Archive for February, 2009

Weekly Round-Up: It’s Not You, It’s the Economy.

Friday, February 27th, 2009

-Sure, having a business plan is critical in getting your start-up off the ground. We’ve established that. But here’s an interesting rationale from a seasoned entrepreneur regarding why they’re so important: it’s because they’re wrong.

-Did you hear? The economy is not simply responsible for your business plan not getting funded. It’s also to blame for your broken transmission, crappy relationship, and bad hairdo. Really. It’s not you, it’s the economy.

-There are many things in life that have either a right way or a wrong way to do them. Asking someone out on a date, for instance. Filleting a fish. Doing a keg stand. Business plans, however, aren’t quite so black and white.

-Looking for proof that you don’t need a business plan for a fancy tech toy or a windmill running on used car parts to get rich? Check out the Slanket.

-Obama got it right in his speech this week: “The answers to our problems don’t lie beyond our reach.” They lie partly “in the imaginations of our entrepreneurs.”

-While getting in the mind of a venture capitalist has never been at the top of our list of things to do before we die, we could see why an entrepreneur looking to get their business plan funded might be into it. While we didn’t provide any mind-melds this week, we gave you the next best thing.

-So the luxury goods industry might not exactly be booming right now. But that didn’t dissuade VCs from investing in a business plan last week that—you guessed it!—focuses on selling luxury goods. We’re assuming there’s something we’re missing here.

-The downturn has a silver lining, and, no, it’s not just that there’s a ton of good deals to be had. Believe it or not, economic dips have served as a launching point for some of the nation’s great businesses like Cisco and HP. That’s reason enough to keep up with your business plan.

-Entrepreneurs are either completely nuts or just sure of themselves: 87% of small business owners said that they have no regrets when it comes to starting a business, and that they’d do it over again if they had to, according to a new survey from payroll firm PayCycle. Given that the survey was taken only a few weeks ago, we’re going with nuts.

-Finally, if you’re an entrepreneur, could you get along with that whole saving the world bit? Oh—you hadn’t heard? The American people are counting on you to lead us to a brighter future. If you could get on that, that’d be terrific. Have a great weekend!

economydown

Tags: weekly round-up
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Please – Enough With the Bailouts.

Friday, February 27th, 2009

It’s every man for him or herself these days. Or at least, that’s how our respondents to this week’s survey question seem to feel. Let us explain: last weekend New York Times op-ed columnist Tom Friedman wrote a piece suggesting that if anyone was going to get a bailout from the federal government these days, it should be venture capitalists. He wrote:

“You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners—university endowments and pension funds—are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way.”

The article generated a lot of talk—which wasn’t exactly positive. His main critic? The venture capital community:

“The top venture firms don’t want, don’t need, and are never going to take government money. The same is true of the top entrepreneurs,” wrote venture capitalist Fred Wilson.

But enough from the talking heads. We wanted to know what you thought about the VC community receiving a bailout. So we asked – and your response was clear: no.more.bailouts, said the majority. Your bailout malaise makes perfect sense. Bailouts have spread throughout the nation like the flu. First Freddie, Fannie, and AIG got a boost. Then the banking industry. Then the automotive industry.

Still, almost as many respondents believe that venture capitalists deserve a piece of the government money pie. 36% of you said that a windfall for the VC community means more money for start-ups, and thus you’re for it. We can’t argue with that rationale. Nor, come to think of it, do we really take issue with the minority of respondents either – who said that the VCs don’t need any more money. Touche.

poll by twiigs.com

Tags: survey, venture capital
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Crazy Ideas Sometimes Make Big Bucks Too.

Friday, February 27th, 2009

These days it seems like you need to patent a wild new tech toy or develop a complex business plan for a new clean technology to be considered a successful entrepreneur. But that’s not necessarily true. Sometimes small ideas that seem ridiculous (to anyone other than the person who came up with it) can actually payout. Take Gary Clegg, an entrepreneur who invented (and yeah, we use the term loosely) the “Slanket.” While you may not know what a Slanket it, you’ve almost certainly seen its recent imitator—the Snuggie. Clegg says he came up with the idea while he was a freshman in a cold dorm in Maine.

“He cut a hole in his sleeping bag because his TV remote wouldn’t work through the fabric, and subsequently asked his mother to sew a sleeve onto it,” says the New York Times. “Mr. Clegg added a second sleeve and otherwise refined the design in the ensuing years. He gave the appendaged blankets as gifts to friends, and finally, with an investment from his brother, Jeff, mass-produced them and started selling them on Slanket.com in early 2006.”

