is to encourage competition in the financial sector that facilitates experimentation in the real economy. Governments should forget about picking winners and focus on picking the right system.
Dave Waldman, CEO and Founder of Los Angeles-based Bccthis, a startup looking to add additional functionality and private messaging into both corporate emails and Twitter messages. Bccthis just announced a version of their product which plugs into Gmail. Dave discusses how and why he and his co-founders--both previously executives at Twistbox--decided to start their own startup, specifically outside of the mobile industry, and a bit about the product.
DURHAM, N.C. - Hardly a day goes by when I don’t have a rookie entrepreneur ask for advice on raising money from VCs.
They usually have a fancy-looking business plan with detailed spreadsheets showing how their company will be worth billions by capturing just 1 percent of a market. All they need is some financing, and they’ll take the world by storm.
My advice is always the same: ditch the business plan, and buy a lottery ticket. Your odds are better, and you’ll suffer less stress.
April 23 (Bloomberg) -- Lobbyists for startup investors say they are close to a deal with Senate staff and state regulators to remove curbs on angel investing from the Senate’s financial reform bill.
The possible compromise would require angel investors, who buy stakes in startups in private offerings, to have a net worth of $1 million, instead of $2.3 million as proposed by the Senate bill, said Marianne Hudson, executive director of the Angel Capital Association in Overland Park, Kansas. It would also scale back plans to let states regulate angel deals, she said.
“We’re close to amendments that are good for entrepreneurs,” said Hudson.
Don’t get Randal Charlton wrong. The executive director at the TechTown business incubator in Detroit is thankful for a recent announcement of $5 million coming his way to help graduates of his FastTrac business training program launch their companies. But, he says, look at it this way: The money, granted by the New Economy Initiative, a Detroit-area philanthropic partnership, is not being thrown at comfortable entrepreneurs. This is, essentially, aid to the unemployed. And, as such, $5 million barely scratches the surface.
Many of the entrepreneurs to be helped by the First Step Fund, the entity created by NEI’s $5 million investment, are not launching startups because it seems like a promising thing to do. They have nowhere else to go, Charlton says. Their former jobs in the auto industry are gone, never to return. Their choices are to leave the state or try to create their own jobs in Michigan.
Being a graduate finance student, sometimes it's a steep challenge to look outside the fish bowl and get an opportunity to see business outside the confined bounds of dollars, cents, and financial statements. As part of the Association of Loyola Entrepreneurs, a student interest group, I decided to gain a broader perspective on starting my own business by inviting three Chicago entrepreneurs to address the future business leaders of Loyola University and give us a real world look at how they decided to take charge of their lives and became their own boss.
David Zapata of Zapwater Communications launched his own public relations and marketing firm after being worn down from working for a boss he couldn't stand. Justin Jacobson of Platinum Events scraped his way through the nightclub scene, eventually acquiring a Bar Mitzvah company and turning it around into a successful event management company serving big corporate clients. Kyle McHugh's journey took him from pushing papers at Georgetown into his very own specialty wine and spirits shop in the heart of downtown Chicago. Together, they shared their insights from the trial and tribulations that come with starting their own business and passed on their unique blend of wisdom.
Charles Henagan loved his new job as a vice-president of marketing at a major beverage company. His challenge was to reinvigorate a legendary brand of vodka and he embraced the adrenaline rush of travel, meetings and strategy sessions. Approaching 50, he was the oldest employee in his division, but made an effort to bond with younger colleagues over cocktails after work. Top management embraced his initiatives and he was feeling great about his work.
Social media tools have many important business uses. One of the most powerful is the ability to foster innovation. With social media, businesses can tap into the needs, desires and opinions of a wide audience — and connect with a highly targeted group that is directly relevant to their businesses. These connections can be invaluable sources for new ideas and alternative ways of thinking.
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