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These articles, written by industry leaders, along with our affiliates and strategic partners within the network, are designed to provide information on a variety of subjects within their focus areas of expertise to assist new ventures through all stages of the funding process.
BUSINESSES NEED CAPITAL - Your Plan by Kaya Morgan, Funding Consultant
TIPS FOR RAISING CAPITAL - Getting Off the Ground by Gene Wang, renowned Entrepreneur
HOW TO FIND FINANCING - Words of Wisdom by Guy Kawasaki, founder of Garage.com
TOP RANK YOUR WEB SITE by Aron Suzuki, Search Engine Optimization Consultant
BUY-SELL AGREEMENTS FOR START-UP COMPANIES by James Burk, Esq.
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BUSINESSES NEED CAPITAL - Your Plan by Kaya Morgan
Successful businesses are well planned and well capitalized. Being well capitalized is having the ability to access capital when you need it. Being well planned will help you to be well capitalized.
Many entrepreneurs lose valuable opportunities because they think the cost of raising the capital is too high. They spend too much time negotiating over the cost of the money, while their window of opportunity closes. Always try to cut a good deal with the investor, but the cost of capital should only be one consideration compared to the function of losses sustained by not having it. Simply, if it costs you one dollar in order to make two, are you actually ahead or behind?
Libraries and bookstores are full of financial "How To Books." We recommend you read as many as you can. These books will tell you about generic sources of capital, debt versus equity financing, business planning, goal setting, etc. The main topics you must not overlook should include: (1) What essential information to present to Lenders or Investors; (2) How to package your request to get noticed; (3) The format your presentation package should take; and, (4) What type of funding sources you wish to use to locate the capital you are looking for.
Unfortunately, statistics show that 90% of all new businesses fail. This can easily be a direct result of the failure to plan. Take the opportunity to plan and it can greatly increase your chances of success.
Funding can sometimes seem like an exhausting effort. However, it is a great exercise in showing your commitment and confirmation to the venture you need funding for. Your unceasing efforts are a perfect example of how you will deliver the same efforts to your investor. Remember, it is their money that will be at risk. You should be willing to do everything possible to show them that their investment has every opportunity to succeed, be repaid and turn a good profit.
If there are areas you have overlooked because it seems like too much work, that is another red flag that simply shows an investor your lack of commitment. So, be willing to do everything asked of you. The more questions you can answer up-front, the less questions you will be asked later.
Additionally, if you have overlooked items that are normally addressed in a business plan, it will appear that you have not taken into consideration all contingencies. That is another red flag to an investor that may make him question what other things you have neglected to consider. Remember, dont appear desperate, even if you are. The more you press an investor for an immediate response, the faster they run the other way.
One final word about presentation. Remember that your business plan becomes the image you will project to investors. If your idea is innovative, it may be difficult to come up with enough research, competition or certain projections to show you have done your homework. Therefore, you may wish to begin sections on new pages in order to increase the look and size your plan. You may wish to include a color copy picture under a clear plastic as your cover page. Never use a three-ring binder. Its too bulky and heavy for an investor to carry around easily. Always have the plan spiral bound. This can be economically and easily done at any office supply store.
The are all normal and usual items that an investor will expect to see. So, if there is anything you have left out, now is the time to include it.
We have provided you this information in a sincere effort to support your search for funding and increase your chances for success. The best idea in the world will not fly without a good solid plan. Continue to improve on it whenever you can. Never give up in your search for funding as a perfect representation of how you will run your business.
Kaya Morgan is a funding executive here at Island Connections. Click to read her bio.
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TIPS FOR RAISING CAPITAL - Getting Off the Ground by Gene Wang
Profile Potential Investors: This is key. Not just the firm, but the kind of person this is: someone who's going to be excited by an energy-charged presentation, or someone who wants a more rational approach where the risks are clearly understood. Is it a corporate investor that wants to benefit the business unit in addition to getting a return? Is it a technical person who wants to get into the bits and bytes, or a marketing person who's more interested in the opportunity and the size of the market? Get a read on their style.
Balance Quantity and Quality: Don't take a shotgun approach, such as calling 100 potential venture capitalists. On the other hand, don't limit your options by calling too few. A dozen good ones can be enough.
Network to Leverage Your Contacts: Get to know each VC well enough to know whom they trust, then you can triangulate on the investor by getting the other person to reinforce their belief in you. Some contacts may offer only a delayed payoff, which makes fundraising a lifetime occupation. And don't toss those business cards. you never know when someone will come back into your life.
Create the Notion of Competition: The thing that drives investors is the fear of missing out on the next Amazon.com or the next Bitfone. For investors, the only incentive to rush in is that fear. But do it with subtlety. You don't want to offend anyone.
