What’s the Straight Scoop on Business Plans?
Adam Toren
by Adam Toren, cofounder of YoungEntrepreneur.com
Everyone knows that the first thing you have to do before you start a business is to create a business plan, right? At least that’s what one school of thought tells us. I’ve seen everything from comments on blogs to entire books dedicated to the belief that no business can succeed without a business plan. Some people even get a little heated over the mere suggestion that creating a business plan might not always be absolutely necessary. And these business plan purists do raise a valid point. Without any planning, your chances of success in anything are slim to none.
Why are You Looking for Investors?
Matthew Toren
by Matthew Toren, cofounder of YoungEntrepreneur.com
Everywhere you look in the entrepreneurial press – blogs, magazines, news stories – you see a lot of coverage of companies who acquired millions of dollars in startup funding, second-round VC financing, and angel investments. So it’s no wonder a lot of new entrepreneurs believe that bringing in outside funding is a necessary step in the startup process. Visions of nice offices, a hefty payroll account, new equipment – and let’s not forget a salary for the founder – can further cement an entrepreneur’s desire for someone with deep pockets to back their new venture.
Are there any good tax deductions I should be looking out for?
QUESTION:
Are there any good tax deductions I should be looking out for?
ANSWER:
Naomi Kokubo
by Naomi Kokubo cofounder of Founders Space
Yes. Here are 14 of the top tax deductions you should be aware of:
1. Auto Expenses
2. Expenses of Going Into Business
3. Books, Legal & Professional Fees
4. Bad Debts
5. Entertaining Clients/Customers
6. Travel
7. Interest
8. New Equipment
9. Moving Expenses
10. Software
11. Charitable Contributions
12. Taxes
13. Education Expenses
Is niche positioning considered a sustainable competitive advantage?
QUESTION:
I’m wondering if niche positioning is considered a sustainable competitive advantage by the investment community?
ANSWER:
Larry Chaityn
by Larry Chaityn, President, Keiretsu Forum NY
Great question and way to be thinking! The short answer is yes.
When determining the type of product/service there are 4 basic strategic options to consider:
1. Enter an existing market
2. Create a totally new market
3. Resegment an existing market as a low cost entrant
4. Resegment an existing market as a niche player
There are specific strategies with each.
What are VC looking for in an early-stage startup?
QUESTION:
I’m trying to raise money for my startup, and I was wondering what VC are looking for in an early-stage startup.
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
It’s hard enough to catch a venture capital company’s eye, but convincing them to give you money is even harder. Here are a few tips my partner and I learned after raising funds for three different startups:
1) VC want to see a viable team with strong leadership. The team is the most important part. They know you’ll hit numerous roadblocks, but if the team is excellent, you should be able to navigate around them and come out successful.
How do private equity and venture capital funds grow the value of portfolio companies?
David Teten
by David Teten, Partner at ff Venture Capital
One of the major themes of the evolution of the private equity industry for the past decade has been the growth of internal groups focused on enhancing the value of portfolio companies. Twenty years ago, the great majority of the people working in private equity came out of investment banking, i.e., a deal background. Today, it is far more common for a private equity fund to employ people with an operational/consulting skill set, e.g., Bob Nardelli at Cerberus. I predict we’ll see the same phenomenon among venture capital funds. The latest example: Union Square Ventures announced that they are hiring for a newly created position as General Manager of the Union Square Ventures Network.
Where can I go to research small business grants?
QUESTION:
Hello, I’d like to find out more on how I can start up a small business? This has been my dream for quite a while, and I would love to follow through on it. I know that it takes money to make money, and that’s my problem — no money. I have heard of grants that are available, but I just don’t know where to go to research these grants. If you could please point me in the right direction, I would really appreciate it. Thank you, in advance and have a wonderful day — Barbara D.
Is it better to get debt or equity financing?
QUESTION:
Is it better to get debt or equity financing? What are the advantages and disadvantages of each?
ANSWER:
Nathan Beckord
How do I compute the optimal amount of capital to raise?
QUESTION:
How do I compute the optimal amount of capital to raise for my first round of funding?
ANSWER:
Nathan Beckord
by Nathan Beckord at VentureArchetypes
Computing the optimal amount of capital to raise is both an art and a science. The goal is to raise enough money to get you to the next milestone, yet not so much that your incur unnecessary dilution.
How do I put together a financial forecast that makes sense to investors?
QUESTION:
If I don’t expect substantial revenue anytime soon (we’re focused on growing our user base), how do I put together a financial forecast that makes sense to investors?
ANSWER:
Nathan Beckord
by Nathan Beckord at VentureArchetypes
Financial forecasts for startups are rarely accurate; but what investors DO care about is how you are thinking about your business, and the logic and diligence that you put into your assumptions. In that sense, building a financial forecast is a great way to organize your thoughts, put numbers around your (future) business model, and run various “what-if” scenarios.
Is it worth hiring a temp CFO pre-funding?
QUESTION:
I’m bootstrapping my startup. Is it worth hiring a temp CFO pre-funding? What would a CFO do for me at this point? My business is pretty simple right now.