Ridiculous, right? Except the Clegg’s the one getting the last laugh. He says he’s raking in $4 million in sales every year, and not only that, the recent Snuggie campaign by what he calls a “cheap knockoff” has actually boosted his sales.

Like we said, you don’t necessarily need a shiny tech toy to make some bucks. Now here’s the Snuggie ad for you to enjoy because it’s awesome:

Tags: business plan, entrepreneur
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The Squawking Begins.

Friday, February 27th, 2009

It’s been less than 24 hours since President Obama released his new budget, and already everyone from the banking lobby to talking heads to, yes, venture capitalists are tearing it apart. VCs are specifically bent out of shape over a new policy that would change the way the government taxes profits for investment partnerships starting in 2011, reports the Washington Post:

“The change is aimed at carried interest, which allows managers of hedge funds, real estate investment trusts, private-equity firms, medical practices and other partnerships to pay tax rates on their profits that are lower than rates paid by salaried and hourly workers.

Investment partnerships have long maintained the lower rates are crucial to their business model. But some Democratic lawmakers argue that the policy allowed big buyout firms such Blackstone Group, Kohlberg Kravis Roberts and Carlyle Group to avoid paying their fair share of taxes.”

Naturally, the venture capital community is up in arms:

“Venture capital investors put up some personal money, and then more importantly we put up our brains just like the entrepreneur does. We don’t just put up money and walk away, and see you in a couple of years. We take an active role in growing these companies,” says Mark Heesen, president of the National Venture Capital Association. And the Post adds: “Heesen said venture capital investors can wait years—and endure numerous business failures—waiting for the one home run that earns them millions. The lower tax rate helps cover the failures.”

Should venture capitalists receive a tax break as such? We see both sides of the argument. Average Americans probably don’t much care whether obviously wealthy VCs can cover their failures or not. Assuming risk and taking losses is simply part of being a VC—it’s why the payouts are so large. But entrepreneurs seeking funding for their business plans likely do care about venture capital tax breaks. If VCs are less able to cover their losses, that means there will be less capital available, and less risk-taking when it comes to who they invest in. At least that’s what Heesen argues.

Still, isn’t part of being a venture capitalists taking risks, without knowing whether or not they’re going to pan out? As an average American, you have to wonder why VCs should get a tax break for, well, doing their job. Sure the argument goes that by getting said tax breaks, they’ve got more capital to fund more start-ups. But we’re not sure that’s entirely true, or that VCs will really fund fewer start-ups once this new tax regulation takes effect. Statistically they need to fund a certain number of businesses to eventually get that home run that Heesen was talking about. So while it may be painful for them to pay more cash, we’re not entirely convinced (yet) that that’s going to have a negative trickle down impact on start-ups.

But what do you think? Are VCs just complaining because this means they’ll have to cough up more cash, or is there real validity to his complaint?

squawking

Tags: economy, venture capital
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Bankers: Only Slightly Worse Than Criminals.

Friday, February 27th, 2009

Sure, it’s frustrating that bankers aren’t giving entrepreneurs or their business plans the time of day right now. And yes, it’s even more galling that it was big investment bankers who are at least partially responsible for this whole economic disaster to begin with. But do they really deserve all the vitriol that’s being directed at them? We only ask after reading Floyd Norris’s column in today’s New York Times:

“It’s not much fun to be a banker these days. One leading European banker says a poll showed that the only groups now held in lower regard are prostitutes and convicted felons. There are plenty of people who would be quite happy to see a few bankers join the latter group.”

Would you?

bankers2

Tags: bank lending, banks
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Federal Agencies Rolling In Cash – Except the SBA.

Thursday, February 26th, 2009

This morning President Obama unveiled a new $3.5 trillion budget that will increase spending on a range of federal programs, including health care, education, and energy. Unfortunately, one government agency that found themselves left out was the Small Business Administration. They’re slated to receive $700 million in federal funding, according to the budget proposal released today. That’s the same amount the agency received in Bush’s 2009 budget, according to Federal Computer Week. Here’s how it’s broken down:

“The Obama administration’s budget proposal would offer the same amount of funding for technical assistance grant programs for small businesses. However, it would increase funding for core agency systems and employees. It would also streamline loan processes and find new ways to highlight opportunities for small businesses in federal prime contracting and subcontracting.”

Highlights of the proposal also include $28 billion in loan guarantees to expand credit availability for small businesses, as well as funding to modernize the SBA’s loan processing systems.

