Angels Fly Further Than Before

Keyword: Strategic Business Plans

It is somewhat of a truism that angel investors invest close to home. Even we have recommended that you seek out angel firms in your area. And there is good reason for that. Travel is expensive, both for the entrepreneur and for the angel investor.

But we've been hearing more and more that angels are flying further afield. And there is good reason for that too: Communication systems are easy and inexpensive to use. Daily phone calls, even for hours on end, are virtually free. Face to face meetings are virtually free. Huge gobs of stuff can be sent over the internet in seconds, and documents can be shared on screen during conferences.

No longer is it so necessary for the entrepreneur and the angel to meet face to face quite so often. Angel investors can easily get updated, and they can get those updates much oftener than if they relied on face to face meetings.

So here's the deal. In creating your strategic business plan, note your ready access to worldwide communications, such as "ABC has accounts active with ..... to encourage active communication with you...."

Fortunately, most angel investors are fairly technologically savvy. These are money-d folks who track stock portfolios and sophiticated investments. They will probably appreciate that your strategic business plan incorporates non-face to face communication.

With geographical limitations out of the way, you can really focus on those angels and those angel groups that might be most receptive to your idea. You will need to plan some extra cash to travel round the country giving presentations. But the payoff is that you will end up with investors who really like your business, and ones that will likely be around for quite a while.

We would call that a pretty good deal.

A New Tactic for Business Grants

Keyword: Business Grants

All corporations make contributions of some sort to organizations of some sort. Some make more; some make less. But all do something. It looks nice in their annual report. And some corporations are nice.

Sometimes, too, a corporation may be simpatico with your line of business. When you can match your business with a corporation and its non-profit organization, you've really hit a hole in one. It doesn't happen all that often, but if you find yourself in that circumstance, you will know immediately how to position your grant raising efforts.

The catch: How do you find out what company is giving what to who? Here's the easy part: Go to Corporate Donations Database

URL: www.nptgrantsearch.com/default.asp

This is a searchable database with data on more than 5,500 corporate donations of $1 million or higher.

And it is totally FREE. You pay nothing at all to search this database.

The Corporate Donations Database is a creation of The NonProfit Times, a magazine on nonprofit management, and Noza, Inc., a search and retrieval technology firm. The site lists 1,200-plus different sources that it utilizes to compile its data.

We recommended this site for finding out what firms have made large donations and to whom. You can search by business name, by recipient cause, or by location (city/state). An advanced search also permits screening a search by postal code, donation category (e.g., endowment, memorial, scholarship), scope (local, national, international), and date (1994–present). The results show the name of the contributor (along with a link to a profile on ZoomInfo), donation range, recipient, and other directory-type data.

This is a "first stop site" if you want to find out about large corporate donations.

Who's Getting Venture Capital?

Keywords: business plans for venture capital

It is no secret that venture capital for startups is hard to come by. I keep preaching, however, that there IS money there, and that deals ARE being made. So I thought you would like to see what happened in one week with venture capital financing for startups:

There were eight startups.

!. J. Hilburn, a retailer, which is backed by early stage tech investor Battery Ventures.
Details: J. Hilburn sells custom men's clothing. It raised $4 million to help it develop technology that manages a more efficient supply chain for textile suppliers to reach consumers.

2. BookTour Inc. San Francisco www.booktour.com
Amount/Round: $350K/Series A
Investors: Amazon.com.
Details: Operates an online directory of events for book authors. The company's chairman is Christopher Anderson, editor-in-chief of Wired and author of The Long Tail.

3. Goom Radio New York www.goomradio.com
Amount/Round: $16M/ Series A
Investors: Wellington Partners Venture Capital, Elaia Partners, Partech International.
Details: Operates an online radio network. The company has been up and running in France since the Fall of 2008 and launched in the United States in March 2009.

4. Foundation Radiology Group Pittsburgh www.frg-rad.com
Amount/Round: $10M/ Series A
Investors: Chrysalis Ventures (led), Health Evolution Partners.
Details: Provides diagnostic imaging professional services for hospitals and other health care institutions.

5. TalentSpring Inc. Seattle www.talentspring.com
Amount/Round: $1.6M/ Series A
Investors: Second Avenue Partners.
Details: Provides semantic search solutions for job recruiters.

6. ExtraHop Networks Inc. Seattle www.extrahop.com Amount/Round: $5.1M/ Series A

7. TalentSpring Inc. Seattle www.talentspring.com
Amount/Round: $1.6M/ Series A
Investors: Second Avenue Partners.
Details: Provides semantic search solutions for job recruiters.

8. EnergyHub Inc. Brooklyn, N.Y. www.energyhub.net
Amount/Round: Undisclosed amount/ Series A
Investors: 406 Ventures, Physic Ventures.
Details: Develops home energy management solutions.

