If you are selling items, you likely need a merchant account for your home businessA merchant account is a special account set up through a bank or through an ISO (Independent Sales Organization) that can arrange for your home business to accept credit card payments. This can be very important to your work at home business, since it allows you to know that you are getting your money immediately. However, you will have to pay set-up fees and a percentage of each credit card transaction will also be charged as a fee.
Using PayPal
One way you can alleviate some of the costs associated with a merchant account is to use PayPal. If you have a smaller business that does not make a great deal of money each month, PayPal can offer an interesting solution, as well as help you accept credit cards for your work from home business. See Also Work From HomeWhat you need to know about owning a home business [Link]
Your work at home taxes will be more than your work from job taxesIt is a good idea to save a little money throughout the year to pay your taxes. When tax time comes around, it can be a shop to learn that you will have to pay more for your home business. The entire Social Security tax will fall on your work from home shoulders. So will your income tax and other taxes. So, be prepared by socking away 15% or so each month in a high-yield savings account (like the ING Orange savings account) so that you do not have to take such a beating when tax time rolls around.See Also Work at Home StrategiesWork from home ideas [Link]
Mystery shopping can be a great way to work at homeIt’s the dream job for many people: getting paid to shop. Mystery shopping can be a great work at home part time job. You get to do a little shopping, do regular business, and get paid for it. But it is important that you are not just getting paid to shop. When you choose mystery shopping as your work from home job, you need to take it seriously. While you can take your kids with you on some trips, others may not be appropriate for children. Companies often have specific guidelines for things they want to know about your shopping experience. Additionally, you often have a specific time frame that you will have to shop in (usually within two or three days at a specific time of day, like morning or evening). You may be directed to do certain things. And you will have to fill out a report. In order to get more gigs, you will need to have thorough reports that cover all of the requested bases. And you need to be efficient to make it worth your while. Make sure that you do other errands while on your way to your mystery shopping gig.See Also Mystery ShoppingMore work from home ideas [Link]
Making money by selling on online auctionsOne of the ways that you can make money working from home is to sell on online auctions. eBay made online auctions famous, but there are dozens of auction Web sites out there, including sections of Web sites like Amazon and Overstock. While you won't make as much money as you could have a few years ago, it is still possible to earn money from home with a little help from online auctions. All you have to do is make sure you get good products that people will want to buy (many people find treasures at yard sales), and then put them online for bidding.
Tip for online auction success: include a picture. You can take pictures with a digital camera then upload them. See Also Online AuctionsWork at home ideas [Link]
Even when you work from home, networking is importantOne of the most important things you can do for your work at home business is to begin networking. Business networking has long been established as an important way to meet valuable contacts and find new opportunities. The same is true for people who work from home. In fact, it may even be more true for a person who has a work at home business. It is important to reach out and get to know people. You can your business networking both online and offline. It is best to do a little of both. That way you find more opportunities. There are plenty of online networking Web sites, and there are also plenty of offline opportunities — from the local small business association to the Chamber of Commerce — for you to take advantage of.See Also Work at Home BusinessIdeas for the person who works from home [Link]
Health insurance quotes for the work at home businessWhen working from home, it can be difficult to find affordable health insurance for you and your family. However, there is a place you can go to find a variety of affordable health insurance plans in your area, specifically designed for the self-employed. Go to HealthInsurance.org to find quotes on several plans for the work at home business.See Also Work at Home HelpIdeas and tips for your home business [Link]
Finding support and help for your home businessThere are plenty of associations out there designed for those who work from home. You can find good support, ideas and helpful hints when you join such an association. there are a variety of such work at home support Web sites, ranging from those for business professionals to consultants to sites for work at home moms.See Also Work at Home MomsInformation on working from home [Link]
Working from home requires schedulingIf you want success in working from home, it is important to establish a schedule. Just because you work at home is no reason to act as though you do not have an actual job. Many people tend to think of it as "just working from home." As if it isn't actual work. It is actual work, and it deserves some respect. So, schedule in work from home time each day, or choose a couple of days to devote to your work at home business. Make sure that it is a reasonable amount of time, and during a time of day that works for you. "Reasonable," of course, depends entirely upon your individual situation. For me, three hours every weekday morning from 6 to 9 am is reasonable, and then three days a week from 9:30 to noon while my son is at preschool. For you, it's probably different. But no matter when "reasonable" is for you, make sure you schedule work from hom time into your life.See Also Working from HomeWork at home business tips [Link]
Work from home affiliate programs A good way to make a little money from home, and have a good time, can be through affiliate programs. I have a friend, D.J., who has been doing an affiliate program for Close to My Heart, a scrapbooking company. She offers workshops on making scrapbooking pages and homemade cards. This not only helps her cover the costs of some of her supplies, but it also builds a loyal group of ladies who, when they want additional ideas and supplies, will visit her Web site and get ideas. And, of course, she gets a cut of whatever is ordered through her Web site. An excellent way to do something you love, and get a little money for it! There are several other types of affiliate programs, from selling educational books to Mary Kay products.See Also Make Money From HomeHome business ideas [Link]