Never Quit: Fewer than one percent of start-ups get venture funding, so the odds are daunting. But you need to be able to learn the reasons why you got a no, address them, refine your thinking, and go back hard at it again.
This 45-year-old, California entrepreneur has raised close to $100 million for his successful start-up companies, Gold Hill Computers, ComputerMotion, PhotoAccess and Bitfone. You can read more about him and his latest venture, Bitfone.com.
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HOW TO FIND FINANCING - Words of Wisdom by Guy Kawasaki
As the financing power list, these tips are critical for entrepreneurs looking for financing:
Don't Outsmart Yourself: Refrain from reinventing securities law with sophisticated financing schemes. This game is simple. You find believers, they give you money, you build the company, and everyone gets rich.
Don't Be Paranoid: You don't want money from anyone dumb enough to sign a nondisclosure agreement. If you have a good idea, five people are working on it. If you have a great idea, ten people are working on it. Thus, the key is implementation, not protecting the secrecy of an idea. So talk it up, find your believers, and get on with it.
Be Brief: One-page e-mail. Twenty-page business plan. Fifteen PowerPoint slides. One-hour meetings.
Acknowledge an Enemy: When you say, "No one else is doing this," investors are thinking: "Then there's no market," or "These guys are clueless." Both are not conducive to getting funded. Competition at least validates that there's a market. Focus on proving how you have an unfair, sustainable competitive advantage.
Look for Value, not Valuation: True or false: The holy grail of entrepreneurship is preventing dilution. Answer: False. The holy grail of entrepreneurship is finding high-value investors who help you create a high valuation company. Look beyond the money to see what kind of recruiting, business development, and expert advice the investor can give you.
Eat When Served: When people are offering to invest in your company, take the money. I've never seen a company go out of business that still had money. I have seen many companies go out of business who thought they could always raise money later.
Build the Team: How do you think the system works? Get they money, than hire the team; or, hire the team, then get the money? This is not a chicken-and-egg problem. The order is, without question, get the team, then you get the money.
Ask for Less Than You Need: This is counterintuitive, but the reason you ask for less than you need is so that you can quickly declare victory ("We're fully subscribed!") and get more money. If you can't declare victory right away, some of the people who were committed may lose interest because hot deals are always oversubscribed.
Keep Burn Rates Low and Cash Balances High: No matter how much money you raise and how much pressure you're under to expand and scale, conserve your cash. Most companies have to change their business models on their way to success. Suffice it to say that it's a bad time to try to raise more money when your old business model is failing.
Guy Kawasaki, founder of Apple Computer and Garage.com really knows his stuff. You can read more about him at Garage.com
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TOP RANK YOUR WEB SITE - Getting to the Top and Staying There by Aron Suzuki, Search Engine Optimization Consultant
This very moment someone is using a search engine to try to find your products or services. Unfortunately, unless you have optimized your web site to rank high with the search engines there is little chance that it will receive enough visitors to be successful.
Webmasters like to build visually attractive web sites because they look great in their portfolio. Yet, it is unsettling how many web sites are built by "professional" web developers that have great creativity, but somewhere along with the process, optimization for search engines is completely disregarded. In defense of the Webmaster, search engine optimization (SEO) is a relatively new topic. It is a highly specialized process and still in the early stages of development.
As a web site owner, your goals are probably related to your bottom line. The key to a successful web site is to drive high traffic to your site, build awareness and ultimately find new opportunities to sell your products and services. Yet, unless you can afford a large online ad budget, you need to find the most cost effective techniques to maximize your web site traffic.
A well optimized site, properly submitted can easily receive a first page ranking within the major search engines (Yahoo, MSN, AOL, Alta Vista, Netscape, etc.). So whats the big secret? The upside is that many of the techniques used to optimize a web site are relatively easy to perform.
A search engine is a pretty basic animal. You submit a word or combination of words related to what you are trying to find. The engine then returns a list of web sites that it believes are relevant to the criteria you submitted. Sounds simple, huh? Yeah, right! If it was that simple, everyone would be doing it.
As search engines have improved, relevance has gotten more accurate. However, it is still more common than not that a search engine will return a list of tens of thousands or even hundreds of thousand of web sites related to that search. Suddenly, the supposedly convenient, user friendly, e-commerce enabling search engine doesnt seem all that great anymore.
Every major search engine uses the same information provided on your web site to decide how to rank it. Therefore, a well optimized web site can land it in the top 10, while a poorly designed site could leave it omitted from the ranks completely!
So how do you secure a good ranking? The real secret isnt even a secret. A web site is simply a collection of web pages. For optimum ranking, each page should be evaluated individually and adjusted based on the content of that page. The URL and title of your web pages are two of the primary factors used in ranking. So, don't overlook their importance. Meta tags - description, keywords, etc.- are also very important to your rank. Finally, the content of your web pages should be well thought out and needs to accurately reflect the focus of your business.
The URL of your web site, otherwise know as your domain name (www.domain.com), is not usually something you can alter. However, if you sell widgets, you can create a web page on your site called widgets (www.domain.com/widgets.htm). Most search engines reward URLs that contain relevant text with a very high rank. So it's important to use your product or service in the title of the individual pages.
Web page titles get a lot of consideration by search engines. Since titles are displayed in the top of a browser window, they are prime real estate to give a concise description of that web page. When determining the title, make an effort to use the words you think people would use to search for your type of products or services. A good title for a company that sells widgets, dongles and doohickeys could look something like this: Acme, Inc Widgets, Dongles, Doohickeys. Dont worry about being case-sensitive, most search engines simply ignore it.
Only the search engines, not the user, see Meta tags. The two most important Meta tags are the description and keyword tags. The description tag is commonly used by search engines for ranking. Many times that description is included with your web site link when a search engine returns results. Keywords are used by the search engines to classify what search terms should match your web site. However, overuse and repetition of keywords can dilute your relevance. So, try to only use the keywords that are absolutely necessary to describe the content of your site.
The content of your web page will be used to verify that the URL, title, description and keywords are accurate. Search Engines use all types of formulas to calculate your position. Many search engines will compare the content of a web page and determine what ratio, or relevance, is contributed to a search word or term. So even if you have a web page with a URL, title, description and keywords containing the word widgets, if widgets does not appear anywhere on your web page you may still get a low rank. As if thats not complicated enough, how many times the word appears and where it appears can also have a big impact.
No matter what, beware of using frames, flash, links and image maps. Such things can prevent search engines from accurately assessing your content and ultimately lower your rank.
Armed with this new knowledge, dont waste any time making those necessary changes. Once you have revised your web site, resubmit it to the search engines again - dont use those bulk submission services. Although some search engines will update your listing quickly with a higher rank, some can take a few months. So be patient.
Aron Suzuki is available for private consultations at: AronSuzuki@hotmail.com
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HOW AND WHY TO BUY PENNY STOCKS
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BUY-SELL AGREEMENTS FOR START UP COMPANIES a.k.a. "Founders Agreement" by James Burk, Esq.
What is the Buy-Sell Agreement?
Buy-Sell agreements are agreements by which interest holders of an organization agree to place restrictions on the transfer of their interests in the Company. The agreement, also called a "Founders Agreement," creates a guideline for the event where an interest holder ("Member") who controls a significant (though it need not be significant) interest in the Company, wishes to sell his/her interests in the Company. In the cases of small companies such as closely held corporations, founders who do not wish to let a member distribute his/her interests to parties outside the Company use the Founders Agreement.
For the purpose of this summary, interests in a company (Corporation, Limited Liability Company, Partnership, etc.) will be called "Shares."
What Types of Agreements are there?
1. Redemption Agreement: The member agrees to first offer all shares to the Company before selling the shares to a third party. If the Company does not purchase the shares at the price and terms fixed by the agreement, the member becomes free to sell the shares to an outsider.
2. Cross-Purchase Agreements: The member must offer all shares to the other Company owners in certain specified situations
3. Hybrid Agreements: The member must first offer the shares to the other owners. If the owners do not purchase all of the shares, then the Company has the right to buyback the shares. The member may then sell the shares to a third party. The order and extent of the right of first refusal can vary among agreements.
What may be in the Buy-Sell Agreement? (Some examples of what may be included)
1. Right of first refusal
2. Amount of shares and the price of the interest to be purchased: fixed or market based?
3. Whether the Corporation will purchase life insurance to cover the buy back upon the passing of the member
4. What triggers the buy-back: termination with or without cause, sale, early
5. Force the member to sell or grant right of the exiting member to force the owners to buy his/her interest or force the Company to buy
6. Restriction against competition
7. Tag along clause: requiring the owner who buys the shares of the majority interest holder to also buy the shares of the minority interest holder
In spite of our intentions, we never know what the future may bring and cannot say with certainty what our partners or we will be doing in five years. The Buy-Sell Agreement outlines the method by which the Company will maintain control throughout changes in ownership.
James Burk, Esq. formerly with the FTC and a U.S. tax court attorney-advisor can be contacted at: firstname.lastname@example.org
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