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Passion Blog Pro Review

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Entrepreneurial Finance Conferences

The premier entrepreneurial finance educational event in the United States. This is not a networking event or forum it is an intensive educational workshop on understanding what investors want, how to present and structure your business plan and investor presentation, how to target the angel market, and how to work with investors you have been introduced to through alternative funding resources. More than 50,000 entrepreneurs have attended this event since 1989. The presenters have been sponsored by more than 200 major entrepreneurial organizations. Contact International Capital Resources, 388 Market Street, Suite 500, San Francisco, CA 94111. (415) 296-2519. www.icrnet.com.

Entrepreneurs Improve Thorton Park and Make a Killing

Florida's new urban entrepreneurs have the vision to see a bustling district of sushi bars, loft apartments and boutiques on a glass-strewn lot or rat-infested warehouse, writes Cynthia Barnett in the August 2001 issue of Florida Trend. Phil Rampy is proud to have been one of those early entrepreneurs. Twelve years ago, Rampy bought a property in the then-shunned Thorton Park neighborhood near trash-strewn Lake Eola (or as they used to call it, Lake Erie-ola). Today,Thor-ton Park has climbed up the status ladder to rank among the trendiest addresses in Orlando. That 60,000 bungalow that Rampy renovated is now valued at more than 200,000. Although Thorton Park still sits on this Earth in the same place it did 10 years ago, nearly everything else about this neighborhood has changed.

The Reaction Of Entrepreneurs To The Shortage Of Capital

Entrepreneurs reacted in various ways to the shortage of capital which occurred after the monetary stabilization. (c) At the same time entrepreneurs sought to increase their working capital by having recourse once more to bank credits, i.e. in substance, by financing their firms at the expense of other classes of society. In the first months of 1924 the Reichsbank, fearing that a rigorously restrictive banking policy would be too severe a blow for German business, once more granted loans to industrialists, thus seriously J There were similar developments in Austria. In the second half of 1922, i.e. during the first months of the monetary stabilization, entrepreneurs began a struggle against the workers and social legislation on the pretext of making possible a production policy (see Geldent7i ertiiiig mid Sttibilisieruiig, etc., p. 236). (d) During the inflation the central bank, the Reichsbank, had become the sole source of credit. It was the instrument through which the forced...

Small Businesses And Selfemployed People

Investing in a 401(k) or 403(b) may sound like a great idea, and if you have access to one at work, it is a tremendous way to increase your retirement nest egg. However, 401(k)s also pose a large cost to the employers who offer them. Because of that, many smaller businesses can't afford to establish 401(k)s at work for their employees. But that doesn't mean that the employees don't have any kind of retirement account to use. There are a few different types of plans that smaller businesses and self-employed workers can use that will offer them the same type of preferred tax treatment, as well as the encouragement to save money for retirement. We're talking about the SEP, SIMPLE, and Keogh plans. These plans are self-directed because they allow the employee, or self-employed worker, to choose exactly what the contributions are being invested in. While the employer who established the SEP and SIMPLE will choose the institution at which the plan is started, the employee will have the...

The Entrepreneur

Entrepreneurs in need of capital need this book. This book is about initiating the process of raising capital for companies at earlier stages of development and for whom traditional financing resources are not available. For the entrepreneur who has failed at these traditional sources of financing, Angel Capital offers a step-by-step formula for reaching the highly secretive and selective market of the private investor, a segment of the investor market that has become a major source of funding for entrepreneurial ventures. Entrepreneurs include those people raising capital on their own, CEOs of ongoing businesses looking for nontraditional financing, and owners of small businesses failing to qualify for loans from traditional sources and seeking expansion capital to grow their businesses. This category also includes owners of financially troubled companies who seek capital to reorganize and inventors who desire capital to commercialize their technologies. Furthermore, the...

Why Start a Business

Rich dad wanted me to start a business in order to find my entrepreneurial spirit. He often said, The world is filled with people with great ideas but only a few people with great fortunes from their ideas. So he encouraged me to start a business, any business. He did not care about what the product was or how much I liked the product. He was not concerned about me failing. He just wanted me to start. Today I see so many people with great ideas who are afraid to start, or they start, fail and quit. That is why rich dad often quoted Einstein's saying of, Great spirits have often encountered violent opposition from mediocre minds. He wanted me to simply start any business just so that I could challenge my own mediocre mind and, in the process, develop my entrepreneurial spirit. Rich dad would also say, The main reason so many people buy assets rather than create them is because they have not called upon their own entrepreneurial spirit to take their ideas and turn those ideas into great...

Authors Acknowledgments

Many people contribute to the birth of a book, and this book is no exception. First, I owe a deep debt of gratitude to James Collins who inspired me when I was a young and impressionable business school student. Jim encouraged me to try to improve some small part of the business world by being an entrepreneur and focusing solely on what customers needed rather than on what made the quickest buck.

Introduction

Entrepreneurs refer to the discovery process as knowledge-based innovation. In finance it has begotten a new discipline systematic trading and investment, the reasoned study of financial markets using the scientific method to explain and replicate market phenomena and the use of computer automation to make profitable trading investment decisions. Today, entrepreneurial activity in financial markets revolves around the practice of systematic innovation1 to build new (and shut down old) trading and investment systems.

Professional And Amateur

Beginning traders often find a system or technique that seems extremely simple and convenient to follow, one that they think has been overlooked by the professionals. Sometimes they are right, but most often that method doesn't work. Reasons for not using a technique could be the inability to get a good execution, the risk reward ratio, or the number of consecutive losses that occur. Speculation is a difficult business, not one to be taken casually. As Wyckoff said, Most men make money in their own business and lose it in some other fellow's.

Why Real Estate Investing

Maybe you want to buy your own home and learn how to save thousands of dollars on the transaction. Maybe you realize there is no job security in the United States (layoffs, reengineering, and early retirement all equal being fired), so you want to create your own business. Even if you have a great job and things are going well, if you are wealthy and successful, I still challenge you to do real estate investing on the side.

Others Irrationality Is Your Opportunity

A logical investor must take irrational market behavior into account when choosing stocks to buy, sell, and hold. Fear and euphoria cannot dominate the actions of someone who really knows the companies and industries in which he or she invests, but other people's fear and euphoria should influence one's choices. Do not blindly follow the herd, but pay close attention to its movements. Opportunity exists in the gap between a company's value and the herd's perception of its value. Of course, it can take a long time for the herd to catch up, but that is how an entrepreneurial investor's patience is rewarded. Entrepreneurial investors welcome volatility, and Benjamin Graham's famous Mr. Market metaphor explains why. Graham asks Figure 2.1 How Market Volatility Creates Opportunities for Entrepreneurial Investors Figure 2.1 How Market Volatility Creates Opportunities for Entrepreneurial Investors

Structure Of The Private Investor Market

Furthermore, it is reasonable to assume that they will remain active investors. Many want to enjoy the small percentage of their capital allocated for private equity. After all, even the most conservative investment adviser will leave a client some money to play with. It is this play money that ought to become the target of entrepreneurs seeking funding for high-risk, relatively illiquid, direct investment securities. These deals, in turn, offer the possibility of exceptional capital appreciation. Angel investors are different from their venture capitalist counterparts, who are more conservative, collect substantially more dollars from pension funds and the like, and put the bulk of the capital to work in later-stage deals. The angels have more time to spend with fledgling companies, helping them to build sustainable companies rather than ventures solely for exit. This hands-on guidance is invaluable to entrepreneurs who are the recipients of more than capital but...