Drop shipping can be a great work from home business model, but choose your wholesaler carefullyWhen it comes to working at home, there are several business models to choose from. One of these is drop-shipping. However, you need to watch out for drop-shipping scams, in which someone poses as a legitmate wholesaler to bilk you out of your money. Here are three things to watch out for: Easy Set-up. Sure, there are home business opportunities that are easy to set up. But any drop-ship wholesaler should require a tax ID number, business license or resale license before working with you.Where's the company info? Always research anyone you will be working with in your stay at home business. If the Web site is full of marketing promises, but you can't seem to find a phone number, address or solid information, it's probably a fake.Recurring fees. Most wholesalers will charge you on a per-order basis, and may charge a set-up fee. However, annual or monthly fees are not part of the legitimate drop-ship work from home business model. See Also Working From HomeSetting up a home business [Link]
Finding viable work from home optionsThere are lots of opportunities for a work from home business. However, sometimes it is hard to see them, or think of the possibilities. Here is a Web site that offers a variety of ideas for working from home. There's bound to be something here that you are qualified for and able to do. Click here for the work at home ideas.See Also Work at Home IdeasTools and tips for working from home [Link]
Not really. It's usually a work at home scam Stuffing envelopes. It sounds like the perfect work from home job. You sit in front of the TV after the kids are in bed and stuff envelopes. Or you do it in the car while on a family vacation. Unfortunately, the whole working at home stuffing envelopes thing is actually a scam. What you are stuffing into envolopes is information on how others can perpetuate the scam. After you send in a fee for "marketing materials" and "information training," you find that you are simply going to be making copies of the information and placing ads asking others to send you money for the information. You won't make too much money, and most honest people will feel bad about participating in such a rip-off.See Also Working From HomeLegitimate ideas for a home business [Link]
An important aspect of working from home is finding time for youMany people who work from home discover that all of their "me" time has disappeared, especially if there is a family involved. After all, if you aren't working, you are taking care of the family's needs: dinner, cleaning, kids, etc. But if you are to maintain sanity in a work at home environment, and if you want to be able to do quality work for your home business, it is important that you take a little time for you. By managing your time and setting aside a specific time frame that is just for you, and not for your home business, you can recharge yourself and feel ready for the day.See Also Work at Home HelpWays to boost your home business [Link]
Helping others publish electronic newslettersOne work from idea is to get into ezine or electronic newsletter publishing. If you have graphic design skills, and a knack for writing compelling content, you can sell your skills to companies that want to publish a professional looking electronic newsletter or ezine.
It can take a lot of work to get started, and you have to go out and find the companies, but once you create a template for each business' newsletter or ezine, it becomes much easier to produce the content and just paste it in there. See Also Work at Home IdeasIdeas and solutions for your home business [Link]
Use it to start a home business While any home business requires more than 10 minutes a day to maintain, you can get started by setting aside 10 minutes a day to get your work at home idea off the ground. One of the most daunting and overwhelming things about a home business is the setting up. There is so much to do. Chunking it down so that you just get moving can have a good effect. Set aside 10 minutes each day that you can devote to working from home. Set yourself a task, and then accomplish it, whether it is finding the paperwork you need to set up your business or arranging a work area, the key is to keep moving and keep working on your at home business. You will find that pretty soon you are spending more than 10 minutes a day, and that you do not feel overwhelmed at all.See Also Starting a Home BusinessWork at home and make money [Link]
Whats the most important thing that an Investor is looking for today?
The most popular words I'm hearing are: Capital Efficient.
We had our Perfect Venture Conference 2 weeks ago and hosted over 60 VCs and Angels. Almost all of them mentioned running a capital efficient business.
Investors are concerned about the economy just like everyone else. They want to know that their investment in your company will enable you to grow. That you can operate in a lean and efficient manor and stretch a buck. I got a call from an entrepreneur the other day. His idea wasn't bad, but at the end of his pitch to me he mentioned that he was raising $20M for his startup, and that was the only way he could execute on his idea. This is not the type of business that will get funded.
As a start-up, you need to show that you can run a tight ship, and that you can take the round of capital that you are asking for and grow a nice and money-making business…and hopefully you wont need to raise another round.
The big question I am hearing every day is How is this Wall Street Fiasco affecting Early-Stage VC and Angel Investing? Has the money dried up? Will Venture Funds and Angel Investors still consider my deal? How has this changed their strategy?
It was the big question at the FundingPost Venture Event last week in NYC where we asked this question of the 7 VCs and Angel Investors on the panel: Moderator: John Hempill, Partner, Morrison & Foerster Speakers: Sita Vasan, Senior Manager, Strategic Investments, Intel Capital Morgan Rodd, Jr., Co-Managing Partner, ArrowPath Venture Partners Ryan Ziegler, Investment Manager, Edison Venture Fund Habib Kairouz, Managing Partner, Rho Ventures Don Sussis, Angel Investor Robert A. Spira, Chariman, Chapman, Spira & Carson John Ason, Angel Investor
We recently interviewed 4 early-stage VCs and Angel Investors, who will be speaking at our November 3 and 4 conference in NYC.
