ManojRanaweera
28th October 2008 at KPMG Manchester
January 2009
Monthly Archive
Northern StartUp 2.0 – Demystifying Venture Capital Funding
Posted by admin on 18 Jan 2009 10:39 am. Filed under Tech.
How do I establish a mineral water plant and do a business plan and access venture capital?
Posted by admin on 16 Jan 2009 10:00 pm. Filed under Small Business.
riverwater
There is good quality water I shall have to sell one of these days and improve my income and standard of living and create jobs!
There is good quality water I shall have to sell one of these days and improve my income and standard of living and create jobs!
Posted by admin on 15 Jan 2009 6:04 am. Filed under Finance.
Marco Terry
Many business owners try to finance their growing businesses by going to venture capital or angel funding groups. Although both financing options provide a great way to finance a business, they are usually hard to qualify for. And furthermore, they all require that you give up some business equity in exchange for funds. That, needless to say, can be a very steep price to pay.
There are some business financing alternatives that can allow you to finance your business, almost as effectively, without having to give up any equity. As opposed to venture funding or angel funding, these options are easy to qualify for and do not require the endless documentation and due diligence that venture money requires..
However, these can only help you if you meet the following criteria:
1. Your business is established and has commercial (not consumer) clients
2. Your business invoices between $40K and $900K per month
These alternatives will help you if:
1. You need money to meet payroll, pay rent or pay supplier
2. Your customers pay you in 15 to 60 days
3. You need (or wish) your customers to pay you sooner
Your first option is called factoring (also known as invoice factoring). Factoring is ideal for businesses that cannot afford to wait 15 to 60 days to get paid by their clients. Factoring provides you with financing that is tied to your invoicing. Basically, the more your company invoices, the more financing you qualify for. This enables you to grow your company – many times exponentially – without having to give up equity.
Your second option is called purchase order financing. It works well for re-sellers, distributors, traders and wholesalers. Purchase order financing is ideal for business owners that have a large purchase order in hand, and who cannot afford to pay their suppliers to deliver the product. PO financing enables you to get a letter of credit, backed by the financing company, to pay your suppliers. This allows you to deliver on the purchase order and effectively make the sale. Usually, very little – if any – of your money is required for the transaction.
Both alternatives are easy to qualify for, take days (or a couple of weeks at most) to set up, and when used correctly allow you to grow your company exponentially.
Many business owners try to finance their growing businesses by going to venture capital or angel funding groups. Although both financing options provide a great way to finance a business, they are usually hard to qualify for. And furthermore, they all require that you give up some business equity in exchange for funds. That, needless to say, can be a very steep price to pay.
There are some business financing alternatives that can allow you to finance your business, almost as effectively, without having to give up any equity. As opposed to venture funding or angel funding, these options are easy to qualify for and do not require the endless documentation and due diligence that venture money requires..
However, these can only help you if you meet the following criteria:
1. Your business is established and has commercial (not consumer) clients
2. Your business invoices between $40K and $900K per month
These alternatives will help you if:
1. You need money to meet payroll, pay rent or pay supplier
2. Your customers pay you in 15 to 60 days
3. You need (or wish) your customers to pay you sooner
Your first option is called factoring (also known as invoice factoring). Factoring is ideal for businesses that cannot afford to wait 15 to 60 days to get paid by their clients. Factoring provides you with financing that is tied to your invoicing. Basically, the more your company invoices, the more financing you qualify for. This enables you to grow your company – many times exponentially – without having to give up equity.
Your second option is called purchase order financing. It works well for re-sellers, distributors, traders and wholesalers. Purchase order financing is ideal for business owners that have a large purchase order in hand, and who cannot afford to pay their suppliers to deliver the product. PO financing enables you to get a letter of credit, backed by the financing company, to pay your suppliers. This allows you to deliver on the purchase order and effectively make the sale. Usually, very little – if any – of your money is required for the transaction.
Both alternatives are easy to qualify for, take days (or a couple of weeks at most) to set up, and when used correctly allow you to grow your company exponentially.
Posted by admin on 14 Jan 2009 9:26 am. Filed under Business.
Akhil Shahani
The way technology companies in Silicon Valley and venture capital firms go with each other, you’d think they were like cake and cream. Indeed, the two are inextricably linked, and have fed off each other to (often) create large amounts of wealth for both groups. If you want to jump on that bandwagon and are wondering about how to raise venture capital, we’ve got some words of advice for you.
Before you knock on any doors on Sand Hill Road, you must know a little bit about the elite breed of venture capitalists. These are the eagle-eyed guys looking out for that extra special business idea which can make them bucket-loads of money in quick time. While there are thousands of firms, your search for one can be simplified by using a directory.
Venture capital firms invest in (usually) technology intensive firms with a breakthrough idea that has the potential to return three to five times their investment in about five years. Venture capitalists will invest relatively large sums of money, in the region of a few million dollars, for a stake and a very definite say in the running of the target company. They will bring along their money as well as their expertise, and in return will expect the business to spurt, after which they’ll go out as quickly as they came! Since their expectations are so high, venture capitalists will only back a team that displays strong capabilities and vision. That’s the first lesson on how to raise venture capital – you have to knock their socks off before you can get them to part with their money.
Our next tip on how to raise venture capital is basically horse sense and that is, to be absolutely prepared. We’re sure that you’ve figured out by now that a venture capitalist is not your friendly neighborhood banker-type of person. He will ask you all kinds of uncomfortable and incisive questions, for which you’d better have a good answer. Keep your business plan ready, and know it better than the back of your hand. It’s worthwhile consulting an expert advisor such as Venture Planning Associates who specialize in assisting entrepreneurs in need of funding.
One thing to bear in mind is that the investors’ interest lies in the growth potential of your business, and the returns it can hope to generate. Remember, they don’t care about earning an interest on their investment; they’re after much bigger stuff, which is the valuation of your business a few years down the line. In other words, they will look for opportunities to sell their stake or the business altogether, at an enormous premium. So, be prepared to tell them how they can get out as well!
But passing that test is not enough! You will have to convince the investors of your unshakeable commitment to the project. Ironically, if you ask fellow entrepreneurs how to raise venture capital successfully, they’ll probably advise you to invest some of your own money first. This is because venture capitalists will measure your commitment not only by the hours of work you’re eager to put in, but also by the dollars that you’re willing to invest, or the (voluntary!) pay cut you suggest. So, be prepared to put your money where your mouth is.
And finally, here’s our most important advice on how to raise venture capital, and that is to be persevering. Be prepared to fight it out, to wait and also have doors slammed in your face. If your idea is sound and the proposition irresistible, you can be sure that you’ll land the funding. Just don’t expect it to be a piece of cake!
The way technology companies in Silicon Valley and venture capital firms go with each other, you’d think they were like cake and cream. Indeed, the two are inextricably linked, and have fed off each other to (often) create large amounts of wealth for both groups. If you want to jump on that bandwagon and are wondering about how to raise venture capital, we’ve got some words of advice for you.
Before you knock on any doors on Sand Hill Road, you must know a little bit about the elite breed of venture capitalists. These are the eagle-eyed guys looking out for that extra special business idea which can make them bucket-loads of money in quick time. While there are thousands of firms, your search for one can be simplified by using a directory.
Venture capital firms invest in (usually) technology intensive firms with a breakthrough idea that has the potential to return three to five times their investment in about five years. Venture capitalists will invest relatively large sums of money, in the region of a few million dollars, for a stake and a very definite say in the running of the target company. They will bring along their money as well as their expertise, and in return will expect the business to spurt, after which they’ll go out as quickly as they came! Since their expectations are so high, venture capitalists will only back a team that displays strong capabilities and vision. That’s the first lesson on how to raise venture capital – you have to knock their socks off before you can get them to part with their money.
Our next tip on how to raise venture capital is basically horse sense and that is, to be absolutely prepared. We’re sure that you’ve figured out by now that a venture capitalist is not your friendly neighborhood banker-type of person. He will ask you all kinds of uncomfortable and incisive questions, for which you’d better have a good answer. Keep your business plan ready, and know it better than the back of your hand. It’s worthwhile consulting an expert advisor such as Venture Planning Associates who specialize in assisting entrepreneurs in need of funding.
One thing to bear in mind is that the investors’ interest lies in the growth potential of your business, and the returns it can hope to generate. Remember, they don’t care about earning an interest on their investment; they’re after much bigger stuff, which is the valuation of your business a few years down the line. In other words, they will look for opportunities to sell their stake or the business altogether, at an enormous premium. So, be prepared to tell them how they can get out as well!
But passing that test is not enough! You will have to convince the investors of your unshakeable commitment to the project. Ironically, if you ask fellow entrepreneurs how to raise venture capital successfully, they’ll probably advise you to invest some of your own money first. This is because venture capitalists will measure your commitment not only by the hours of work you’re eager to put in, but also by the dollars that you’re willing to invest, or the (voluntary!) pay cut you suggest. So, be prepared to put your money where your mouth is.
And finally, here’s our most important advice on how to raise venture capital, and that is to be persevering. Be prepared to fight it out, to wait and also have doors slammed in your face. If your idea is sound and the proposition irresistible, you can be sure that you’ll land the funding. Just don’t expect it to be a piece of cake!
Posted by admin on 8 Jan 2009 11:22 am. Filed under Management.
Ramandeep singh ghumaan
When companies enter into negotiations with venture capital firms, there are several issues which need to be defined and agreed upon. This article describes the key issues.
Valuation. Valuation is the most prominent negotiating issues. Valuation is the price of the company in which the venture capitalist invests. Valuation determines what percent of the company the investor is buying for their capital.
Timing of the Investment. Many investors will commit a large amount of capital, but will contribute that capital to the companies in installments. Often, these installments are only made when pre-designated milestones are met.
Vesting of Founders’ Stock. Like capital, investors often prefer that stock is given to company founders and key employees in installments. This is known as vesting.
Modifying the Management Team. Some investors insist that additional or substitute management employees be hired subsequent to their investment. This gives investors additional security that the company will execute on its business model. An important issue to negotiate with regards to modifying the management team is the amount of stock or options that will be issued to new management team members, as this will dilute the holdings of the founders.
Employment Agreements with Key Founders. Venture capitalists typically do not want companies to have employment agreements that limit the circumstances under which employees can be fired and/or set compensation and benefits levels that are too high. Other key employment agreement issues to be negotiated with venture capitalists include restrictions on post-employment activities and employee severance payments on termination.
Company Proprietary Rights. If the company has an important product with intellectual property (IP), investors will want to ensure that the company, and not a company employee, owns the IP. In addition, investors will want to ensure that new inventions be assigned to the company. To this end, investors may negotiate that all employees must sign Confidentiality and Inventions Assignment Agreements.
Exit Strategy. Investors are very focused on how they will “cash out” of their investment. In this regard, they will negotiate regarding registration rights (both demand and piggyback); rights to participate in any sale of stock by the founders (co-sale rights); and possibly a right to force the company to redeem their stock under certain conditions.
Lock-Up Rights. Venture capitalists may require a lock-up period at the term sheet stage. The “lock-up period” is typically a 30-60 day period where the investors have the exclusive right, but not the obligation, to make the investment. Investors typically conduct due diligence during this time without fear that other investors will pre-empt their opportunity to invest in the company.
Each of these issues are critical when raising venture capital, since the outcome can significantly impact the success of the venture and the wealth potential of the company founders and management team. Because venture capitalists are very knowledgeable regarding these issues, and have great skill in negotiating on them, companies who are raising venture capital should seek advisors who also have this experience and expertise.
When companies enter into negotiations with venture capital firms, there are several issues which need to be defined and agreed upon. This article describes the key issues.
Valuation. Valuation is the most prominent negotiating issues. Valuation is the price of the company in which the venture capitalist invests. Valuation determines what percent of the company the investor is buying for their capital.
Timing of the Investment. Many investors will commit a large amount of capital, but will contribute that capital to the companies in installments. Often, these installments are only made when pre-designated milestones are met.
Vesting of Founders’ Stock. Like capital, investors often prefer that stock is given to company founders and key employees in installments. This is known as vesting.
Modifying the Management Team. Some investors insist that additional or substitute management employees be hired subsequent to their investment. This gives investors additional security that the company will execute on its business model. An important issue to negotiate with regards to modifying the management team is the amount of stock or options that will be issued to new management team members, as this will dilute the holdings of the founders.
Employment Agreements with Key Founders. Venture capitalists typically do not want companies to have employment agreements that limit the circumstances under which employees can be fired and/or set compensation and benefits levels that are too high. Other key employment agreement issues to be negotiated with venture capitalists include restrictions on post-employment activities and employee severance payments on termination.
Company Proprietary Rights. If the company has an important product with intellectual property (IP), investors will want to ensure that the company, and not a company employee, owns the IP. In addition, investors will want to ensure that new inventions be assigned to the company. To this end, investors may negotiate that all employees must sign Confidentiality and Inventions Assignment Agreements.
Exit Strategy. Investors are very focused on how they will “cash out” of their investment. In this regard, they will negotiate regarding registration rights (both demand and piggyback); rights to participate in any sale of stock by the founders (co-sale rights); and possibly a right to force the company to redeem their stock under certain conditions.
Lock-Up Rights. Venture capitalists may require a lock-up period at the term sheet stage. The “lock-up period” is typically a 30-60 day period where the investors have the exclusive right, but not the obligation, to make the investment. Investors typically conduct due diligence during this time without fear that other investors will pre-empt their opportunity to invest in the company.
Each of these issues are critical when raising venture capital, since the outcome can significantly impact the success of the venture and the wealth potential of the company founders and management team. Because venture capitalists are very knowledgeable regarding these issues, and have great skill in negotiating on them, companies who are raising venture capital should seek advisors who also have this experience and expertise.
what is the difference between a venture capital and private equity?
Posted by admin on 7 Jan 2009 5:00 pm. Filed under Investing.
shappy
pls help because i am confused. and also is there a link with sovereign wealth funds and Derivatives ?
pls help because i am confused. and also is there a link with sovereign wealth funds and Derivatives ?
Posted by admin on 7 Jan 2009 12:54 pm. Filed under Web Hosting.
Bill Pratt
Venture capital funding or financing is a good option for those corporations that have a unique corporate proposition, which could earn high ROIs or returns on investments that would be at least 30 percent annually. These corporations generally need huge outlays of capital.
The venture capitalists typically get an ownership stake, so that they would be able to share with the business risks and profits of the corporation. Hence, it could ultimately become one of the corporation’s institutional shareholders. In exchange, the corporation would be able to benefit from the operational and financial support, which would be provided by the management team of the venture capitalist.
One crucial consideration for the corporation would be to get sufficient capital to be able to quickly achieve market share. The additional funding that has been raised through venture capitalists could provide the company with a sufficient working capital to have the capacity to market, brand then sell the products of the company.
By having a venture capitalist or an institutional shareholder in your corporation, you would be able to give your customer confidence.
Also, by getting a venture capitalist on board would mean that corporate governance is a part of the policy of the company from its start. However, a negative aspect of venture capital funding would be that a company might feel that they lack control panel as venture capitalists could have stringent covenants such as not allowing the company to be able to change the direction of the business without asking for approval.
A company or corporation must view venture capitalists as individuals who are committed to invest on the growth of the company, thus creating a value for themselves as they provide strategic guidance, sales referrals and business network contacts.
Venture capital funding or financing is a good option for those corporations that have a unique corporate proposition, which could earn high ROIs or returns on investments that would be at least 30 percent annually. These corporations generally need huge outlays of capital.
The venture capitalists typically get an ownership stake, so that they would be able to share with the business risks and profits of the corporation. Hence, it could ultimately become one of the corporation’s institutional shareholders. In exchange, the corporation would be able to benefit from the operational and financial support, which would be provided by the management team of the venture capitalist.
One crucial consideration for the corporation would be to get sufficient capital to be able to quickly achieve market share. The additional funding that has been raised through venture capitalists could provide the company with a sufficient working capital to have the capacity to market, brand then sell the products of the company.
By having a venture capitalist or an institutional shareholder in your corporation, you would be able to give your customer confidence.
Also, by getting a venture capitalist on board would mean that corporate governance is a part of the policy of the company from its start. However, a negative aspect of venture capital funding would be that a company might feel that they lack control panel as venture capitalists could have stringent covenants such as not allowing the company to be able to change the direction of the business without asking for approval.
A company or corporation must view venture capitalists as individuals who are committed to invest on the growth of the company, thus creating a value for themselves as they provide strategic guidance, sales referrals and business network contacts.
Venture Capital Firms for Technology Company?
Posted by admin on 6 Jan 2009 8:08 pm. Filed under Small Business.
andrecan2002
My company is developing it’s own line of home automation hardware and software and we are looking to raise 1.5 to 2 millions in order to lanch the products. I was looking for some recommendations of good venture capital firms in Florida or even outside of Florida. I am currently working on the business plan and we will be ready to start looking for capital in about a month. Thanks for all help you may be able to supply.
My company is developing it’s own line of home automation hardware and software and we are looking to raise 1.5 to 2 millions in order to lanch the products. I was looking for some recommendations of good venture capital firms in Florida or even outside of Florida. I am currently working on the business plan and we will be ready to start looking for capital in about a month. Thanks for all help you may be able to supply.
Organization type for venture capital?
Posted by admin on 3 Jan 2009 3:40 pm. Filed under Corporations.
Albert S
Me and my partners have started a business which is incorporated as an S-Corp. We are interested in obtaining some venture capital. Do we need to switch our company to a standard C-Corp? If we aren’t required to do so, is it advantageous to?
Well, I’m not looking for any advice that would be a subsitute for getting a lawyer. I am just trying to get some basic information.
Me and my partners have started a business which is incorporated as an S-Corp. We are interested in obtaining some venture capital. Do we need to switch our company to a standard C-Corp? If we aren’t required to do so, is it advantageous to?
Well, I’m not looking for any advice that would be a subsitute for getting a lawyer. I am just trying to get some basic information.