Dirty Harrys Investment Philosophy

Some people view the stock market as an elaborate gaming table. Others see it as a noble democratization of business ownership. Both want the highest possible returns, and they can improve the odds of success by investing in companies that are easy to understand. Over the long term, Wall Street rewards simplicity, because a company attracts investors by demonstrating that it knows how to profit, generate cash flow, and maintain competitive advantage. The market sometimes loses sight of this in the 1990s people touting the new economy said some very cruel things about Warren Buffett because he just didn't get it. Buffett's eventual vindication was a triumph for entrepreneurial investors everywhere. Note that in the preceding sentence we said your company, because that is how an entrepreneurial investor views the ownership of stock. Financial columnist David Forrest regularly asks his readers whether, if they had the money, they would buy the whole company in which they wish to invest....

Investment Beginnings

Warren Edward Buffett was born August 30, 1930, in Omaha, Nebraska. His grandfather owned a grocery store (and once employed a young Charlie Munger) his father was a local stockbroker. As a boy, Warren Buffett was always fascinated with numbers and could easily do complex mathematical calculations in his head. At age eight, he began reading his father's books on the stock market at age eleven, he marked the board at the brokerage house where his father worked. His early years were enlivened with entrepreneurial ventures, and he was so successful that he told his father he wanted to skip college and go directly into business. He was overruled.

Investor Activity In Earlystage Deals

Angels are financially sophisticated private investors of means willing to provide seed, research and development (R& D), start-up, and expansion capital to investors and young or less-experienced entrepreneurs for high-risk ventures. For many entrepreneurs, the process of finding angels proves to be inefficient, and for many, frustrating and disappointing. You could make hundreds of presentations, spend countless hours and untold dollars searching for the hard-to-find private investors unless you use proven strategies to identify them and, thereby, establish contact. This is why segmenting the high-net-worth market into target categories most appropriate for your particular venture remains even more critical in today's challenging capital-raising market.

Creating Wealth Through Microfinance

Since the mid-1990s, it has become increasingly possible to link directly the high end of financial markets with the bottom end, where transactions involve microentrepreneurs, small businesses, and households using deposit accounts to save and to receive or send money transfers. This has occurred with the formation of microfinance investment funds (MFIFs). Some MFIFs have been created by MFIs and networks of MFIs as vehicles for attracting investment from outside parties, often official donors. These house MFIFs are complemented by independent MFIFs that invest in MFIs or networks selected on the basis of criteria that include investment returns, and in many cases also development impact. Dual-objective investors concerned about development impact are very prominent. In all cases, private investors, both individual and corporate, are increasingly courted and viewed as the natural owners of MFIFs.

The Hedge Fund Manager

As has already been remarked, each hedge fund tends to be unique. Hedge funds are characterized by a strong entrepreneurship and the absence of a stringent regulatory framework. Every hedge fund has its unique organizational and legal structure, particular business culture, management style, and manager's professional experience, age and education. In every hedge fund it is the manager who sets the rules of the game in full latitude management style, investment time horizon, return and volatility objectives, target market and the fund's optimal capacity.

Myth 5 You Need a Great Deal of Confidence

I made a conscious decision not to let my past dictate my future. I grew up in an average middle-class home. There's nothing wrong with that. In fact, in my estimation, there's everything right with that. I worked for what I got. I learned solid values. A good deal of that came from my parents. My father was not particularly entrepreneurial until later in his career. Hardworking, yes, but not entrepreneurial. He worked for the same company for most of his career and earned a stable living that supported our middle-class lifestyle. It was a good life for me, my brother, and two sisters. When I got out of college I followed in my dad's footsteps and got a job. But while in that job, I began to meet people people who showed me their entrepreneurial ways. They became my mentors, and from them I became entrepreneurial. Then I combined the innate values I received from my parents and my own newfound entrepreneurial spirit and I became whole.

Investors Worth Accessing

So, as many entrepreneurs in our experience have discovered, these investors are worth accessing. Still, there exists the old problem of meeting these investors. In his book Giant in the West, Julian Dara writes that Joseph Strauss attempted to get funding to build the Golden Gate Bridge for 19 years before he found A.P. Giannini, who ultimately financed the 6 million necessary for construction. Although contemporary entrepreneurs have been creative in identifying and accessing alternative sources of capital for their growing ventures, we have to be realistic How many of us have the patience of a Joseph Strauss For many entrepreneurs, finding, attracting, building relationships with, and closing with private business angel investors remains inefficient. The rea

Multiple Ways to Improve

As you will see, though, in Chapters 13 and 14, you can (and should) go far beyond cosmetics. As a truly creative entrepreneurial investor, you will develop a total fix-up and renovation plan that may As an entrepreneurial investor, you will survey competing properties, look for unsatisfied tenant (buyer) wants, and then strategically design a plan of improvement to create the wow factor. With wow factors in place, you will not only add to the value of your building, you will attract topflight tenants and collect higher rents.

This Book and Its Structure

Financial engineering is increasingly important in attracting new private funding though deals that include different levels of risk and return for various classes of investors. KfW's approach is well-suited for this purpose based on its capacity to innovate and take risks while engaging private investors on a consistent basis over the long term. At some point donor-investors will seek exit as the trickle of private capital becomes a torrent. Unresolved questions include the types of exit vehicles chosen and, of greater importance, their implication for continued service to target groups of microentrepreneurs, small businesses and others who do not have access to the leverage provided by formal financial services.

Dont Overlook Site Enhancement

In high-priced areas of the country, site value can easily account for more than 50 percent of a property's total value. When you find better ways to use the property's site, you immediately boost the property's value. Walkways, fencing, landscaping, driveways, storage, and redevelopment may all offer promise for profit. As an alert, entrepreneurial owner, you will think through a dozen or more potential ways to enhance site value.

Inspirational Figures Benjamin Graham

One of the strongest points Graham repeated throughout his career emphasized the importance of distinguishing investing from speculation, and choosing only to engage in the former. Investing is most intelligent when it is most businesslike, wrote Graham. He insisted that stock not be viewed as a piece of paper bought and sold based on price, but as a share of ownership in a real company. Thus, as in our own entrepreneurial investing style, Graham focused on the company, not the stock the value, not the price. Many investing methodologies derive from Graham's approach, including our own entrepreneurial style. Obsessed as we are with intrinsic value, margin of safety, and resistance to the disadvantageous entreaties of Mr. Market, we owe much of our success, as do many of our peers, to the teachings of Benjamin Graham.

The Private Placement

The informal, more practical, realistic definition of the private placement is any deal that the entrepreneur can legally negotiate and an attorney can write up. In essence, the private placement in angel transactions becomes a written record of the agreement and deal struck between the entrepreneur and the angel investor, which is precisely why we do not advocate indulging prematurely in overly structured transactions. Peddling highly structured transactions in the current angel market precludes the angel's propensity to negotiate. More constructive for the entrepreneur is an open-minded, negotiation-oriented approach. This more flexible posture, when supported by a strong business plan, is the constructive strategy to open the negotiation The relaxation of SEC requirements is possible under private placement exemption offered by Section 4(2) of the Securities Act of 1933. More recently, Regulation D offers entrepreneurs a safe harbor in other words, by complying with Regulations D's...

Selecting The Right Capital Source

As an inventor, entrepreneur, or owner of a small but rapidly growing business hungry for capital, you must ask if nontraditional resources will suit your deal. For ventures at the preseed, seed, R& D, start-up, or expansion stages, a vast array of financing methods are available. After tapping one's own finances, and that of family, friends, and other founders, and perhaps having exhausted the bootstrap financing option, what alternative sources remain Even a partial list can seem confusing academic institution research financing, community loan development funds, technology licensing, venture leasing, transaction purchase order, corporate investment by strategic partners, incubator-based financing, and of course angels and venture capital. Another decision involves determining whether the business will appeal to an equity or debt source of capital, a decision determined primarily by risk and return. If the business can offer a high return, more traditional equity sources seem...

Real Estate Is One of the Best Tax Advantaged Investments

The U.S. government gives you all kinds of financial reasons to invest in real estate. For example, when you buy a property for 200,000 and sell it for 300,000, you pay only long-term capital gains tax on it (provided you've held the property for a certain length of time). Long-term capital gains tax is currently only 20 percent. If this were profit from a business you owned, you would have to pay up to 39 percent on the profit plus you would have to pay self-employment tax on the profit. Because real estate is tax advantaged, you pay less than half as much in taxes. In this case you make an extra 20,000 in profits from this single tax savings And we still haven't even talked about things like depreciation, 1031 exchanges, capital gains exclusions on personal residences, and other write-offs the U.S. government gives you. All in all, real estate is one of the last real tax shelters the average person has.

Is Your Deal Financeable

Management team experience is crucial. An astute investor has said, If the critical element in a successful real estate transaction is 'location, location, location,' the critical element in a successful business endeavor is 'management, management, management.' In determining if your deal is fi-nanceable, consider the quality of the managers, their references, the extent to which the team is complete, whether they have worked together as a team, their past success in the venture's industry, and the relevance of their backgrounds to the entrepreneurial task at hand. Especially in an early-stage venture, experience in the industry far exceeds the importance of functional expertise. The venture needs a CEO who understands the industry, its market, and the application of its underlying technology more than it needs a financial expert, operations officer, or advertising maven. Market size must be calculated. Assess the size of the market, specifically whether the total number of potential...

Is Your Risk Financeable

Before embarking on the path to raising capital, the entrepreneur asks three important questions Is the deal financeable Am I personally financeable Is the risk in the deal financeable The first of these is management risk Will the management team stick together We've termed this risk team risk. Do the members of the management team get along with one another In giving birth to the company, will the team be able to work through the highs and lows of the entrepreneurial experience trepreneur's ear to the vibrations of the marketplace. What out there might affect the company Sometimes entrepreneurs get so close to their own technology, so close to the features of their own deal, so close to developing the business plan, to putting the management team together, to raising the money, that they overlook the pulse of the market. Entrepreneurs must not ignore market information. They do so at their own peril. Entrepreneurs can ill afford a business plan that lacks a sense of the market...

Letters For Readers Report

Today, Yunus runs Bangladesh's Grameen Bank, a leading advocate for the world's poor that has lent more than 5.1 billion to 5.3 million people. The bank is built on Yunus' conviction that poor people can be both reliable borrowers and avid entrepreneurs. It even includes a project called Struggling Members Program that serves 55,000 beggars. Under Yunus, Grameen has spread the idea of microcredit throughout Bangladesh, Southern Asia, and the rest of the developing world.

Parallels Between the Development of Microfinance Institutions and the Development of Microfinance Investment Funds

Gradually, with the search for additional resources, some MFIs started to generate their own resources through profits and realised that a sustainable operation provided a sound basis for a continued provision of services to the poor. The central notion of microfinance is to hand over to an individual entrepreneur the responsibility for her his own development, assisted by a loan. The same applies to MFIs. The more independent an institution is from initial subsidies and the more capacity it has to create the basis for its own growth, the better equipped it is to fulfil its original development mission. The first dual-objective investment fund seeking both a financial return and a social return which was not launched by private donors or development agencies is the Dexia Micro-Credit Fund. It was established in 1998 by Dexia-BIL in Luxembourg. This fund was created later than many donor or development agency sponsored funds, but it grew faster, especially after its microfinance...

The importance of the market data

On commodities that have a seasonal stocking industry that brings the unconsumed production on a given year to the following one, prices tend to assume a similar pattern according to the expiration months. With US corn, for example, which is harvested from September to October, the same players are involved (farmers, stocking industry entrepreneurs, cattle breeders, etc) on the September expiration contract each year and so they tend to assume the same behavioural pattern. In other terms it is more proper to create a price series with all the September expiration months connected together than a continuous or perpetual price series that mixes up different delivery months that have nothing in common.

Making Your Search For Investors More Efficient

Why One reason has already been discussed These investors protect their privacy. Here is another reason, also briefly mentioned earlier The private investor's reasons for investing are not always exclusively economic. Therefore, the entrepreneur faces difficulty in judging which approach to adopt in trying to locate, attract, and build a relationship with angel investors.

Attributes of Superior Performers

Yet, in either category, a true competitive advantage must be hard to copy, sustainable over time, a barrier to entry, a generator of real value, and adaptable to changing conditions. Entrepreneurs know that competitive advantage is impossible to sustain forever, that strategic planning is really the process of imagining new competitive advantages for the future.

The Problems With Conventional Wisdom

In locating an angel who can work financial miracles, many entrepreneurs employ conventional wisdom. Its precepts are predicated on the procedures applied to financing from banks, professional venture capitalists, and brokerage of public securities. Such a strategy is handicapped. What are these precepts and why don't they work Conventional wisdom also advises that you advertise. Just peruse the Mart section in the Thursday afternoon edition of the Wall Street Journal, and you will discover numerous solicitations for investors advertised there, thinly disguised as business opportunities. These types of classified advertisements supposedly provide another vehicle that entrepreneurs can rely on in order to generate investor contacts. But be warned In many places, advertising a private placement investment is illegal. This restriction has been eased in some states, for example, in California. The California Corporate Code's 25102(n) statute permits small business entrepreneurs to...

Myth 10 You Cant Be Afraid of Failing

Show me an entrepreneur who says he or she isn't afraid of failing and I'll show you a liar A bold statement, absolutely, but a true one. Everyone is afraid of failing. The difference is that some of us let that fear of failure hold us back. Sometimes fear stops us from beginning altogether and that's unfortunate. If that's the case, make the decision now to just begin putting one foot in front of the other, making one phone call at a time, visiting one property, and then another. It's not hard, but it can seem so if we focus on the end result instead of the tiny and very doable steps in between.

Why investing in the futures market is like any other business

Let's pretend that you, the retail business owner, wind up staying in your horrible business for the mere fact that you couldn't find a buyer that is willing to pay enough for you to break even. You end up having to cut employee benefits and find other ways to increase revenue. You later have all kinds of problems but decide to hang on because you have no other choice. After 10 years in business, your business has appreciated in value and is finally able to sell at a fair profit.

The Case Of The Internet Startup

In contrast, one can look at the start-up entrepreneur. How do you obtain venture funding, and how do you position the firm such that it is more attractive to the potential investor Your core competency is in developing software or Web-enabled vehicles on the Internet, not financial valuation. How do you then structure the financing agreements such that your firm will be more attractive yet at the same time the agreements are not detrimental to your operations, strategic plans, or worse, your personal equity stake What are your projected revenues and costs How do you project these values when you haven't even started your business yet Are you undervaluing your firm and its potential such that an unscrupulous venture firm will capitalize on your lack of sophistication and take a larger piece of the pie for itself What are your strategic alternatives when you are up and running, and how do you know it's optimal for you to proceed with the next phase of your business plan

An Inefficient Market Defined

Inefficiency in the private equity market is important for entrepreneurs to understand because it is a problem that leads to underinvestment. This, in turn, contributes to the capital gap we mentioned earlier. The absence of an organized capital provider system creates hardships for the entrepreneurial earlier-stage companies regardless of whether seed, R& D, start-up, or an expanding small business. Systems and the critical information for entrepreneurs and investors to make fast, informed decisions are simply not readily available. limited, both on the micro level (i.e., at individual companies) and on the macro level (i.e., at technical fundamentals underlying the capital market's dynamics). As a result, it becomes difficult for private investors to perform comparative analyses on their deals against baselines of compiled statistics on groups of other deals. Entrepreneurs need to appreciate that investors are forced to operate blindly, without information on valuations, deal...

The Expanding British Empire

Skipping through time, banking and financial markets closer to those we know today started in the coffee houses of European financial centres. In the seventeenth century these coffee houses became the meeting places of merchants looking to trade their finished products and of the entrepreneurs of the day. Soon after the Battle of Waterloo, during the nineteenth century, foreign trade from the expanding British Empire, and the finance required to fuel the industrial revolution, increased the size and frequency of international monetary transfers. For various reasons, a substitute for large-scale transfer of coins or bullion had to be found (the Dick Turpin era) and the bill of exchange for commercial purposes and its personal account equivalent, the cheque, were both born. At this time, London was building itself a reputation as the world's capital for trade and finance, and the City became a natural centre for the negotiation of all such instruments, including foreign-drawn bills of...

Making Private Loans to Businesses

What does the business owner do If you're making a loan to a business for direct infusion into the business itself, look at the business owners' financial plan and their profit-and-loss (P& L) statements for at least the last two to three fiscal years, if they've been in business that long. Also, keep in mind that 90 percent of businesses fail in the first five years, so the longer the business has been in existence, the better off you are if you're considering investing because the business needs a cash infusion. A company that has been doing business for more than five years is a relatively stable business and a less risky investment. If you as a private investor are considering lending money to a business owner who has run into a cash flow problem (like Dan with his delinquent IRS payments or a situation in which the business owner has to make payroll immediately), and the loan is the only way the owner can get the money needed, you must do the necessary due diligence to protect...

Finding investment money in tax savings

According to the Tax Foundation, the average U.S. citizen pays more in taxes than in food, clothing, and shelter combined. Sit down with your tax advisor and try to find ways to reduce your taxes. A home-based business, for example, is a great way to gain new income and increase your tax deductions, resulting in a lower tax burden. Your tax advisor can make recommendations that work for you.

Build a Capitalization Strategy

We have found from our informal research with successful entrepreneurs those who have completed their financing rounds and raised the needed cap-ital that successful money raisers have been those who have understood that the responsibility for that task rests squarely with them, that it is a critical feature of their job description. The task of raising money never goes away from seed, start-up, and early growth through to the establishment of the company in equity markets. The money-raising responsibility changes only in form. During early stages, the task is to convince fellow founders, friends, and family to trust in your vision and integrity. Next, entrepreneurs turn with their deal to nonrelated angels. If they can grow, venture capitalists may get involved, again for equity Series A rounds. If the company survives and prospers, commercial banks provide corporate debt. And, if the venture becomes sustainable, if it grows to meet stock exchange require- ments, the company might be...

Focus on Management Not Documents

Getting the most from your board means selecting individuals who add value, not merely serve in an honorary capacity. Look at the legal debacles we read about daily in the business press. An entrepreneur's best insurance against future litigation lies in his or her careful selection and scrutiny of the board of directors. Many entrepreneurs believe boards are just a check against their Lone Ranger tendencies. Not so. Independent boards serve in an important advisory capacity, providing help, counsel, and insight in carrying out your business plan. We will discuss later how the Sarbanes-Oxely So an independent board is important in attracting new investors, investors who must know these people will stay on if and when things get bad. In this highly litigious age, as the entrepreneur adds more investors while the company develops, he or she correspondingly becomes vulnerable to lawsuits. PricewaterhouseCoopers, in their Growing Your Business booklet, suggests the following tips for...

Budget for the Financing Program

Ironies abound in the money-raising game for example, only companies that look like they don't need capital are successful at raising money from high-net-worth investors. Another irony is that it takes money to raise money. This means building a budget to raise money. While every exuberant entrepreneur believes that skilled professionals will line up to work on commission for the privilege of being associated with his or her venture, good help willing to work on the come (i.e., on commission) is hard to find. Worse, you'll get what you pay for nothing. We have often advised entrepreneurs to start early, assign an individual to be solely responsible for and focused on fund-raising, premarket the deal vigorously before beginning the capital raising, and never stop fund-raising by making it part of your job description and daily task list. Regardless of these suggestions, many entrepreneurs exhaust their resources developing their product and spending money on attorneys and consultants...

Credit Scores Count Most

With a very strong credit score, lenders will lay aside their magnifying glass. With strong credit you will need to worry far less about high qualifying ratios, low down payments, self-employment (difficult to determine income), piles of verifications, inconsistent life patterns, or character flaws. As a strong credit borrower you will win the lowest interest rate, the best terms, and the fastest approval. You need never suffer the claw marks of predatory (hard money) lenders.

Anticipate Due Diligence

Entrepreneurs can expect due diligence to take two weeks to six months Due diligence is no more than the caution any prudent person would exercise with their own money. Sophisticated investors recognize that nothing takes the place of a full-venture audit, an in-depth assessment of the founder and entrepreneurs, and close scrutiny of the deal elements themselves to judge the viability of a prospective early-stage investment moreover, the investor will require numerous face-to-face meetings with the entrepreneur, thorough review of the business plan and strategy, and interviews with customers, suppliers, and competitors and he may seek counsel from relevant industry or technical experts. The entrepreneur can expect following the losses investors suffered as a result of lax due diligence during the dot-com debacle that investors will investigate the principals, including comprehensive background and reference checks, as well as possibly conducting interviews with former superiors,...

Chain letters pyramid schemes Ponzi finance manias and bubbles

Chain letters, bubbles, pyramid schemes, Ponzi finance, and manias are somewhat overlapping terms. The generic term is nonsustainable patterns of financial behavior, in that asset prices today are not consistent with asset prices at distant future dates. The Ponzi schemes generally involve promises to pay an interest rate of 30 or 40 or 50 percent a month the entrepreneurs that develop these schemes always claim they have discovered a new secret formula so they can earn these high rates of return. They make the promised interest payments for the first few months with the money received from their new customers attracted by the promised high rates of return. But by the fourth or fifth month the money received from these new customers is less than the monies promised the first sets of customers and the entrepreneurs go to Brazil or jail or both.

The Public Private Bridge

There is a large body of academic literature on the principal agent problem in private venture capital transactions. This literature focuses on the conflict of interest between an agent who is an entrepreneur needing financing and a principal who is the investor providing the funds for the venture. The theory has identified a number of ways in which the investor or principal can mitigate these conflicts. First, the investor can engage in information collection before deciding whether to invest, in order to screen out unprofitable projects or bad entrepreneurs. Second, the investor can engage in information collection and monitoring once the project is under way. Third, the allocation of cash flow between the entrepreneur and the investor can be designed to provide incentives for the entrepreneur to behave profitably. In these three approaches, we can find a series of information advantage opportunities that may also be found in the micro cap arena. In the first instance, when...

Its Up to You to Nahe I Happen

tart thinking about your business team. Unfortunately, most real estate investors are a team of one. They're entrepreneurial, like Rambo standing in the field with a machine gun in his hand and the entire Russian army coming at him with tanks and airplanes. He's by himself, and you think you're by yourself. You're not That's why you want to build your team.

Build Relationships with Prospective Investors

Angels do not invest in business plans they invest in people. The relationship between the angel and entrepreneur is the most significant factor in moving forward the sale of the illiquid investment security. When the chemistry between dreamer and dream-maker merge, other factors, such as business plans and private placement memoranda with risk-disclosure statements, become secondary. The relationship is everything. Astute entrepreneurs will appreciate that people are motivated to acquire relationships that improve their self-image. Investors have different motivations for investing, just as they have different motivations for declining the opportunity. Still, people invest in people. This seems to be the sense of it I'm investing in you. If the association uplifts me, you have a better chance of gaining my contribution to the venture. By the same token, a transaction they think will lower their self-perception will keep them on the sidelines.

Line Up Precommitment

The entrepreneur can increase efficiency in finding investors by lining up a commitment from them before spending time and money on preparing documents. Private placement investments involve two types of documents (1) the business plan and (2) the private placement investment memorandum or risk disclosure document. Basically, the business plan proposes reasons for investing, while the risk disclosure document suggests reasons against investing. Ironically, many entrepreneurs incur 10,000 to 25,000 in legal fees to prepare a risk disclosure document even before building interest in the venture which presents investors with reasons why they should not invest. Before the dot-com bubble, a significant percentage of investors were willing to invest without a complete business plan that is not the case today. In its newest study of 1,300 investors in its proprietary investor database, 95 percent of those who responded required a full business plan and financials for review before seriously...

Culture Matters Culture Is Real

For an entire generation of Silicon Valley entrepreneurs, including Steve Jobs, who has often said that HP was the inspiration for the freewheeling corporate culture at Apple, HP represented the dream of a company that was not just fun to work for and treated its employees well, but which was built upon a foundation of loyalty, trust, and community service. It was the embodiment of ethical capitalism.1

Dreamers And Dream Makers

As we declared at the outset, funding is an arduous task. But a lesson we have learned along the way may encourage you in your search for angels. Investors and entrepreneurs are people on opposite sides of a transaction, although they have more in common than might be obvious. For what is the real difference between founders with the dream of commercializing their idea into a 100-million-a-year company and the dream maker who anticipates a return 20 times over an initial investment After diligent targeting and sourcing, meeting high-net-worth, direct investors amounts to plain hard work, persistence, and attention to detail. Moreover, your approach must entertain as well as incite interest. Consistent application of the principles set forth in this chapter will serve to develop investor awareness of entrepreneurs and those ventures that merit such attention. Sooner or later the persistent entrepreneur will capture the interest and investment of these high-risk investors when they are...

The Impact Of Economic Trends On The Accessibility Of Capital

A number of macroeconomic trends are having significant impact on the entrepreneur's ability to find investors and to raise capital. These trends include a better understanding of undercapitalization's effect on building sustainable companies declining interest rates and the desirability of traditional debt and credit government intervention through tax incentives contraction of the institutional venture capital market and negative impact on the desirability of the alternative asset class and a moribund IPO market. Capital is the coal that stokes the fires of entrepreneurship in the United States. No capital, no start-up. No capital, no expansion. This everyone knows. Particularly for start-ups and small businesses, finance-related issues appear to be the number one cause of failure, according to Festervand & Forrest's extensive research prepared for the SBA. Eighty percent of new businesses fail because of undercapitalization. Major culprits include an inability to secure adequate...

Not All Change Is Progress

People have said some pretty harsh things about Carly Fiorina for damaging the HP culture, but we reassert that this is exactly what she was hired to do Arrogance is an unwillingness to learn from others the detached yet confident board of directors and their intensely focused CEO were a match made in . . . well, somewhere. We find it sad that companies so often undervalue their own uniqueness. Time and again we hear board members, analysts, and consultants telling entrepreneurial and innovative companies that they need to be more like real companies.

Research and Development Arrangements

Like other alternatives in this list, R& D arrangements offer variations. Basically, however, an R& D limited partnership grants R& D funding to a company perfecting a technology. The limited partners stand to gain through tax benefits and substantial royalties. Depending on the details of the agreement, the company responsible for developing the technology also has options to eventually buy the technology, to develop and market the technology, or to join with the limited partners to form a new company. R& D is an effective way to get promising technology off the ground, especially when a strong entrepreneurial management is not available.

Building an Economic Moat

When possible, look at the situation from the customer's perspective. What value does the product or service bring to the customer How does it help them run their own business better Why do they use one firm's product or service instead of a competitor's If you can answer these questions, odds are good that you'll have found the source of the company's economic moat.

Nonlinear Models 31 The Goodwin Model

By the capacity of the investment goods industries'.15 This is, of course, a judgement about the nature of the world as one could construct a model in which the limited capacity of the capital goods producing industries is just sufficient to satisfy the demand derived from the difference between the desired and the existing capital stock. Also, if the desired increase in capital stock is greater than the limited productive capacity of the capital goods industries, the price of capital goods can be expected to change. However, Goodwin ignores these possibilities, so we have that the maximum amount of investment possible is a constant, k*, per period, and if the desired capital is i, the actual capital is k, maximum investment will take place for - k k* periods. An additional gratuitous observation by Goodwin that 'entrepreneurial expectations are such that, even if it were possible to expand plant in the boom, there would be great resistance to it' is made.16 Aside from being a casual...

Intellectual Property Rights

Moreover, the counterfeiting business employs a significant number of people and generates much needed income in villages where counterfeiting plants are located. Cracking down on counterfeiting would mean firing workers and closing factories. That would cut offa valuable stream ofincome and disrupt the social order. As the dependence on small businesses in private sectors grows to generate jobs and income, government officials are more likely to turn a blind eye to those illegal activities.

Maximize taxdeferred retirement account savings

Fund companies are happy to encourage this financially detrimental behavior. It's not detrimental to them. They lure you into their funds without educating you about using your employer's retirement plan first. Why Because the more you invest through your employer's plan, the less you have available to invest in their mutual funds. (See the section on retirement later in this chapter to learn about the different retirement accounts you may contribute to, including plans for self-employment income.)

Repeat the Entire Waterfall Process for Continuous Improvement Kaizen Chapter

Through small innovations from research and entrepreneurial activity, trading and money management firms can discover breakthrough ideas. These include, among other things, the creation of new trade selection algorithms, application of existing systems to new markets, and the implementation of new technologies for more efficient trade execution. Through continuous improvement, trading firms can extend the maturity stage of the trading investment system life cycle.

An Historical Perspective

Regularly question the validity of their models. They should wonder what could make them defective in the future, whatever their degree of success in the past. As Bernstein (1996) explains The science of risk management sometimes creates new risks even as it brings old risks under control. Our faith in risk management encourages us to take risks we would not otherwise take Research reveals that seatbelts encourage drivers to drive more aggressively. Consequently, the number of accidents rises even though the seriousness of injury in any one accident declines. Furthermore, the Minsky Paradox of Tranquility is never far away, just waiting to lull investors' awareness. This paradox postulates that after a long enough period of relative tranquility, entrepreneurs and banks tend to become complacent about economic prospects. Little by little, they start to take more risk, going for more debt, and hence making the system more vulnerable. This may be what happened in South East Asia in 1997,...

Hiring a TaxSaVVy Accountant

I Evaluates your real estate investment activities to determine whether you're considered an investor or a self-employed dealer essentially the difference between a part-time and full-time investor i Pays your quarterly estimated taxes if you're considered a self-employed dealer

International Sources of Capital

No longer the exclusive purview of large corporations, international trade has flowed increasingly into the ken of small businesses. International sources of capital have blossomed as a result, running the gamut from local commercial banks to the federally, state, and locally funded Center for International Trade Development. In addition, the SBA's Export Working Capital Program, like the SBA's other programs, guarantees 90 percent of a private sector loan up to 750,000. Although not exclusively for international funding, the Department of Commerce's Minority Business Development Agency (MBDA) funds Business Development Centers across the country. The Department of Commerce also supplies nonfinancial aid through its National Trade Data Bank (NTDB), which contains international information valuable to exporters. What we have mentioned here hardly scrapes the top layer of options open to the international businessperson who, unfortunately, faces daunting regulations and requirements.

Trading and Money Management Firms

Development of trading investment systems is centered on knowledge-based innovation. As such, top management and product teams must work in concert to build new revenue streams in the hopes of earning entrepreneurial reward with management's primary responsibility being to invest in new strategies that may potentially become new revenue streams and to maximize the value of the portfolio of new and existing trading investment systems and product teams' responsibility being to maximize the value of individual systems. Financial firms do combat against other firms, where product teams are the foot soldiers and trading investments systems are the weapons. The new Lanchester strategy for financial market is that the victors

Why Playing the Markets Is Different from Other Businesses

On the other hand, consider the example of a person who buys a manufacturing business for which there is no easily available pricing mechanism. Initially, he may find that things go well. The cost-cutting measures that he takes immediately increase his cash flow. He uses the savings as capital to invest in more plant capacity and equipment to spur future growth. After awhile, though, he runs into problems sales slow down and the economy looks weak. Our entrepreneur may decide to sell his business, but he is less likely to do so because he cannot find a suitable buyer. Eventually, he no longer experiences the urge to sell and hangs on until retirement several years later. When he finally liquidates the business after 15 years, he finds that it has appreciated in value to a considerable extent and he now has a wonderful nest egg. In this example, the business owner concentrated on running his business. He was not constantly looking to see how much it was worth each day for the principal...

Incubator Based Financing

As the New York Times reported in January 1999, the number of incubators operating in the United States reached 550 in 1998 of these, 30 offered services but no physical space (incubators without walls). Forty-five percent were located in urban areas, 36 percent in rural areas, and 19 percent in suburbs. Forty-five percent had no particular focus, but one quarter of the incubators focused on technology. Ten percent were dedicated to general manufacturing, 9 percent to other specific industries, 6 percent to services, and 5 percent to minority-owned businesses. That a few incubators merely sustain failed entrepreneurs, as investor and author Geoffrey Moore (Crossing the Chasm and Inside the Tornado) has pointed out, good incubators, he reassures us, attract . . . key resources advisers, partners, investors, and visionary customers. Incubators, he has explained, give a structure to the bottom levels of basic needs so that entrepreneurs can focus on the higher levels. Incubators have...

Persevere And Drive Through All Obstacles

If you've ever been part of anything entrepreneurial or even if you ever built something from scratch, then you know endeavors such as these take twice as long as you think, require twice as much work, and cost a lot more than you expected. Those are facts of life, so I am never surprised when they prove to be true. Every project brings with it obstacles. Things that make work work, if you want to look at it that way. Or, things that keep work interesting. I preler the latter.

Small Corporate Offering Registration

Thus, with all the nourishment that small businesses bring to the economic dinner table, it is no wonder that the government understands the need for supplying some coal of its own to stoke the economic fire. Despite the government's best efforts and good intentions, however, its very nature precludes it from playing the role of venture capitalist. Venture capital involves more than capital venture capital involves adding value to the money invested. Nor are the venture capitalists themselves likely to offer the necessary degree of added value. As David M. Flynn observes in The Critical Relationship Between Venture Capitalists and Entrepreneurs Planning, Decision- Making, and Control (in Small Business Economics, 1991), Venture capitalists (VCs) are less involved with their affiliated new venture organization than may be necessary for long-term survival. Entrepreneurs may properly dominate the early stages of a venture, explains Flynn, but in the venture's ongoing development, the...

Why the Sublease Option Strategy Isnt Financially Feasible

The main reason I am not a fan of the sublease-option strategy that is being taught today is that it is not financially feasible. In other words, there is just not enough profit in most sublease-option transactions to make them financially worthwhile. For example, under a typical sublease-option scenario, a lessee-optionee would be lucky to receive from a tenant-buyer a 1,000 option fee and a monthly sublease payment that is 100 above his or her lease payment. In most cases, what appears on paper as a 100 a month positive cash flow really is not. This is because most investors involved in sublease-option transactions never bother to factor in the amount of time they spend managing property as a business expense. If they did, they would come to the quick realization that they are working for minimum wage. I do not know about you, but to me, the prospect of working for minimum wage, especially as a self-employed real estate investor, has zero appeal However, low wages are not the only...

Professional Venture Capital As A Funding Resource For Earlystage Companies

The reasonable question for the entrepreneur to ask is this Are professional venture capitalists a realistic option for me to pursue to finance my deal It may be fair to say that these could be the worst of times for the venture capital industry. As the Money Tree Survey claims, valuations are down 50 percent, often as low as one to three times revenues the venture-backed IPO market is soft, averaging eight venture capital-backed IPOs per quarter for the past three years 50 percent of venture capital firms are predicted to be gone in five years, and 27 percent of venture capital firms formed in the past six years will not raise a second fund litigation with limited partners is increasing major write-downs are still to come in many venture capital portfolios syndication is in vogue to reduce or share risk, making a round more complex early-stage investing has been effected more than has later-stage fund managers are refocusing on a few industry sectors and hundreds of firms are walking...

Comparison Of Angel Investors With Professional Venture Capitalists

Entrepreneurs should realize that early-stage investing by professional venture capital will form only a small part of their investment strategy. Arthur Rock, a founder of Intel, said in Fortune that venture capitalists are now portfolio managers, more interested in creating wealth than in creating companies. Another Silicon Valley veteran has dubbed venture capital an oxymoron. Still another CEO warned entrepreneurs not to look on investment bankers as their friends, calling them gatekeepers as they screen out what to them is just another deal. For entrepreneurs to rely too heavily on that particular resource is a mistake, when, in fact, there remains a larger resource willing to assume a greater risk. The angel investor patient and interested in adding value to smaller, higher-risk transactions stands ready to nurture a company through the early leg of the relay. Then the professional venture capital community becomes a more suitable contributor by virtue of its fiduciary...

Professional Venture Capital Help Or Hindrance To Your Funding Success

In their 1990 article in the California Management Review, Does Venture Capital Foster the Most Promising Entrepreneurial Firms Raphael Amit, Lawrence Glosten, and Eitar Muller suggest that start-ups backed by venture capital have a much higher failure rate than those financed by individual investors. Venture capital is spread thin, say the authors, and venture capitalists negotiate tough deals that drive away the ablest entrepreneurs, those who know the value of their projects. Hence, they conclude, we can expect higher failure rates among firms seeking venture capital than among the total population of new firms. One reason for the double digit of investment failures among venture capital investments may be that some more inferior deals gravitate toward venture capitalists because of their more aggressive valuation stance. In other words, entrepreneurs with less confidence in their venture may be willing to take less money for equity in their current round of financing. Compare the...

STAGE 0 The Money Document

The trading and money management industry is highly entrepreneurial. Individuals who start new trading investment systems (in any legal form) are confronted with traditional activities related to entrepreneurship raising seed capital, product development, marketing. Trading investment system start-ups are distinguished from other new business ventures, however, by the need to develop the investment trading strategy concurrent with the business strategy. Put another way, before any trading can begin, trading investment system entrepreneurs must consider two sources of capital

Venture Capital Investing Zero In A Million

Venture capital investing is in some ways the riskiest and most unpleasant way to lose money. The business plan usually describes a unique entrepreneurial enterprise. It seems like a good idea and a good business on the face of it. The entrepreneurs will often have gold-bordered brochures to support their very logical plan. They will list very smart investors who are backing it. They may invite you to meetings if they are local. They also usually have a very affable, smart man or woman who somehow becomes your personal confidant, an executive of the firm who gives you the inside scoop about what's going on and fills you in confidentially on whom they are talking to Coca-Cola, Merck, Yahoo , General Electric. This person craftily merges the business and its very logical plan with you and your money. But he said that he had always wanted to be more involved in young entrepreneurial ventures. It was downright American to support young companies to grow and become great. He would...

Engaging the Target Group

The ProCredit banks lend to micro entrepreneurs and to small and medium-sized enterprises (SMEs) that otherwise would have virtually no access to outside capital from formal institutions. The shareholders' objective is that these clients should build their businesses with outside capital raised on market terms without subsidies. The microfinance banks' approach is to provide services that respond precisely to their target group's capacity. In this way these banks build the SME sector, which is the backbone of economic (and also democratic) development. Hence, the business model that has been developed is valid, useful and important not only in Southeast Europe and in transition countries, but globally.

The Highnetworth Investor Market

Positioning your venture for success in fund-raising mandates an appreciation for early-stage investors, particularly understanding angels, what they look for in a deal, their investment criteria, their motivations, and their outcome expectations. These are the critical elements entrepreneurs must understand as they target their deals to the appropriate investors. Targeting the private investor means having the information to answer such questions as these Who would be interested Who can afford it Where are they located What is the best way to reach them What message should I emphasize Another point we come to is how dependent this market is on individuals with high net worth, the wealthy, those who possess something beyond high incomes. A person with a high income may be affluent but not wealthy. Only high net worth determines wealth. Earlier, we discussed how some entrepreneurs mistakenly judge investors solely on their income, forgetting that income alone has little to do with the...

Defining the Brokers Role

The distinction between personal stockbrokers and institutional stockbrokers is important. Institutional brokers make money from institutions and companies through investment banking and securities placement fees (such as initial public offerings and secondary offerings), advisory services, and other broker services. Personal stockbrokers generally offer the same services to individuals and small businesses.

What one gains the other loses

However, the condemnation of accumulation does not necessarily mean the condemnation of trade. In the major thinkers there is a cautious overture towards entrepreneurial activity. Augustine confirms his suspicion of the practice of trade which was repeated soon after by the pope, Leo the Great,

Creative Beginning with Lease Options for Investors

Twenty years, 23 homes, and 71 properties later, Suzanne had become not just independently wealthy, but a nationally recognized author, speaker, and entrepreneur. In her excellent book, House-wise, she tells about her renovation experiences and the career she found by chance. As I've said, it's a great book for anyone who would like to learn hundreds of profit-making ideas that can be applied to buying and renovating fixers.3

Advantages And Disadvantages Of Direct Venture Investing

For entrepreneurs planning to court high-net-worth investors for their venture, it is worthwhile to take a moment, step back from the search, and acknowledge both the advantages of early-stage investing that attracts investors and the disadvantages that create barriers to and bottlenecks for investor involvement.

The Private Investors Criteria

Whether in technology or nontechnology, the private investor in this select group has investment criteria. As Exhibit 6.3 suggests, he or she is steeped in the excitement of this type of investing. To the investor, these feelings figure as prominently as ROI. Remember that a part of this excitement comes from the infectious enthusiasm of the entrepreneurs themselves. Because experienced, sophisticated investors find risk distasteful, they minimize it in every way possible. Nothing minimizes risk more than the business plan. But the business plan also works to the advantage of the entrepreneur, enabling him or her to achieve two critical goals recruiting talent and raising capital. The business plan achieves these two goals because nothing better explains the entrepreneur's concept and vision. It helps capture the attention of the investor, defines the argument, and forces the entre The business plan acts as a resume for the venture. In the entrepreneur's absence, it sends a host of...

Unearthing Profit Opportunities

This was one of my purposes in writing the series, Which Kind of a Stock is Best As those articles progressed they indicated that the chain store and mail order stocks were, in many respects, better than the other leading groups such as steel, copper, railroad, telephone, etc., the principal reason being that these companies were putting more of their earnings back inlo their business than any other single group.

Designing and printing business cards

Even in this hi-tech age of computers, Web sites, and cell phones, the lowly business card is your key marketing tool. If you have a computer and a fairly good printer, you can design your own business card and print it on card stock that you can pick up at any office supply store in your area. If you don't have a computer and printer, head down to the local print shop to have it produce your cards. Include the following on your cards

How Angel Investors Can Help Beyond Capital

Early-stage, active investors can help entrepreneurs of the companies in which they invest, in a number of ways. First, the entrepreneur must recognize that all direct investors offer the potential to provide more than money. To seek only the capital and forget the capitalist is to miss the point. We look at investor contributions as value-added, over and above their capital investment. Investors can help with identifying and facilitating alliances and strategic relationships with more established corporations, using such vehicles as technology transfer, joint venture, or original equipment manufacturers agreements. agement and technical experience in multifunctional areas, they can assist in strategy development, business planning, and recruitment of key talent for the management team to help grow the business. But most of all, having already been there and successfully having done what the entrepreneurs are trying to do, they will bring patience, calmness, and fortitude in the face...

Property Rights Institutions And The State

Most financial contracts are less simple. At least one of the parties is generally exchanging a nontrivial property right. For example, a financial capitalist might exchange property rights over his capital (easily defined, when it takes the form of cash) for property rights over part of the income stream that an entrepreneur generates using the capital. A more complex exchange might involve an exchange of human capital5 for the same property rights over the income stream. We have argued that property rights are useful because they facilitate the devolved decision-making upon which capitalist economies rely. Such decision-making is efficient because it allows individuals to make the most of their knowledge of local conditions, and to apportion the returns from productive activity in such a way as to provide the most effective incentives to all of the involved parties. In the absence of well-functioning property right institutions, assets are likely to be allocated inefficiently, and...

Private Investor Motivation

Because private investor motivation is a driving force behind their investment criteria, it will pay entrepreneurs to attend to what prompts investors to make their investment decisions. One way they can recapture their successful experience typically in their forties and fifties, after they have already made it is by investing in new companies, making investments based on the acuteness of their analysis and intuition. Scoring once again reinforces their self-image. Their judgment, once again proven correct, sustains recognition in the investment and entrepreneurial communities in which they live. This serves as an important motivation. In their book Angel Investing, Osnabrugge and Robinson suggest that business angels' primary motivation for investment encompass (1) expecting a high financial reward, (2) playing a role in the entrepreneurial process, (3) feelings of fun and satisfaction in being involved in an entrepreneurial firm, A particularly fascinating component in the...

Nonstate Institutions

Extra-Legal Institutions Many forms of property rights are secured if the courts operate in a predictable fashion and without the interference of the state. Sometimes, however, the courts may be politically undermined they may have little ability to make nuanced judgments, or they may be prevented from enforcing some contracts. Equally, the courts may be undermined by technological limitations. For example, it may be impossible to establish rights to some assets, such as the price-relevant information in which investment banks deal, because they lose their value as soon as they are publicly revealed. Entrepreneurs whose ability to contract is reduced for political or technical reasons will naturally attempt to create alternative, private sector, property rights

The Allocation Decision

Since the founding of ICR in 1989, one of the authors has interacted with more than 4,000 entrepreneurs. A review of the results of the fund-raising ef forts of these past clients and contacts suggests that the most accurate predictor of an entrepreneur's success at raising capital is having successfully raised capital in the past. Based on an informal review of 4,000 records, 65 percent of those entrepreneurs who went on to successfully raise capital in their current rounds had raised capital previously from family, friends, co-founders, and angels and or professional venture capitalists. If you are among the 35 percent who have not yet raised capital from family and friends, who have not been subjected to thorough due diligence, or perhaps who have raised capital but did so before the dot-com bubble burst, stock market meltdown, and recession, just what do these findings mean to you We contend that by understanding what goes into the investor's decision making, entrepreneurs will be...