It was a Live call with over 1000 people listening in. Investors on the call: Ron Thompson, Corporate Angels; Ross Goldstein, DFJ Gotham Ventures; John Filla, Houston Angel Network; Warren Haber, Jr., Crossbar Capital
More information on the Perfect Venture Conference in November with 50+ VCs and Angels: www.FundingPost.com/pvc
This may sound as absurd to you as it does to me. While searching for angel investors, a company contacted me (several in fact, but one was a real company with real people) and offered to fund my start up to full production due to the type of mfg as long as it's all USA made. (My plan anyhow). Funds are incredible and the employees and business check out with my lawyer. They want the min fee of 100K up front that is refundable in 6 months with funding draw #1. These people check out and as I have been raising the 100K plus attny fees and living expenses for 6 mos. a few people questioned this. They too are running due dilligence and I hate to even think this is a scam. It checks out and the state they are from says they are legit.. my lawyer says they are legit… Research shows connections of these people to all the right groups, but I know scams can run deep. Gut instict said to listen to them, second instinct is in awe.. and finally I am double checking myself. A wealthy potential provider of these initial funds is also doing due dillidence. This is a big deal and a life altering invention that will change the USA and mankind. How often does this kind of thing take place on the up and up?
I would NEVER pay out $100K as an up front fee for them to write you a check. PERIOD. It does sound absurd and you will most likely never see a dime of their financing nor your $100K ever again. Look for an investor who wants to write YOU a check, not the other way around.
Now, I know of financiers and lenders, especially in equipment or purchase order where they change an application fee, but $100K is ridiculous.
In response to the FundingPost email for the event on June 5, 2008: The event will focus on best practices in raising capital…. how they determine your valuation.
This one caught my attention… you never let a VC tell you how to determine your valuation. Lol. It's like letting you home buyer tell you how much you should sell the house for!!
I notice the tone of this e-mail focuses on Entrepreneur sucking up to VC. I am an entrepreneur and the way I see it is, it's a privilege for VCs to invest in my company that i bust my chops to make it happen (and not the other way around).
VC and company's are partners in a single mission. Funding post should position it such a way. It's very immature to have entrepreneur who are the having to suck up to VCs. It doesn't have to be that way. It should be a place of gathering for two people with common goal to meet.
I dont think its about sucking up, but you Do need to impress the VC with your company. Positioning your pitch to make it out to be a "privilege" for the VC to invest doesn't often work….Unless you are a serial entrepreneur with large exits under your belt. Yes, you are busting your chops and working hard to grow your business, but if you need capital to grow, you need to impress the guy with the check book.
As for Valuation, yes, its a negotiation. You think its higher, they think its lower. So, how do they determine your valuation? Do they just take your word for it? probably not. They look at several factors, including the team, the technology, the market, what you have put into it (cash and sweat), competitors, how far along the company is, etc…. That mixed with a bit of their gut feeling is the number they come up with that they would buy in at. This is what they determine your valuation should be. Now, You dont have to take their money if you think they are valuing it too low, just as they certainly dont have to write you a check if they think you are valuing it too high.
When you buy your next house, I strongly recommend that you dont write a check for the listing price. Look at the other houses in the area, look at the quality of the house, the market, the schools, etc. and then make an offer of what you think the value of the house should be if you were to write a check.
Valuation is often a deal-killer. If the entrepreneur and the VC spend so much time negotiating this, it can be seen as a reflection of things to come. I often hear that getting rid of a business partner is harder than getting a divorce. You guys are in this for the long haul with a common goal. Its always in your benefit to understand how the VCs think, and what their expectations are right up front. Thats the goal of our events.
I have a small pet shop that is presently a sole proprietorship. Would I have to incorporate to raise venture capital?
This is a great question - Company is a Sole Proprietorship, should you Incorporate to raise capital? Yes. Investors wont invest in a Sole Proprietorship for the simple reason that there is only one owner. The VC or Angel Investor cant buy any stock. However, you can still raise money by things like factoring, bank loans or venture leasing.
The main thing I wanted to explain is why would a small one store pet shop want to raise venture capital? You probably don't. First thing I want to explain - cause I hear this So often is: Venture Capital is not a synonym for Money. Most early stage entrepreneurs hear the words Venture Capital and are not sure what that really means, except that they can 'give' you money. Most of these people who say they need to raise Venture Capital don't need to, and wouldn't want to if they know what it actually means.
Now, this might not be the exact scenario of the question above, but Im going to generalize and say that people who own small pet stores, or other small businesses and want additional capital are looking for anywhere from $25,000 to $100,000 to buy more product, expand into the store next to them, or to pay off bank loans and other debt.
If you say I need to raise venture capital, it means a number from $1M up (typically) and the VC is buying stock (ownership) in your company. The VC is looking for a LARGE multiple on his investment - typically 10X +. That means if he invests $1M in your corporation, he will eventually want you to Sell the company (or go public) earning him $10 million + in a few years. This means you want your small pet store to go head to head with some of the larger chains and have them eventually buy your company for many millions of dollars.
Now, I don't want to dissuade people from raising money from VCs or Angel Investors. In fact, that's my business at FundingPost. FundingPost maks introductions from Investors to Entrepreneurs every single day raising $250,000 to $10,000,000+. Almost every large corporation out there has raised money from outside investors at one point.
You just have to consider what you are raising the money for.
I need about $1,000,000 to build a factory in Japan. Do I need to give away shares of my firm to get a business loan from angel investor? Can I just give away a percentage of the future profit?
If you can get someone to give you a million dollars for only a percentage in future profits, you are a better salesman than anyone I know!
That's sorta risky for an investor. He gives you $1 Million. Then he has to wait till you build a factory, then get your business going, then start selling your product, then get profitable before seeing a dime! This could take years and you may never get profitable.
What happens in 4 years when you are about to get profitable, then you go out of business? Or you Sell the business? What does the investor get? There is no way any investor would agree to that.
Even a bank loan holds something as collateral. Though to actually build a factory, they would hold a lot more than buying an existing factory.
Now if you gave the investor equity in the company (part ownership in stock) and secured his investment with the equipment you are buying with his money, and gave him a split of the profits you may have a better shot!
You might now be thinking: No Way! That's too much!
Well, I guess it goes back to the Golden rule: He who has the Gold, rules.
I hear all the time from investors speaking at my venture capital events that the money is out there, you just have to be reasonable in your negotiations in order to get it. Having a great product and an amazing management team helps too!
I would like to find a few investors for my Bar/restaurant, but I don't want to offer a percentage of interest in the business. How should I proceed and How do I pay off these investors?
What you want is a Loan. Investors typically take an equity stake, and/or a profit share in the business.
Banks will invest a sum of money, usually secured by something like your house, or the restaurant, and you pay it back, with interest, in monthly increments. They take no equity in your business and once its paid back you don't owe them anything.
What is Angel Capital? How can I get a list of Angel Capital groups?
Angel capital is money given to a company by Angel Investors (wealthy individuals). This is not institutional money, rather money earned (usually) by former executives of companies or by other means. It's cash from their own bank account. Its often known as risk capital because of the high risk in giving it to start-up companies. In fact, from what Angel Investors tell me and the audience at my Venture and Angel Events, they typically expect 60%+ of the companies that they invest in to go out of business!! They only expect to actually Make a nice return from 10% of the companies they invest in! Hopefully this will be a nice enough return to balance out and make a profit on all of the money they invested.
Often Angel Investors group together and form Angel Groups. There are hundreds of these throughout the country. Here is a directory of Angel Groups: Angel Group Directory
I have a friend who is writing an article and needs an Entrepreneur who is under 40 yrs old, and whose companies date back to 1999 or so, who now has $5M in revenue or more, who did some creative things to slog through the downturn until things improved. Any industry, don't care about where they're at with fundraising.
Also looking for anyone who is still in business, any age, who's got a '91 recession survival story and grew into a big success, and they're still with the business
This is a short term request - - Its now 4/22/08. Please contact me in the next 3 weeks.
I am beginning a software company in the San Francisco Bay area. Are there any special groups or investors that specialize in software industries?
Um, Yeah! You are right near Silicon Valley. This has the highest concentration of Software and Technology VCs on the planet. FundingPost does events there all the time. The last one we did had speakers from Venrock Associates, Rocket Ventures, Selby Venture Partners, Trinity Ventures, GKM Ventures, Pyramid Technology Ventures, Diamondhead Ventures, Altos Ventures, Horizon Ventures, CDIB Ventures, Red Rock Ventures, and Vision Capital. All of these firms look at software and technology.
What you should expect in a term sheet? What should be in your business plan & executive summary? What kinds of customer and revenue requirements investors require? What kinds of technology would work for me? Which kind of capital to raise, and, of course, should you be raising Venture or Angel Capital or using some other sort of financing options like factoring?
Wow. That's just about every questions concerning raising capital that you can ask. For most of these, there is no exact answer, but Ill give it a shot.
What you should expect in a term sheet? Basically, these are the terms the investor has come up with when he gives you a check. It's sorta like the contract. For this amount of money, you will give me x% of your company, a board seat, this many warrants, and first right of refusal on future rounds. The exact terms vary with each investment. Depending on how far along you are and how much money you are raising determines the x% and everything else. Its how much you are valued at (your valuation).
What should be in your business plan & executive summary? While people only write a biz plan when they are raising capital, the business plan is something that is really written for YOU. It's a plan on how to run your business. You need to include how the business operates and makes money, your financials (3 year is fine), some info on your market, and your management team. I usually hear investors say they read business plans from the back to the front, reading your management team first. Your exec summary is the same, only shorter. You need to explain your business in 1 page. This should be an easy to read document that entices an investor to want more. And if you can't explain your business in one page, don't bother talking to an investor until you can.
What kinds of customer and revenue requirements investors require? Varies with each investor and each deal. However, investors usually want to see that someone out there will buy your product. So having one customer and $50 in revenue is 1000% better than no customers.
What kinds of technology would work for me? Um, I have no idea what you do. But in most cases you need a website (97% of the time) You need to get the word out there and start getting customers, or people who will read your updates. You should collect email addresses and demographics and keep in touch with your customers. If you have a website and you are not doing this, Shame on you! Here is a great resource: www.GotForm.com. This site will let you put email and demographic collection on your existing website without knowing much about HTML programming… It also gives you tell-a-friend (for viral marketing) and a contact us form (to let your customers conveniently email you.) Its all easily customizable through the GotForm website. In fact, we use it on THIS website. See the "Join my mailing list" text on the left? That's gotform!
Which kind of capital to raise, and, of course, should you be raising Venture or Angel Capital or using some other sort of financing options like factoring? Well it depends on what you do, how much you need and what you need the money for. If you need $200,000 you don't need venture capital you need an Angel Investor or 2. If you need $6,000,000 you need VCs. If you are operating your business but you are finding that your customers are paying in 45-60 days and it's putting you in a cash crunch, you should consider factoring. You'll get paid immediately (minus a small %) There are also other options such as PO financing, Venture Equipment Leasing, and of course, grants and bank loans.
Good question - well, if you are on this site, you're on the right path. Many investors can be found on the internet. But if you type in the word INVESTOR you get 5 million sites….
There are other ways as well. Go to an investor related event. There are plenty of them around, and new investor event companies are popping up every day - It seems to be the new trend. Some events are better than others, some are a complete waste of money. You should search for an event thats right for you. Events are a great way to be in the same room as an investor and get a chance to give your elevator pitch. I know of several financings that have come as a result of venture events (including the ones hosted by FundingPost)
There are other ways as well - there are Online listing services. Some people say they dont work, some say they do. I know I see a lot of introductions made through mine. (an average of 1 every single day)
You can also go the Broker Route. But you gotta be careful. There are a lot of brokers who charge hefty retainers - upwards of 10k a month!) and do nothing. If a broker wants a large monthly, and a large success fee, I suggest getting another quote….
Heres something not to do. Dont blanket fedex your business plan to 300 VCs you found on google. It doesnt work. They will just go in the trash. Same goes for email.
VCs and Angel Groups get thousands of plans a year - Most of them are unsolicited. None of them get funded. You need to be introduced through a qualified source. Does your law firm know of any VCs? Your accounting firm? These people are usually good referral sources. Another great referral is one from another VC! Remember, investors are often friends with other investors.
Sometimes at our events an entrepreneur comes up to me and says that the investors in the room arent interested in his idea. I usually send that person back to ask each VC what other firm he should contact that may be interested. Usually that entrepreneur goes home with a few really good leads.
What risks do I run choosing venture capital to start up my business?
Now that's a great question! People say they need VC to start their business, but often the startups don't necessarily understand what that means! Most people think of Venture Capital as another word for Money. It's a lot more than that!
When you take in VC money you are taking in new co-owners of your business. Actually, the money you are taking in usually isn't even the VCs money - its their investors money! Yes, VCs raise money just like you. And since they are playing with someone else's money, they have to report on the activities to their LPs (limited partners). They want to report good news so they need good news to report, which is where that whole co-owner thing comes in. They need to make sure that you are doing the right thing, and are on the right track to make them a lot of money. You need to report good news to them!
So here's a risk - you now have someone to report to! Before, if you didn't meet your numbers, or if you didn't want to work for a few days, or if you use your corporate credit card to pay for your hotel for you and your wife, a nice dinner and show tickets in NYC and expense it, that was no big deal. It is now!
People don't like when you 'mess' with their money. The Investment you got wasn't a favor, it was an investment. The investors are going to do anything in their power to secure this investment. Even if that means…and here's another risk…replacing some of the management team.
Every entrepreneur loves their own business - whatever you are doing. But sometimes you are not the right CEO to take your business to the next level! Yup, take in enough Investment capital and one day you can wake up out of your CEO job. You won't be fired, you would probably remain on as president or COB or something… Of course, this wont make you poor, you'll still have your stock - and hopefully the new CEO will be able to take the company to an exit (IPO or acquisition) where you and the VCs make a lot of money.
Another thing I want to be clear on, is that when an investor gives you a check, he becomes a co-owner of your company. You used to own 100% of your company, now you own 68% (or something). If you raise another round, that number goes down even further. Usually by the time a company goes public, the original owners own just a small part of the company! That might scare you - but its not really a risk. One of my old investors once told me its better to own 10% of $10,000,000 than 100% of nothing.
I met an investor at one of your events 2 months ago - he seemed really interested in my company and told me he would follow up but I never heard from him. Any advice on what I did wrong?
Sure - I got advice, persistence. VCs and Angel Investors get so busy from the outside it seems like they don't care about you or have a serious case of A.D.D.
It's not true. Investors work long hours and usually on multiple projects at once. That's in addition to the multiple biz plans they are reading about potential new projects, and the dozens of spammed biz plans that clog up their spam filter on their way to the trash bin.
Oh yeah, don't do that. Don't buy a VC list and email out your biz plan to everyone. It's a waste of bandwidth and usually puts you on a blacklist so even if you want to communicate legitimately with an investor, you cant.
Anyway, back to the question. Investors get busy so the best way to get their attention is with a gentle reminder. Persistence - you are asking for a lot of money! Maybe touch base from time to time? Now remember, Persistence borders on annoyance, so don't go crazy. Check in, say hi, or better yet, send periodic updates.
That works well: Bill, I hope you are enjoying your summer. We've had a busy month here at my company. Those 2 potential contracts I mentioned last time were just signed! This is a huge step forward for our company, not to mention a big revenue boost.
Drop me a note when you get the chance, I look forward to catching up!
Thanks, Joe Rubin COMPANY NAME COMPANY URL EMAIL PHONE
Here is another tip - and something that truly drives me crazy. When you send the above email to the investor, check to see if he sent you an email before. If he did, reply to that email - and be sure that his Original email is on the bottom.
You would not believe how many emails I get every day. Its a ridiculous amount. So many of the emails are replies to something I sent - many of them have no email trail on the bottom and no contact info.
So i get an email that says "I just did that thing we discussed". Well what does that mean?!?! If my original reply was on the bottom I would know what you are talking about.
Well now I'm just ranting. But take my advice seriously - if it annoys me, it annoys the investors and its just easier for them to hit DELETE than deal with it.
What kind of returns are Venture Capitalists looking for?
Big returns. VCs are not banks - they do not charge an interest rate on an equity investment.
Note: There are such things as venture firms who also do convertible & bridge loans. This is explained in another question
VCs are looking for returns in excess of 10x. So if they give you a million dollars, in a few years, when you exit the company by either an acquisition or an IPO, they want at least $10M.
Now they don't expect every investment to be a home run like that. That's why they diversify and make multiple investments. They know that some of them will fail, some will do OK, fewer will do very well and 1 or 2 will be the home run.
But their investment process qualifies companies as if you are going to be the home run (not the strike out)
Another thing you have to remember is that eventually the investor wants to be paid back! This means that you need to 'exit' the company through an M&A (selling the company), or the less likely, IPO (going public). While they don't expect you to do this right away, once they write the check, they will be helping you grow your company specifically for this purpose.
What you should expect in a term sheet? What should you watch out for and be sure to include in a contract?
Terms sheets are pretty complex, but they all include the same basic stuff. They are always written by the VC giving you the money. They include everything from Pre-Money Valuation of the Company, Anti-Dilution Protection in later rounds through Liquidation Preference on exit.
FundingPost hosted an event with Nisha Atre of Mellon Ventures where she covered everything regarding term sheets. We keep this as a free resource at FundingPost - you can view it here: Term Sheets
OK - I've answered this one before, but I'll add to it.
Most entrepreneurs fail on the follow-up!
I see it all the time. Entrepreneurs send one email or leave one message and dont get a return call - and thats it. No more contact. write that investor off.
Thats the wrong way to do it folks - you need to be persistant, but not annoying! Send interested investors regular updates on your progress. You just hit a new milestone, or revenue goal, you just signed a contract or hit 1M page views to your site. Anything of substance will do. DO NOT send a pissed-off email that asks why they aren't returning your calls.
Also, keep a tab on the investors happenings as well! Subscribe to their blog, read their press releases, check up on who they are investing in. Then send them a 'congrats on your recent investment or exit', in addition to your update. One of the companies they just invested in MAY be a compliment to your company! Let them know how!
In short, do your homework, be persistant, and as Bob Gailus from NY Angels said at our Perfect Venture Conference the other day, "Talk to an investor with the same respect that you would talk to your mother".
Also, on a side note. If an investor asks for something specific, Please send them exactly that. If they say: Send a 1 page summary, do NOT send a 3 page executive summary!
Not Really a Question, just a note from me that we InvestorQuestions made the Alltop.com list of valuable resources of Venture Capital RSS Feeds and websites. Its big news making the news!! So this entry is my way of standing behind the reporter and yelling "him mom!"
I did that last week on ABC news when they were at my California Venture Event.
But seriously, if you have learned anything useful from my site, there are a bunch of other useful sites relating to raising venture capital listed at Alltop.com. It's kind of a magazine rack, or an expanded blog roll managed by real humans! and if you are raising capital, you should Definitely be subscribing to one or more of these feeds.
(Oh yeah - be sure to check out the FP feed on that same Alltop page!)
What are some good strategic ways i can come up with exit strategies for my angel investors. The industry is advertising and the business is car wraps. The future of advertising. (Mobile Billboards.)
There are only a few possible exit strategies.
One, you sell the company. This gives you cash (or stock) that you give to you investors based on what they invested in the company.
Two, you go public. This is a very unlikely scenario for you, especially if you are dealing with Angel Investors only, and being a small company. Of course, there are other ways like Pink sheets and public shells, but you still have to be a little further along in your companies life-cycle.
Three, you can buy back their shares. Though, you will have to make them a nice offer, especially if your company is doing well. They aren't going to want the exact amount they put in. They are going to want a lot more…..if they even go for it.
Four, you can NOT exit, but pay them a dividend or a percentage of the profits.
Will angel investors look into the personal credit history of the person trying to get the funding for their venture?
Most likely. If you filed for 3 bankruptcies and are having your house foreclosed on and owe $80,000 to the credit card companies, an investor would feel a more than little silly writing you a huge check without knowing this.
He will also probably sue you for not disclosing that information prior to doing the deal, as well.
I am interested in knowing how to place a value or dollar amount for shares as it relates to a startup? For instance if a company needs $500k how do they utilize their shares to raise it?
This is called the company's Valuation. Basically if you need $500K, you (and the investor with the check) need to determine what percent of the company that money buys. You would then sell that many shares in your company.
Valuation is determined by many things, though it usually comes down to a gut feeling.
What does it mean to finance different stages: Angel, Seed, 1st round, 2nd round, later stage?
This refers to the various stages of a company lifecycle.
The first would be founder, friends and family. This is you at the idea stage. You put in $10K, and you get some close family and friends to put in a few thousand dollars (or more, depending on how much money they have and how much they like you to get the business started.
Angel and Seed usually go together. They are the First outside investors that put money into your company - usually $50,000 to $1,000,000 (depending on the company) They are usually rich individuals who have some knowledge of the industry and like to take a gamble for the potential upside.
First Round is just after that. This is typically a company that has more structure, a product, a basic management team, you could have some revenue/sales, but you are not a $10M corporation. It's Early-Stage. Typical investments range from $1-$5M.
Second stage is after that. The company has a lot of traction, strong sales, a solid team, and they are looking to heavily expand nationwide or internationally, and are on track to pull in several million dollars in revenue. They an raise anywhere from $7-20M in VC capital.
Later Stage is after that (or at the same time) This is often grouped with the LBO (leveraged buy out) category. This would be for raising a large amount of money to Buy another corporation, position yourself to be purchased, or to go public.
I’m in California and I'm looking for Angel Investors for my business. I know that there are a lot of rich software execs out here, but I don't know much about angel investing, how it works, how to meet them and what to say. any advice?
The first thing you need to do is decide if your type of business needs Angel Investors. Lots of people think of the term Angel Investors, or Venture Capital, as just another term for 'money'. Many very small businesses out there, mom & pop type businesses should NOT go after Angel Investors as a first source of capital.
I met a girl who recently opened a dog grooming shop in my neighborhood. She was 26 and always wanted to be in that business. She found a location, went to the bank and took out a small business loan for $30,000 to get it started. Her first year in business should net her over $100k.
However, she has no plans on growing this to a $100M corporation, or going public. She pays back the loan over a few years at x% and thats it.
Most Angel Investors aren't giving out loans. They Invest and become part owners. ie: They take stock, which is a percentage of your company. They eventually want you to grown the business into something VERY big and eventually sell it, after 5-7 years, giving them 10 Times what they originally invested.
You need to come to terms with what percentage of the business you want to give this person for his/her money (valuation). How much involvement you want from this person, and their expectations.
Its a step by step on the capital raising process, with 10 Interviews with Angel Investor Groups, including California Angel Investors, and a directory of 50 Angel Investor groups in the US.
What are some good strategic ways i can come up with exit strategies for my angel investors. The industry is advertising and the business is car wraps. The future of advertising. (Mobile Billboards.)
There are only a few possible exit strategies.
One, you sell the company. This gives you cash (or stock) that you give to you investors based on what they invested in the company.
Two, you go public. This is a very unlikely scenario for you, especially if you are dealing with Angel Investors only, and being a small company. Of course, there are other ways like Pink sheets and public shells, but you still have to be a little further along in your companies life-cycle.
Three, you can buy back their shares. Though, you will have to make them a nice offer, especially if your company is doing well. They aren't going to want the exact amount they put in. They are going to want a lot more…..if they even go for it.
Four, you can NOT exit, but pay them a dividend or a percentage of the profits.
Will angel investors look into the personal credit history of the person trying to get the funding for their venture?
Most likely. If you filed for 3 bankruptcies and are having your house foreclosed on and owe $80,000 to the credit card companies, an investor would feel a more than little silly writing you a huge check without knowing this.
He will also probably sue you for not disclosing that information prior to doing the deal, as well.
I am interested in knowing how to place a value or dollar amount for shares as it relates to a startup? For instance if a company needs $500k how do they utilize their shares to raise it?
This is called the company's Valuation. Basically if you need $500K, you (and the investor with the check) need to determine what percent of the company that money buys. You would then sell that many shares in your company.
Valuation is determined by many things, though it usually comes down to a gut feeling.
OK - I've answered this one before, but I'll add to it.
Most entrepreneurs fail on the follow-up!
I see it all the time. Entrepreneurs send one email or leave one message and dont get a return call - and thats it. No more contact. write that investor off.
Thats the wrong way to do it folks - you need to be persistant, but not annoying! Send interested investors regular updates on your progress. You just hit a new milestone, or revenue goal, you just signed a contract or hit 1M page views to your site. Anything of substance will do. DO NOT send a pissed-off email that asks why they aren't returning your calls.
Also, keep a tab on the investors happenings as well! Subscribe to their blog, read their press releases, check up on who they are investing in. Then send them a 'congrats on your recent investment or exit', in addition to your update. One of the companies they just invested in MAY be a compliment to your company! Let them know how!
