27 May Funding for Small Businesses and Solo-Entrepreneurs
As a Certified Public Accountant in the greater Asheville, NC market I am blessed to see a lot of start-up companies. Many of my clients are small business owners or solo-entrepreneurs. One of the biggest keys to the success of new ventures is their ability to fund the first 3-5 years of business operations. During their first years, many companies fall apart not due to lack of work ethic or lack of a real product or service. The greatest challenge is finding enough funding to create a structure that will allow the company to be successful and grow in a prudent fashion while keeping the owner out of the poor house.
New business owners often self-fund their start-ups and in some cases they can secure a small business loan from organizations like The Support Center in Asheville. Many times those loans are personally secured with their home or other assets. But there is another option, and that one is angel investors. While attending the First Annual LEED Conference at Western Carolina University, I was pleased to see so many angel investors in the crowd. It made me think about how smart it was for these investors to attend the event. During the conference, they were able to hear 3-minute speeches from new start-up companies and 5-minute speeches from existing companies. They were just like the TV show Shark Tank. What a great place to spend an afternoon and see what the newest ideas are floating around this mountain region. In a very short period, they could assess interest in a company or project.
To elevate my understanding of the angel investing system, I have been reading the book “Winning Angels the 7 fundamentals of early stage investing” written by David Amis and Howard Stevenson. In the book, they reference a study done in 2000 called “The Winning Angels Study” crafted by David Amis and Jocelyn Dinnin. The aim of the study was to learn what most investors do as well as what the winners do. Below I have listed some of their key concepts:
What most investors do…
1) Network informally with friends and family
2) Traditional advertising and some word of mouth advertising with every angel investor they knew
3) Do nothing as they bank on their reputation to gain a flow of deals from investors
What the successful “winners” do…
1) Educate their networks as to the types of deal referrals they are interested in seeing which makes the process more meaningful for both sides
2) Act strategically with a focus on early-state high-quality opportunities
3) Remain open to chance encounters as they are opportunists so that when a great deal presents itself by luck of timing they can act on the information
4) Create their start-up venture capital group that allows the opportunities to flow through their door on a monthly basis
5) Find a good CEO and build a company around them
6) Be active in your public relations as each talk or speech can result in gaining many opportunities
7) Join an angel investment group
8) Invest in new activities with people you already have a relationship with
9) Be supportive of any project you can even if you are not going to invest in the project as you never know when they may have something you may be interested in
10) Focus on investing in industries you know and understand
Other Blog Posts of interest:
Small Business Retirement Plan Options
Leveraging your retirement savings
Will Hager
Posted at 11:32h, 27 MayAlicia, in these start up companies that you come across, do you ever offer any advice from concepts learned within the ME program? I really like how you separate what most investors do from what successful investors do! All of your points are dead on and serve as great guidelines for business owners as well as investors. It is great to hear about local support groups in Asheville! Hopefully I will be able to attend one of these seminars in the near future!! I enjoyed your post-I look forward to the next one!!!
asmcpa@yahoo.com
Posted at 00:23h, 28 MayWill,
I do a lot of consulting work with new start up companies and help them look at multiple aspects of their business from setting up their chart of accounts, internal control systems etc. If I don’t know the answer, I can refer them out to other experts in that field.
Chris Sitzman
Posted at 15:49h, 27 MayHaving clients that are small business owners gives you valuable insight on what to do to ensure your business’ success. Funding a venture is one of the most difficult tasks an entrepreneur faces. Would you say most of your small business clients are self-funded or do the majority have investors?
asmcpa@yahoo.com
Posted at 00:27h, 28 MayChris,
I would say that nearly all of them are self-funded. They are living on the salary of one spouse and building their business full time from scratch. Many are very grassroots. So other clients are well established providers who simply need assistance with maintaining what they have but do look to me for information regarding tax planning and retirement goals.
Alicia
Maria-Elena Surprenant
Posted at 18:04h, 29 MayThank you for sharing your personal experiences from a CPA standpoint. Also, I visited the link you provided for the conference you mentioned, and had never heard of it. This is such a neat opportunity! I am interested in being a part of something like this, especially as I sense the time to officially start my venture. Did you just go a bystander or competitor?
asmcpa@yahoo.com
Posted at 20:41h, 29 MayThe conference was about a month ago. I was one of the speakers in the shark tank style presentation. It was interesting seeing all of the presentations and being able to hear the speakers and net work a bit. There is another conference coming up you may wish to join. I am registered already. http://thesupportcenter-nc.org/wwbc
Chris Carter
Posted at 19:28h, 30 MayAlicia,
As always, you bring a great perspective to this topic. Based upon your experience at the LEED Conference, would you consider attending again? Are you a fan of the elevator pitch method of sourcing investors or do you think it is more beneficial for a longer initial interview?
Thanks,
Chris
asmcpa@yahoo.com
Posted at 15:56h, 31 MayChris,
I would attend again. I felt fine about the elevator pitch method although I would have preferred 5 minutes to the 3 I was given. From an investors standpoint I can see why they would love this format. They could quickly weed out businesses they have no interest in speaking with and see ones that they might have interest in. If interested, I see that they might move to the next step of an interview. From a start-up business standpoint I think its great to have any opportunity to share your business plan.
Alicia
Schree Chavdarov
Posted at 14:53h, 01 JuneSeeing the main concepts laid out was really helpful because it felt like I was going through a check list or a ‘to-do’ list. The additional resources/blog posts of interest you shared contain really good information!
asmcpa@yahoo.com
Posted at 15:22h, 01 JuneI am also a fan of the good ole check list. I use it often in business and my writing reflect that style. Glad it is of help.
Alicia
Mitch McDowell
Posted at 14:29h, 22 JuneAlicia,
Good article and I agree that most start-up businesses end up self-funding their business ventures. I have been to a few angel investing events myself. The events are fun to watch and provide a good forum for entrepreneurs to pitch their idea and seek investors for their business models. The problem seems to be that the pitches are less than desirable from the angel investors perspective.
Thanks,
Mitch