Today I return to writing a new book I am co-authoring with my buddy George Solomon, who teaches at George Washington University. Our book is about raising money in light of the new economic realities we now face.
I received a very timely e-mail this morning from a Belmont alum, who is trying to start a business here in Nashville. She wanted advice on where to find money. She does not need much funding, but does need some start-up capital.
Banks are only marginal players right now with entrepreneurial ventures. They do play a role, but only a limited one with later stage businesses that have good cash flow. Any start-up loans will be to the entrepreneur as a personal loan. That means be ready to back the loan with a second mortgage. But, with plummeting property values over the past three years, there ain't much water in that well for many younger entrepreneurs. After all, you need equity in your home to be able to lend against it.
Investors are moving back into earlier stages in their funding. Angels and even some VC's are doing some start-up seed funding. But, they still want high growth and they will be VERY active in the management of the business.
So in the end my advice to our alum was simple. Use what resources you can scrape up yourself and get the rest from friends and family. And bootstrap every chance you get!
The new reality of financing does not mean we are entering an age when no exciting new start-ups will be emerging.
Remember that the Great Depression saw the start-up of many businesses that later thrived and became industry giants, including Disney, Hewlett-Packard, Publix Super Markets, and Kentucky Fried Chicken, just to name a few.
How did they do it? They bootstrapped and focused on getting cash flowing as soon as possible. Revenues are the best source of financing we can ever hope for during lean times. Let satisfied customers fund your growth and life is much easier than when you rely on bankers and investors.
Growth takes time with this approach to building a business. But, the result is often a much more sustainable business model built not on market speculation about the future, but rather on creating long-term relationships with a growing group of customers.
Our book, being published by Entrepreneur Press, has the working title The Entrepreneur's Money Book. It is due out in early 2011.
I received a very timely e-mail this morning from a Belmont alum, who is trying to start a business here in Nashville. She wanted advice on where to find money. She does not need much funding, but does need some start-up capital.
Banks are only marginal players right now with entrepreneurial ventures. They do play a role, but only a limited one with later stage businesses that have good cash flow. Any start-up loans will be to the entrepreneur as a personal loan. That means be ready to back the loan with a second mortgage. But, with plummeting property values over the past three years, there ain't much water in that well for many younger entrepreneurs. After all, you need equity in your home to be able to lend against it.
Investors are moving back into earlier stages in their funding. Angels and even some VC's are doing some start-up seed funding. But, they still want high growth and they will be VERY active in the management of the business.
So in the end my advice to our alum was simple. Use what resources you can scrape up yourself and get the rest from friends and family. And bootstrap every chance you get!
The new reality of financing does not mean we are entering an age when no exciting new start-ups will be emerging.
Remember that the Great Depression saw the start-up of many businesses that later thrived and became industry giants, including Disney, Hewlett-Packard, Publix Super Markets, and Kentucky Fried Chicken, just to name a few.
How did they do it? They bootstrapped and focused on getting cash flowing as soon as possible. Revenues are the best source of financing we can ever hope for during lean times. Let satisfied customers fund your growth and life is much easier than when you rely on bankers and investors.
Growth takes time with this approach to building a business. But, the result is often a much more sustainable business model built not on market speculation about the future, but rather on creating long-term relationships with a growing group of customers.
Our book, being published by Entrepreneur Press, has the working title The Entrepreneur's Money Book. It is due out in early 2011.
this was very helpful