Sell Your Lease Option Rights

As you can see from this example, a master lease with option to buy can create significant profit opportunities for investor-entrepreneurs who are willing to turn a poorly managed, run-down apartment building into an attractive, effectively operated residence for high-quality tenants.

The Need for Financial Education

In the early 1980s, I began teaching entrepreneurship and investing to adults as a hobby. One of the problems I ran into immediately was that most people who wanted to start businesses or invest with greater confidence lacked the basics of financial literacy. I believe that this lack of financial education is why nine out of ten new businesses fail in the first five years, and why most investors think investing is risky and do not make or keep much money.

Management Management Management

As in any business, the quality of the management is a key factor in determining the success of the enterprise. In most cases, the skill and vision of the key management team will determine the long-term success of an enterprise. And the smaller a company, the larger the impact of the top management team. In a micro cap company, the top tier of key management people has a disproportionately large influence on the success or failure of the company. Unlike large companies, in most micro cap organizations the key management people also have direct responsibility for actual business execution. This is an important difference between the big and the small enterprise. Success in the micro cap world requires a certain management skill set that merges big corporate vision with a high level of entrepreneurship. So in micro cap companies, for practical purposes, the single largest contributing factor in corporate performance is attributable to the top management team. This suggests that finding...

Deep Pocket Investor

The trick in this business is to learn by doing business and to try not to make the same mistake twice. But oftentimes we get caught up in the entrepreneur's and the founder's enthusiasm. That's as it should be. That's the kind of business this is more art than science. My particular background is eclectic I've been on both the entrepreneur side and the venture capital side. Last year I spent the better part of the year working as the founder of a company and I was humbled by that experience. So I certainly have empathy for people on that side. Like any business plan, like any good entrepreneur, you can count on shifts in your strategy once you get into the market. So I would urge you to also understand the market and be comfortable with the fact that it's big enough to accommodate the necessary shifts in your strategy. If you're in a very small, very well-defined, limited market, you're not going to have the luxury of shifting your strategy, so you'd better I don't put my money into...

Why Would You Want to Deal with This Type of Easy Money Lender

The Optimistic Entrepreneur Say you find a desperate (that is, motivated) property owner who is willing to sell you his 300,000 as-is property for 220,000 if you can come up with the cash within 10 days. You know that after putting in 25,000 for repairs and sweat equity, you could sell the house for at least 335,000. You want to grab this deal before someone else beats you to it. But how can you raise 220,000 on such short notice

An Institutional Theory of Investment Banking

Running the payments system and providing liquidity insurance are two complex and essential tasks which are most efficiently managed by a specialist institution. There is however no a priori reason why this institution need be a bank. The most important role of commercial banks is enabling entrepreneurs, and more established corporate actors, to respond to economic opportunities. They accomplish this by breaking down some of the informational barriers that exist between entrepreneurs and investors without this service, capital-constrained innovators could not attract funds. Only those with sufficient capital could then develop new ideas, and the distinction between investors on the one hand, and entrepreneurs and corporations on the other, would not exist. We argue in this chapter that, like commercial banks, investment banks break down informational barriers between investors and entrepreneurs that would otherwise prevent investment from occurring. It follows immediately that their...

The generation of the accelerator coefficient

For the increase in aggregate effective demand that is registered in the minds of the individual entrepreneurs may add up to a sum quite different from the real increase in aggregate output. This is particularly obvious for a competitive industry. There an increase in aggregate demand would generally lead first to a rise in the price of the product, although the tendency to rise in price might be held in check somewhat by speculators. It is the rise in the market price of this product that would be registered in the mind of an individual entrepreneur but he would have no idea of the magnitude of the increase in aggregate demand, let alone his share of the increase. If he assumes that the increase in demand, that is to say the price of his product, is permanent, the increase in output and the requisite optimum investment to produce it, which he would plan in response, would be that which would make his own long-run marginal cost curve equal to the new price. It is evident that there is...

Information Innovation And Property Rights

In advanced economies, many supply chains rest upon intellectual, as opposed to physical, assets. The most important examples concern innovations. Consider, for example, an entrepreneur designing a new production process. Precisely because the process is new, he may have insufficient knowledge of demand conditions to decide whether it is worth developing. Thus demand information is central to efficient investment without it, some good ideas will not be pursued and some bad ideas will be. In the language of chapter two, demand information is an intellectual or informational asset which is an essential input into the production process. It is important to stress that most of the innovations with which we are concerned in this chapter are not themselves intellectual assets. Even when the innovator has a natural monopoly over a physical innovation, implementation will occur only if he can attract capital. The information that we are concerned with is needed by capitalists to evaluate...

Charlie Ponzi was alive and well and living in Tirana

The transition from the command economies to the market economies in what had been Eastern Europe in the early 1990s meant that the financial structures were no longer regulated. Entrepreneurs some of them former Some Albanians sold their homes to get the cash to buy these bank deposits and then rented the same properties from the buyers the 'interest income' on their deposits was much higher than the rent they had to pay for the same homes. Often the buyers of the apartments were the same entrepreneurs who owned and managed the deposit banks. Albanians in its diaspora sent money from New York and Chicago and Frankfurt to their relatives in Tirana to be deposited in these new institutions. Some Albanians stopped working because the interest income on their deposits was so much higher than their wages and salaries.

Solving Potential Loan Predicaments

The best defense against loan rejection is avoiding it in the first place. To head off potential rejection, disclose anything that may cause a problem before you apply for the loan. For example, if you already know that your credit report indicates some late payments from when you were out of the country for an extended period or your family was in turmoil over a medical problem, write a letter to your lender that explains this situation. Or perhaps you're self-employed and your income from two years ago on your tax return was artificially much lower due to a special tax write-off. If that's the case, explain that in writing to the lender. If you're self-employed or have changed jobs, your income may not resemble your past income, or more importantly, your income may not be what a mortgage lender likes to see in respect to the amount that you want to borrow. A simple (although not always feasible) way around this problem is to make a larger down payment.

Consortium Investor

We like to get very close to the entrepreneurs, the people who start the business, the people who have the ideas. We offer them some oversight we offer them a sounding board, and, of course, we offer them some capital. I am an individual investor, working with about half a dozen other people, all of whom have started, run, and then sold businesses, but have continuing interest in nurturing small businesses. We're a loose confederation of investors. We don't have a company structure as such. We respond to each opportunity as we see it. Our focus is on the people involved in starting a business. We like to get very close to the entrepreneurs, the people who start the business, the people who have the ideas. We offer them some oversight we offer them a sounding board, and, of course, we offer them some capital.

Guide To Internet Entrepreneurship

Guide To Internet Entrepreneurship

Discover What It Really Takes To Succeed And Profit From Your Online Business And Find Out The Little Discussed Facts That People Ignore - Or Choose To Ignore - That Makes You Either An Internet Entrepreneur Or Simply, Plain Broke! The Ultimate Factors That Decide Your Internet Business Journey And Success Has LITTLER To Do With The Techniques You Use Or The Programs You Join Than You Expected!

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