In short, do your homework, be persistant, and as Bob Gailus from NY Angels said at our Perfect Venture Conference the other day, "Talk to an investor with the same respect that you would talk to your mother".
Also, on a side note. If an investor asks for something specific, Please send them exactly that. If they say: Send a 1 page summary, do NOT send a 3 page executive summary!
I’m in California and I'm looking for Angel Investors for my business. I know that there are a lot of rich software execs out here, but I don't know much about angel investing, how it works, how to meet them and what to say. any advice?
The first thing you need to do is decide if your type of business needs Angel Investors. Lots of people think of the term Angel Investors, or Venture Capital, as just another term for 'money'. Many very small businesses out there, mom & pop type businesses should NOT go after Angel Investors as a first source of capital.
I met a girl who recently opened a dog grooming shop in my neighborhood. She was 26 and always wanted to be in that business. She found a location, went to the bank and took out a small business loan for $30,000 to get it started. Her first year in business should net her over $100k.
However, she has no plans on growing this to a $100M corporation, or going public. She pays back the loan over a few years at x% and thats it.
Most Angel Investors aren't giving out loans. They Invest and become part owners. ie: They take stock, which is a percentage of your company. They eventually want you to grown the business into something VERY big and eventually sell it, after 5-7 years, giving them 10 Times what they originally invested.
You need to come to terms with what percentage of the business you want to give this person for his/her money (valuation). How much involvement you want from this person, and their expectations.
Its a step by step on the capital raising process, with 10 Interviews with Angel Investor Groups, including California Angel Investors, and a directory of 50 Angel Investor groups in the US.
I have a california based software company and Im looking to raise my first round of Venture Capital - It seems like I am going to get a low valuation. How can I get investors to give me a better valuation so I give away less of the company?
Good question! There is no exact answer for this. Valuation is determined on several factors including how far along the product is, are there sales, the management team, etc….
We just did a VC Event in California. On this panel we had 4 venture capital firms speaking about raising capital in California. One point was made by John Hall of Horizon Ventures on how to get a better valuation based on timing and milestones. Watch this short video:
regular business, and get paid for it. But it is important that you are not just getting paid to shop. When you choose mystery shopping as your work from home job, you need to take it seriously. While you can take your kids with you on some trips, others may not be appropriate for children. Companies often have specific guidelines for things they want to know about your shopping experience. Additionally, you often have a specific time frame that you will have to shop in (usually within two or three days at a specific time of day, like morning or evening). You may be directed to do certain things. And you will have to fill out a report. In order to get more gigs, you will need to have thorough reports that cover all of the requested bases. And you need to be efficient to make it worth your while. Make sure that you do other errands while on your way to your mystery shopping gig.See Also Mystery ShoppingMore work from home ideas [Link]
way to meet valuable contacts and find new opportunities. The same is true for people who work from home. In fact, it may even be more true for a person who has a work at home business. It is important to reach out and get to know people. You can your business networking both online and offline. It is best to do a little of both. That way you find more opportunities. There are plenty of online networking Web sites, and there are also plenty of offline opportunities — from the local small business association to the Chamber of Commerce — for you to take advantage of.See Also Work at Home BusinessIdeas for the person who works from home [Link]
A good way to make a little money from home, and have a good time, can be through affiliate programs. I have a friend, D.J., who has been doing an affiliate program for Close to My Heart, a scrapbooking company. She offers workshops on making scrapbooking pages and homemade cards. This not only helps her cover the costs of some of her supplies, but it also builds a loyal group of ladies who, when they want additional ideas and supplies, will visit her Web site and get ideas. And, of course, she gets a cut of whatever is ordered through her Web site. An excellent way to do something you love, and get a little money for it! There are several other types of affiliate programs, from selling educational books to Mary Kay products.See Also Make Money From HomeHome business ideas [Link]
Stuffing envelopes. It sounds like the perfect work from home job. You sit in front of the TV after the kids are in bed and stuff envelopes. Or you do it in the car while on a family vacation. Unfortunately, the whole working at home stuffing envelopes thing is actually a scam. What you are stuffing into envolopes is information on how others can perpetuate the scam. After you send in a fee for "marketing materials" and "information training," you find that you are simply going to be making copies of the information and placing ads asking others to send you money for the information. You won't make too much money, and most honest people will feel bad about participating in such a rip-off.See Also Working From HomeLegitimate ideas for a home business [Link]
While any home business requires more than 10 minutes a day to maintain, you can get started by setting aside 10 minutes a day to get your work at home idea off the ground. One of the most daunting and overwhelming things about a home business is the setting up. There is so much to do. Chunking it down so that you just get moving can have a good effect. Set aside 10 minutes each day that you can devote to working from home. Set yourself a task, and then accomplish it, whether it is finding the paperwork you need to set up your business or arranging a work area, the key is to keep moving and keep working on your at home business. You will find that pretty soon you are spending more than 10 minutes a day, and that you do not feel overwhelmed at all.See Also Starting a Home BusinessWork at home and make money [Link]
to get the business started.