The diversity of these projects is impressive. Yes, internet is prominent, but not required. Even retail is getting a shot at venture money, a surprising development for many.

So you think the money isn't there? Well, it is. Our advice remains: develop the strongest venture capital business plan you can, take the company as far as you can on your own, and go for it.

The Smarmy Side of Venture Capital

Keywords: business plans for venture capital

Every so often I go off on a tangent on those yucky "introduction services" that promise to introduce you to 10 great venture capitalists, if only you will pay them $10,000 for their services, plus, of course, a commission on all monies raised. Well, there isn't ever a commission because there isn't any money raised. These guys are true ripoffs.

But, for goodness sake, be wary of the smarms. "References" don't really count unless it is the direct reference of established venture capital firms. It is just not that hard for these "consultants" to claim to be connected to venture capital firms. When in doubt, make a direct call to the venture firm and ask. If the guy is legit, there is no reason for them to hide it. If he is not, well, they just won't know him.

The consultants, or matchmatkers, as they are often called, do perform real services. They can polish a business plan for venture capital, polish a presentation, help set up your advisory board, and do a lot of preliminary work that will make your company a truly viable venture capital candidate. Just be sure to check them out.

In all honesty, I have the same reservations about the online services that provide "angel investor introductions". Typically you pay to "post" your business plan, and "qualified" angel investors review it. Trust me, any Tom, Dick or Mathilda can become a "qualified" angel investor as far as these online companies are concerned. So strangers look through your business plan. Someone may even "call" you (yeah, it is probably a phony caller). Do yourself a favor and just avoid them.

Business plans for venture capital are not easy to develop. Because you are looking for more unsecured money, it is going to be harder. Accept that. If you opt to hire a business plan writer, do that. But don't expect any miracle introductions -- it just doesn't happen.

Incubators -- The Hidden Resource for Minority Businesses

Keywords for this post:
How to finance a business

Incubators are one of the most seriously overlooked keys for small business, especially minority small business, when they want to know how to finance a business.

For example, look at the tremendous success of the Nussbaum Center for Entrepreneurship in Greensboro.

57% of Nussbaum Businesses Minority or Women-owned.

Of 66 companies residing in the Center, 38 businesses, or 57% are owned by members of minority groups. Of that total, 28% of the companies are owned by African-Americans, compared to a national average of 5.2%. Additionally, 41% of all companies are owned by women. Asian Americans and Hispanics make up 3% of the ownership, respectively.

“The Nussbaum Center exists to boost economic development through helping create successful business owners” says Associate Development manager, Clay Howard. “The diversity of ownership demonstrates the effectiveness of the Nussbaum Center to bring businesses together, creating an atmosphere conducive to growth.”

The Nussbaum Center for Entrepreneurship, Inc. is a private non-profit corporation whose mission is to enhance economic development in Greensboro and the surrounding area through creating successful business owners.

The incubator is designed to support non-retail, new or emerging businesses. The Center provides shared support services such as business counseling, receptionist, copier, fax, mail boxes, and word processing along with office and light manufacturing space.

For information: http://www.nussbaumcfe.com or Contact: director@nussbaumcfe.com Phone: 336.379.5001

There are several hundred of these incubators scattered throughout the country. Ask your local banker or SBA representative, or your Congressional Representtive, for contact information.

Look to SBDC for Real Business Rescue

Keyword for this post:
Basic Business Plan

Small Business Development Centers (SBDCs) are the hidden heroes in much of rural US. This is the agency that knocks itself out to really help small businesses.

ECONOMIC IMPACT OF SBDC SERVICES

SBDC's are required to gather reliable data on the impact of their services on the clients they serve. The data gathered includes new jobs created, existing jobs retained, new business starts, debt and equity financing obtained, and business expansions. For certain specialized SBDC's, data is gathered on government contract dollars obtained and new export sales assisted. To guarantee the accuracy of the impact, SBDC's are required to obtain a signed statement from the client attesting to the impact.

For calendar year 2008, the SBDC program produced the following economic impact nationally:

* More than one million clients served

* More than 80,000 new jobs created

* Saved more than 95,000 existing jobs

* Debt and equity financing acquired in excess of $3.5 billion

* More than 13,000 new businesses started

Additionally, SBDC clients experience more than 17 times the job growth of non-SBDC client businesses, and sales growth of 20.2% compared to 5.2% for businesses in general.

SBDC SERVICES

SBDC's work with both start up and existing businesses, providing a wide array of services. In addition to providing assistance with business plans necessary to access bank and investor capital, SBDC's give advice on low cost marketing ideas, analyze the feasibility of new business ideas, and assist with human resource management problems. Most SBDC counselors are adept at performing a very detailed analysis of a company's financial statements, identifying cash flow blockages, and providing solutions to inventory and accounts receivable management problems.