ANSWER:
Soody Tronson
by Soody Tronson, Founder of Soody Tronson Law Group
The role of a CFO, is more than performance of accounting function. There are a few good organizations that provide part-time CFO’s for startups (e.g., www.cfos2go.com). Some top level reasons, even for a pre-funding start up, will be prospective planning, a solid business plan and financials, review of what compensation plans/criteria/consequences best fit the particular business objectives.
Is it easy to switch from an LLC to a C-Corp once I’m ready for investment?
I’m planning on bootstrapping my startup for at least the first six months. However, I do plan to seek investment down the line. Is it easy to switch from an LLC to a C-Corp once I’m ready for investment? What’s the best approach?
ANSWER:
by John Frankel, Founder of ff Asset Management
John Frankel
Yes. The advantage of having an LLC is the pass through of losses that can offset other income. Thus, many companies do not make the switch until they start to rack up profits. It’s easy to switch. Note that most later stage VCs require a C Corp, but at ff Asset Management we do not.
Who should I approach about investing in a green energy project?
QUESTION:
Can you help me connect with anyone interested in investing in a green energy invention? I went to a local colledge and spoke to a physics professor about the theory I have for my invention. To make a long story short,the physics professor said, “If it works, you’ll win a Nobel Prize!”
ANSWER:
Soody Tronson
by Soody Tronson, Founder of Soody Tronson Law Group
As an entrepreneur, what do I need from an incubator?
QUESTION:
Many of our founders keep asking the question, “As an entrepreneur, what do I need from an incubator? And with so many choices out there, how do I select one?”
ANSWER:
Nari Kannan
by Nari Kannan, Chief Delivery Officer, V-Soft Consulting
Of late, there has been a lot of discussion in this forum about incubators, what measures they use for their own success, their business models, and so forth. In this post I discuss five things that I, as an entrepreneur, need from an incubator.
How do I avoid over expanding and making a costly mistake?
QUESTION:
I own a four-year-old company in the web & internet solutions sector. We were break even in six months, and for the last year, we were profitable. I am at the stage where I think I can grow rapidly from $10 million to $100 million in revenue. But I am not sure how to go about this. We are getting constant business, good referals, and more orders. However, when I think of having more offices spread over more regions, both domestically and internationally, I am not very comfortable with the idea. What if I take the wrong step and can’t go back to being a profitable business? What should I do at this critical stage? Please help — Robert
What’s the best way to outsource services & create a billing system?
QUESTION:
I’m starting a marketing company that offers services requiring outsourcing from different partners. What’s the best way to outsource this work and create a billing system that shows my company name to my clients?
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
Here are few billing systems that you can check out:
AcceptPay http://www.acceptpay.com
HighDeal http://www.highdeal.com
Aria http://www.ariasystems.com
PaySimple http://www.paysimple.com
Steve Lindstrom also recommended…
Free Books http://www.freshbooks.com
As for outsourcing work and finding talent, there are numerous online services that act as virtual marketplaces, where contractors and businesses can connect. Here are three of the more popular services:
Where can I find or get market research reports for my startup?
QUESTION:
I’m starting to put together an outline for building my business plan, and I am looking for advice on market research. Basically, where to find it and if it doesn’t exist, then how to best go about conducting it. I understand there are many research companies creating industry reports that are a great resource, but those are very expensive at $500-$2000 a report. I’d appreciate any suggestions. Thank you.
ANSWER:
Nari Kannan
by Nari Kannan, Chief Delivery Officer, V-Soft Consulting
How do I get my first startup financed without bankrupting myself?
QUESTION:
I am in the process of starting a business centered around an invention of mine which is a luxury manufactured good. It’s cheap to make and has a guaranteed large target market. I am hitting speed bumps when it comes to the financing aspect as I am 20 years old and do not have a ton of capital to my name. I don’t want to reach out too far and have no control of my first venture, but at the same time don’t want to bankrupt myself in the process. Are there any good suggestions you could offer for my bankruptcy questions and financing needs?
What’s the worth of my fast-growing Facebook app?
QUESTION:
I run a small FB app that is getting a bit of attention, and I’m constantly being emailed asking if I’d like to sell. I don’t want to at present. I am really loving building it up,
and I know it will grow fast and be worth a lot (well, I hope). Either way, how does it work? A couple of people have asked about investment, and I honestly don’t know how it works. What does one do in this situation? How do you know what your app is worth? What are the ups and downs of investment versus outright selling, and what if they want
you to stay on?
Is it possible to find funding for a startup that will grow into multiple franchise units?
QUESTION:
I am looking to start a company that I vision will grow into operating multiple franchise units. Is it possible that I can find startup funding? If so, where?
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
The answer is yes. Venture firms do fund companies they feel will grow into successful franchises. If they’re convinced you’ll become the next Crispy Cream Donuts or Starbucks, you won’t have trouble getting financing from VCs. That said, you need to prove that you have the winning formula and vision.
What is shadow stock and how does it work?
