Redrawing the Public-Private Boundaries in Entrepreneurial Capital-Raising — The Harvard Law School Forum on Corporate Governance

Small business of-interest and need-to-know.

Excerpt:  In our article, Redrawing the Public-Private Boundaries in Entrepreneurial Capital Raising, we examine what the JOBS Act (enacted earlier this year) tells us about the division between the public and private spheres in securities regulation. On its face the JOBS Act broadly expands the private realm as defined by our national securities laws. It provides two new exemptions from registration (crowdfunding and Regulation A+) and will broadly expand the reach of the most-used existing exemption from registration by removing the ban on general solicitation from exempt offerings made pursuant to Rule 506, provided they are made only to accredited investor. Yet legislative reform has done little to shore up the shaky foundation of existing theory that guides how we have thought about dividing public from private obligations in this area of the law.

Read full article via Redrawing the Public-Private Boundaries in Entrepreneurial Capital-Raising — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

The VC Term Sheet Decoded : Managing :: AMEX

Are you about to launch into the search for funding?  Link to the  infographic from AMEX that gives you the basic VC term sheet information and what it means.

Excerpt:  Ready to raise capital? For many new businesses, this can mean approaching venture capitalists for startup funding. And if you’re lucky enough to get them interested, you will be introduced to a term sheet. The term sheet is, in the simplest terms, the contract between investors and companies raising capital. It includes stipulations on who owns how much of the company, the terms under which the investors will supply the capital you need, and who gets what when the company is either sold or taken public. Here we decode the most important parts of the VC term sheet with the help of Jason Mendelson, co-author of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. This is the first step to building a knowledge base to have your funding conversations end on a note where everyone feels they are a part of a fair business deal.

Read full infographic here via The VC Term Sheet Decoded : Managing :: American Express OPEN Forum.

Analyzing a Startup, and Pivoting

Recommended for all entrepreneurs and startups.  The article addresses the basic thought process and includes some how-to —  important launch direction in your role as entrepreneur

Excerpt:  I’m involved in two startups. In both cases, we are going through the process of developing a model that evaluates all aspects of the business — our target customers, products and services, organization, infrastructure, channels, financial projections, and funding needs.

In particular, the process of building a solid financial model forces you to think through things like payroll costs, equipment purchases, research and development, sales channels, and even office space. I found myself adding new elements to every part of our business model as I focused on the financial aspects.

I was reminded this week of how important it is to view them all as a whole instead of as the individual parts. I will share the details on one of those startups in this article.

Read full article via Analyzing a Startup, and Pivoting | Practical eCommerce.

A Faster Horse: It’s Time for Enterprise Personal Computing 2.0

Good read.  Article gives you insight into trends and the takeaways are in developing how-to to take advantage of the trends and needs today.

Excerpt:  Technology Vendors for IT Focus on IT Spend

Forrester’s technology vendor clients prefer data over analysis, whereas our IT clients prefer analysis. The vendors are gracious and will sit through a few slides of customer problem examples and politely let me wax on about where their real opportunities are, but most only really perk up when I get to the data slides. Having been responsible for product strategy for software product lines myself, I understand precisely why this is the case: When you’re in middle management, your ability to get oxygen (read: funding) to sustain your team depends on your ability to make a case, and the case is usually predicated on IT spend.

Read full article via A Faster Horse: It’s Time for Enterprise Personal Computing 2.0 | Forrester Blogs.

Guarding Against the Angels | Wharton Magazine

This is a founder or CEO question that is foremost when seeking venture capital funding  ….  or if it is not, it should be.    Read advice and reality.   Entrepreneurs

 Excerpt:  There is a question that most founders ask when organizing their startup companies in preparation for fundraising with the angel and venture capital community:

“Should I protect myself against getting fired from my position with the company?  Maybe a severance payment clause or a clause accelerating the vesting of my stock if the VCs fire me without cause?”

Read full article via Guarding Against the Angels | Wharton Magazine.

Practical Advice for Raising Early Stage Venture Capital – HBR

Good read on startup’s funding and venture capital — practical tips and advice.  All entrepreneur’s read recommendation.

Excerpt:  Most great businesspeople I’ve met would correctly advise an entrepreneur to avoid raising money if possible. Easy for them to say, right? But there are good reasons to bootstrap. First, you maintain control of the company. Second, maintaining control allows you to experiment and learn where the business is “naturally” going. Third, if you own the company, you can have a great exit at a low price. Fourth, if you’re able to build the company without significant outside capital that may mean your business has even more “real” legs.

But raising venture capital is sometimes a great idea. If your business has high velocity, high margins, and a huge market, venture may be a good road for you. There are some helpful resources out there on venture terms, good venture funds vs. bad ones, and questions you may want to ask a venture capitalist if you meet one.

The notes below are practical working tips on how to go about navigating venture capitalist conversations. Some of these might be surprising or seem hard to follow. But, in my experience, they’re good medicine.

Read full article via Practical Advice for Raising Early Stage Venture Capital – Michael Fertik – Harvard Business Review.

Dot-Com Bubble’s Equity Swaps Are Back

Need cash or funding to cover the needs of startup — here is an alternative that is back for another go around.  Explore well before jumping in — but it could be for you.

Excerpt:  Raaj Nemani and a pal were making plans to start their own business, an online retailer of limited-edition sneakers. But they couldn’t afford the $100,000 for high-end website design.

Then, they learned of an alternative.

Raaj Nemani and Aaron Firestein of Chicago paid for website development primarily using equity in their firm, BucketFeet Inc.

By joining forces with a Chicago website-design and professional-services firm, the pair of first-time entrepreneurs were able to get the work they needed by paying primarily with equity, instead of cash.

The swapping of equity for services is exploding, as a range of professional services providers—including website designers, attorneys, ad agencies and business consultants—seek to profit directly from the growing demand for their services on the part of U.S. start-ups.

Read full article via Dot-Com Bubble’s Equity Swaps Are Back – WSJ.com.

A Novel Idea for Putting Sidelined Cash to Work – HBR

Good idea — big company cash hoard to aid the startups cash need with a win – win  —  both sides receive good value.    Cash management and funding.

Excerpt:  Even as the large companies are hoarding cash, many small and mid-sized enterprises are still facing significant challenges and hurdles gaining access to the credit markets. Loans to these companies would help chip away at our alarming unemployment rates—and even more troubling underemployment rates—as well as knock down some of the hurdles that these firms face in executing on their business and growth plans.

The challenge for these emerging growth companies is twofold. First, credit standards and lending rates make it generally difficult to access otherwise very attractive capital available at low interest rates. Second, for small and rapid-growth technology companies, the problem is compounded by the fact that, while rich in intangible assets, they typically lack the kind of collateral (equipment, inventory, real estate, etc.) banks require to secure commercial loans.

What if the idle cash sitting in the treasury accounts of our largest companies could be used as collateral to secure these loans?

Read full article via A Novel Idea for Putting Sidelined Cash to Work – Andrew J. Sherman – Harvard Business Review.

Convertible Equity, A Better Alternative To Convertible Debt?

A new funding vehicle for startups is launching, read the details and why it is different than the not-so-friendly convertible debt in current use.  Cash management

Excerpt:  There has been no shortage of controversy and criticism around the convertible note, a popular investing vehicle that’s used by seed stage and angel investors. As a refresher, a convertible note is a loan that automatically converts into equity upon the closing of a Series A round of financing. Sometimes these loans have a valuation cap and/or a discount. Although these types of notes are relatively easy and cheap to form, many have argued that these types of vehicles are not startup-friendly for a variety of reasons, which we’ll explain below. Today, TheFunded.com and the Founder Institute is announcing in conjunction with law firm Wilson Sonsini, Convertible Equity, a startup-friendly seed-financing vehicle intended to replace Convertible Debt notes.

Read full article via Convertible Equity, A Better Alternative To Convertible Debt? | TechCrunch.

Start-up Seed Funding Cash Management

Within the article story of one startup are great takeaways for entrepreneurs and all startups.  

Excerpt:  The key to handling the seed money, Palmer says, is not a secret: you try to keep expenses down. For instance, Pingup is located in the Innovation District — a heretofore largely undeveloped and unprepossessing slice of South Boston’s waterfront — because rent is cheap. “We try to be as efficient as we can with every single dollar,” says Palmer, who includes herself in that efficiency. She works at Pingup part-time.

Read full article start-up seed funding cash management.  From CFO.com

VCs’ Strange, Instinctual Need to Replace Founders – HBR

A must read for all entrepreneurs and startups — need-to-know.    Due diligence of VC before seeking funding is important but not fail safe in this instance of CEO replacement.

Excerpt:  The weirder, more important instances come when a company is doing well. Frequently, VCs disagree with a key element of strategy, often how aggressively monetize the company at the expense of other growth. The downsides to doing so are several-fold. ….

Read full article via VCs’ Strange, Instinctual Need to Replace Founders – Bruce Gibney and Ken Howery – Harvard Business Review.

Should You Fund Your Startup With Convertible Debt? : AMEX

Advice and definition  — in case you do not already know how this works.  Cash management and funding

Read full article Should You Fund Your Startup With Convertible Debt? : Money :: American Express OPEN Forum.

Ten Nonprofit Funding Models | Stanford Social Innovation Review

This is a reprint but well worth bringing it to your attention now  —  great information and takeaways for nonprofit ideas and business models.  Recommended

Excerpt:  For-profit executives use business models—such as “low-cost provider” or “the razor and the razor blade”—as a shorthand way to describe and understand the way companies are built and sustained. Nonprofit executives, to their detriment, are not as explicit about their funding models and have not had an equivalent lexicon—until now.

Read full article via Ten Nonprofit Funding Models | Stanford Social Innovation Review.

Is Venture Capital Broken? – HBR

This is an interesting article…….  since the outcome of such thoughts can make a major difference in startup and small business funding…. what are your thoughts?

Excerpt……..It’s not hard to see the venture capital industry trifurcating. There will always be top-tier firms who give their seal of approval to a select group of startups. Expect to see continued growth among incubators that support fast-cycle iteration. And in between, look for a rise of companies that take the Google Ventures approach even further to approach the funding of startup companies scientifically. The rest? Well, Darwin has a way of working out such problems.

Read full article…….via Is Venture Capital Broken? – Scott Anthony – Harvard Business Review.

10 VCs And Founders Share Their Tips On How Startups Should Be Fundraising

Ten in-the-know give entrepreneurs tips and advice on the all important funding your small business.

Excerpt……..With so much competition in the market and numerous routes to explore at the beginning stages, every fundraising choice you make will have long-term consequences.

To help entrepreneurs make their startup idea a reality, we’ve interviewed a bunch of entrepreneurs and investors about the best ways to fundraise.

Read full article…….via 10 VCs And Founders Share Their Tips On How Startups Should Be Fundraising – Business Insider.