Because SBDC counselors are intimately aware of their community resources, they are often called on to provide referrals to skilled service providers on issues not handled by the SBDC. Training programs on business management topics are part of every SBDC's service delivery goals. Finally, an SBDC counselor is often the ONLY confident a business owner has. They are reluctant to share business problems with employees, competitors, their banker or CPA, and often, not even their spouse.

Some states have established specialized SBDC's that focus exclusively on government procurement, international trade assistance, and technology entrepreneurship.

SUBSTANTIAL, DOCUMENTED SUCCESS

During trying economic times, government must make sure it receives a reliable, consistent, and predictable return on the investment of taxpayer dollars. The SBDC program has historically provided a substantial long-term, proven, and documented return on tax dollars. For calendar year 2008, the SBDC program has returned $2.87 for every $1 invested by government. Some states perform much higher than the average.

The ROI numbers mentioned above are not estimated or projected figures. Each year, the national association for SBDC's (ASBDC) hires Dr. James Chrisman of Mississippi State University to perform the ROI analysis. Year after year, the SBDC program proves that it is one of the wisest and most certain investments the government can make. In light of our recent, shared learning experience about the speculative nature of investments, it is comforting to find an investment that is virtually a sure thing.

The House Small Business Subcommittee on Rural Development, Entrepreneurship and Trade is now hearing proposal for expanding the solidity and reach of SBDCs. This is an agency worth our investment. Contact your Representative and let them know how important you consider this work to be.

Top Tips for Starting Your Own Business

Keywords for this post:
Basic business plan

Legions are being laid off, many from jobs they thought were secure, from companies they considered sound. All levels of workers are being laid off. And huge numbers of these folks are forming their own businesses. If you are one of them, here are our top tips for starting your own business:

THE HARDEST PART

The hardest part is that there is often no mentor to walk you through what needs to be done. Unlike the corporate environment, you are out there on your own. So the very first thing to do is create a support network around you, people who are knowledgeable about your business, people you trust. This one step will set you leagues ahead of others.

HAVE A WRITTEN BUSINESS PLAN

Fortunately, Business Plan Master can help you out here. Get your ducks in a row, and write it down. Keep it lean and mean and flexible. But do it.

GET A TEST RUN

It's ideal to start a business while you're still working because you have an income. Many don't have that option any more. If you do, use it.

SCRUTINIZE POTENTIAL PARTNERS

You will spend more time with your business partner than with your spouse. If it is a good relationship, you whole life benefits. If it is bad, well, everything suffers.

LEARN ABOUT BUSINESS FINANCIALS

Understanding revenue and profits is completely foreign to a lot of people. To get up to speed, take a class on business accounting. That financial know-how is a must for any small-business owner. Keep on top of your numbers, because at the end of the day that's what your business is going to be valued off of.

PLAN FOR THE UNPLANNED EXPENSES

Business comes with all sorts of unexpected — and expensive — surprises. In the financial template in our Basic Business Plan, and every other business plan, Business Plan Master provides a "contingency cost" option. Use it. It will take you through many rainy days.

BE SPECIAL

If your company cannot provide something special, something that is uniquely you, you shouldn't be in business. Cookie cutter businesses don't make it. Even if you have a franchise, you are in a unique community.

TRUST YOUR GUT

The bottom line is that it is YOUR business, not anyone else's. You know it. Even when the numbers point you somewhere else, trust your own gut first.

KEEP RETIREMENT AND INSURANCE FUNDS SEPARATE

New entrepreneurs are often tempted to cash in insurance policies and rob the 401(k) piggy bank. Don't. Those policies and plans were put there for a reason. Unless that reason has changed, leave them alone.

DEVELOP A RIDICULOUS OPTIMISM

There is no logical "reason" why most small businesses should succeed. They just do. The determination of the owner is an amazing driving force.

Keyword for this post:
Venture Capital

Peter Rip in Newsweek magazine draws a stunning parallel between baseball and venture capital.

Author Michael Lewis chronicled the success of baseball teams such as the 2002 Oakland Athletics in his book Moneyball. The A's didn't have the funds to buy top athletes, but instead assembled a winning team through a more analytical approach. Statistical analyses included in the book found that ballclubs that simply tried to get a man on base as many times as possible won more games than teams that focused on hitting home runs.

Most investors in venture capital understand that you cannot generate an acceptable rate of return by hitting singles and doubles. What they don't appreciate is that a strikeout is far more destructive when grand slams are fewer and further between. And with fewer grand slams, time also matters. In a secular bear market, that Great Exit may take so long to occur that the drought destroys your internal rate of return.

The bottom line advice is: look to firms that sit on more solid ground, those can hit base hits more consistently. Those are the ones that will bring you returns.

It is good advice. We can only hope the venture world is smart enough to heed it.

Credit Suisse and Michigan Sizzle!

Keyword for this post:
Business plans for Venture Capital

Credit Suisse's three-year management of the Michigan Economic Development Corp.'s two venture capital funding operations is drawing to a close, but the firm's role in boosting the state's VC industry will last for another few years.

Credit Suisse is managing another $75 million - a piece of the $300 million Invest Michigan Growth Capital Fund - designated for Michigan investments.

The global investment firm is soon expected to make the final investments from MEDC's VC programs - the $95 million Venture Michigan Fund and the $110 million 21st Century Investment Fund.

And, to top it all off nicely, Credit Suisse's Michigan connections played a central role in drawing the 2009 Credit Suisse Private Equity Conference on Small & Emerging Manager and In-State Investments. The conference, previously held in Houston and Los Angeles, will take place April 21 at Wayne State University's MacGregor Hall in Detroit. This conference alone is expected to draw over 300 investors from outside of Michigan and may prompt some major investments.

Big Bullies, Be Gone!

Keyword:
Small business plans

Firms with less than 20 employees create more than 97 percent of all new jobs in America, so bringing an end to the diversion of billions of dollars in federal small business contracts to “corporate giants” should be the first order of business for incoming SBA Administrator Karen Gordon Mills.

No problem facing the Small Business Administration has been the subject of more federal investigations and more media attention than the diversion of federal small business contracts to Fortune 500 firms. The American Small Business League (ASBL) has estimated that every year more than $100 billion in federal small business contracts are diverted from legitimate small businesses to some of the largest corporations in the United States and Europe.

In March of 2005, the SBA Office of Inspector General (OIG) released Report 5-15 which stated, “One of the most important challenges facing the Small Business
Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.”

In February of 2008, President Obama recognized the gravity of the issue when he released the statement, “It is time to end the diversion of federal small business
contracts to corporate giants.”

Every major newspaper in the country has written about the diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 firms and thousands of other large businesses in the United States, and even Europe. ABC, CBS and CNN have aired investigative stories, which found corporate giants such as Rolls Royce, Wal Mart, Microsoft, Xerox, Sherwin-Williams, John Deere, Raytheon, General Dynamics and British Aerospace (BAE) had been the actual recipients of federal small business contracts.

As a first order of business at the SBA, Karen Mills should immediately remove all Fortune 500 firms, large businesses and their subsidiaries from any and all government databases of firms claiming status as small businesses. This would
once and for all bring an end to the “miscoding” that has plagued the SBA for the last eight years.

Next, a warning should be placed on the government’s Central Contractor Registration (CCR) Database warning all government suppliers that misrepresenting a firms status as a small business to illegally receive federal small business contracts is a felony under section 16(d) of the Small Business Act, which carries a penalty of up to 10 years in prison and a $500,000 fine per occurrence.

Finally, Administrator Mills should ask President Obama to issue an executive order immediately directing all federal agencies and all prime contractors to stop reporting awards to publicly traded firms as small business awards. The Small
Business Act clearly defines a small business as “independently owned.” Publicly traded firms are certainly not small businesses, and do not qualify as
“independently owned.”

Optimism in the Venture Capital Market

Keyword for this post:
business plans for venture capital

Bloomberg released a report conducted by the University of San Francisco that gave venture capital the nicest boost of confidence that it has had in nearly 40 years. The source of the confidence appears to be prospects for the government’s stimulus efforts and recent strength in the stock market.

The confidence rating from investors responding to the University of San Francisco’s quarterly survey rose to an average of 3.03, on a scale of 1 to 5, from 2.77 in the fourth quarter.

The increase came even as acquisitions of venture-backed companies plunged and the market for initial public offerings stayed frozen, leaving backers of start-up companies with few profit opportunities. Investments by venture capitalists fell 26 percent in the fourth quarter from a year earlier, the latest data show.

The discrepancy between rising confidence and declining venture investment isn’t as unusual as it may seem. Investors’ confidence rises when fewer dollars chase the same deals, making it cheaper to buy stakes in young companies and more profitable when the IPO market thaws. That is the situation right now.

Also, even with the increased confidence, it just takes a while for proposals to work their way through the venture capital wringer before financing is even an option.

IPOs may have a bit of a comeback this year too. There have been no U.S. IPOs of venture-backed companies since August, the longest stretch without a startup going public in at least 38 years, according to the National Venture Capital Association, a trade group.

Many venture capitalists are saying that it will take a couple of years for everything to stabalize, but it is headed in the right direction.