QUESTION:
I run a design firm, and I don’t want to go to all the trouble of giving out stock options to my employees and contractors. I’ve heard people talking about “shadow” stock, where you promise to give people working for you a bonus equal to a percentage of the sale price of your company if it is acquired while they are still employed. Is this what shadow stock is all about? Can shadow stock be as simple as a bonus agreement tied to the milestone of selling the company within a given time period?
ANSWER:
I have $2k to invest in a commercial franchise, bad credit and no real assets. Are there any loans I can get?
QUESTION:
I have $2000 to invest in a commercial franchise, bad credit and no real assets. But I want to know, are there any grants or loans I would qualify for based on the business, so I could make a larger investment?
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
A traditional bank probably won’t loan you the money. Most banks have found credit scores to be the most reliable indicator of whether a loan will be paid back or not, and since you don’t have good credit, you’ll probably be screened out. And I’m not sure about grants. They are hard to come by these day, with the fiscal crisis.
How do I plan my Internet advertising budget for my startup?
QUESTION:
Can you please tell me how to plan an Internet advertising budget for my startup? Should it be a certain percentage of revenue?
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
First of all, your advertising budget should be determined by your goals. Is your goal to brand your product? Drive users to your website? Drive awareness? Drive sales? Also, how much money do you have to invest in advertising? It usually takes a while to optimize an advertising campaign and figure out exactly what works and what doesn’t.
How do you overcome an inexperienced management team when seeking capital?
QUESTION:
When seeking capital, how do you overcome the weakness in the management team of not having start-up experience? Also, is it a sign of weakness to inform them that we are seeking this capital as a way to attract top level CEO candidates or other high level team members to help us to the next step?
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
Lots of entrepreneurs today don’t have startup experience. It’s common for recent college grads to start a company without any work experience, let alone startup experience. The key is having a compelling and timely product that investors can evaluate.
Any recommendations for A/R financing companies or factors?
QUESTION:
I have a startup that’s about 1 year old, and just starting to bring in revenue. I have a new, credit-worthy customer that I’ll be invoicing regularly about $20-30K per month, but will probably take 45 to 60 days to pay. In the past, I’ve setup A/R (accounts receivable) financing for my companies. What can I expect in terms of fees and percentage rates in the current climate, and for a company in our stage? I’ve heard about firms charging as much as 3.5% to 4% of the invoice amount for 30 days! That’s a LOT more than I paid in the past. Finally, any recommendations for A/R financing companies or factors?
Why is it so hard to close VC funding?
QUESTION:
Why is it so hard to close VC funding? I feel like it’s an impossible hurdle to overcome.
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
Don’t give up. Every single time my partner and I went out for venture funding it felt the same way. Between us, we’ve started and gotten funding for three separate companies, and each time we had a moment where we felt like you do. But we kept on pitching because we believed in what we were doing.
Let me help you understand why it’s so hard:
How do I find a partner for a joint venture?
QUESTION:
Our company has a patent on a fire gel to start your wood and other fires. We are looking for someone to do a joint venture with to market our product. How do I go about this?
ANSWER:
I have some general advice that would apply to any business in your situation, but first, I am assuming you don’t have the money and/or expertise to manufacture and market this yourself. In this case, you may want to consider several options:
What should I have in hand when I meet with VCs?
QUESTION:
I have a meeting lined up… Now what? What should I have in hand (documents, demos, etc) when I walk into a meeting with a VC/Angel Investor?
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
In addition to confidence, you should have the following:
* A PowerPoint that outlines your business plan. Keep the PowerPoint short. Less than 15 slides is the rule. You can have extra slides at the end — just in case they want to go deeper on certain areas.
What can I do to position my startup for an acquisition?
QUESTION:
My startup is still young, but I’d like to know what I can do to position my company for an acquisition down the road? Any advice would be much appreciated.
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
If you want to eventually have your company acquired, here’s what I suggest:
DOs:
- Position your business so that it’s worth buying. Honestly, some businesses will never be bought, at least not for much money. Your business needs to provide a product or service to a large enough market to make it worth something. Check the size of the market you are in and its growth potential. If these are pretty small, you may want to consider repositioning your business.
How do I find a venture capitalist?
QUESTION:
How do I find a venture capitalist?
ANSWER:
by Naomi Kokubo, Cofounder of Founders Space
Here’s a list of 900+ venture capitalists that Founders Space has compiled. I hope this helps!
| @ Ventures | Marc Poirier | www.ventures.com |
| 2M Technology Ventures | www.2m.com | |
| Accel | Heikki Makijarvi | www.accel.com |
| Accent Capital Management | Mansoor Ghori | www.accentcap.com |
| Accent Capital Management | Cliff Mountain | www.accentcap.com |
| Accent Capital Management | Lee Urbina | www.accentcap.com |
| Accent Capital Management | Gil Burciaga | www.accentcap.com |
| Active Starts | Eric Di Benedetto | www.activestarts.com |
| Adams Street Partners | Priscilla Colaninno | www.adamsstreetpartners.com |