Now, we’re guessing bureaucrats at the SBA are pretty bummed that they weren’t among the government agencies to get a windfall from this new spend-heavy budget. But we’re on the fence regarding just how much more cash the SBA really should have gotten. While it’s true that they certainly offer assistance and support, as well as an invaluable loan guarantee program, it’s unclear how throwing any more money at the agency would have really helped small business owners or entrepreneurs. Federal money is perhaps better spent in other areas, such as health for instance, which, while not directly involved in small business, still impact a company’s bottom line.

Thoughts? Does the SBA deserve more than they got?

Tags: government, sba
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A Crash Course in VC.

Thursday, February 26th, 2009

Chances are you appreciate it when people tell it like it is—particularly when it’s the venture capitalists you’re trying to woo with your business plan. That’s why you’ll like this “Venture Capital Crash Course” presentation given by VC Jason Mendelson of the Foundry Group last night at a meeting of the Silicon Flatirons, a center for law, tech and entrepreneurship at the University of Colorado. It’s honest, but more importantly, skips the B.S. and is actually informative. Example: in a section titled “What VCs Don’t Want To Tell You,” Mendelson lists the follow nuggets of wisdom:

-We aren’t valuation experts. We don’t know your valuation either. It’s part art and part science. Mostly art.

-We don’t know the right amount of money for you to raise as well as you do. We have past experience as our largest guide.

-You can know everything we know about negotiating terms sheets; Check out www.feld.com.

-Nothing is better than an intro from a VC’s friend/trust source. However, an introduction from another VC who is not investing in your company is usually bad.

And he goes on. But don’t take our gushing over it as proof that it’s awesome—check out the slideshow of the presentation below:

VC Crash Course—Feb 24 2009

View more presentations from rosscarlson. (tags: finance venture)

Tags: funding, venture capital
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Captain Obvi – Er, Business Week To The Rescue!

Thursday, February 26th, 2009

Just in case you weren’t aware yet that the market sucks, start-ups are hurting, and that, yes, VCs are tightening their belts, BusinessWeek decided to print a facsimile of story we’ve read in their magazine ten times already:

“Venture Capital and Startups Feel More Pain.”

Er, gasp?

But really BusinessWeek, slow news…year?

downturndip

Tags: economy, idiocy, media
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How Do I Structure My Business Plan?

Thursday, February 26th, 2009

There are many things in life that have either a right way or a wrong way to do them. Asking someone out on a date, for instance. Filleting a fish. Doing a keg stand. We could go on. But what about business plans? Reader Mary wrote in this week asking whether they’re black and white like that:

“Does my business plan need to follow a specific format? I keep finding templates on the Internet, but many of them are organized differently. What style should mine follow?”

While there’s as many ways to do a business plan correctly as there are ways to do it dead wrong, there’s no one specific way to do it. Confused? Let’s break it down: your business plan, as we’ve noted ad nauseum, must contain certain key sections. You need 1) an executive summary 2) a summary of your product/service 3) supporting market data 4) a description of your team 5) an analysis of the competition 6) basic financials. How you choose to organize those sections is your call. However, there are a few ways to do it such that your business plan is easier to read and your concept simpler to grasp.

Here’s what we’d suggest: put your executive summary first. It just makes sense. This section is (er, should be) a summary of your business plan. It’s also the only thing most lenders and investors read, so you don’t want to force them to dig through your entire business plan to get at it. The order after that is up to you, but in most cases it makes sense to follow the exec sum with a detailed description of your product or service. Most business plans are structured this way, and it’s likely that that’s where an investor or lender will expect that section. As far as was comes next, the traditional structure is market research, followed by competitive analysis, a summary of your team, and financials. The specific order doesn’t really matter, though. What should determine how you organize those sections is by what flows best, and by what gets the most exciting elements of your business model out there most quickly.

Example: for most start-ups, the things you want to put out there right away are 1) What your product or service does 2) What problem it solves and 3) Why consumers will bite. You should also describe your business model right away, along with what makes it different or special— i.e., the magic. After that, it’s entirely up to you how you structure your business plan. We just caution that you don’t make it too confusing, too clunky, or too boring. While there may not necessarily be a right way or a wrong way to structure your business plan, that doesn’t mean anything goes.

rightwaywrongway

Tags: business plan, q&a
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Your Business Plan Isn’t Crazy, It’s Just Forward-Thinking.

Thursday, February 26th, 2009

When investors laugh at your business plan today, you can just tell them that in twenty years, they’ll be the laughing stock. It’s not like they’re actually making a relevant point or anything: