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Traversing the Entrepreneur’s Valley of Death with a Business Plan

The business plan is a bridge that extends from initial startup to plans for long range success. That bridge crosses a wide canyon that includes seed money, angel investors and eventually venture capitalism and commercial funds. The first round of funding by angel investors is enough to get the business established and generating income through modest growth, but at some point for successful businesses the funding chasm becomes wide and deep. This Valley of Death, as the $2 million to $5 million is not so affectionately called,  can kill young businesses if it’s not traversed with injections of new venture capital investment money. On the other side of the valley can be found business loans from traditional lenders meaning the company is now poised for unlimited growth.

There’s a lot of debate on whether this valley really exists. Many business analysts believe there is always money for market worthy companies that need cash. This is based on the assumption that inefficient companies or companies with products that don’t succeed in the marketplace will drop out of the running for funding. That leaves the companies with competitive products and services looking for funding. Angel investors play an important role in this process because they fund companies with the well designed business models and that are most likely to succeed over the long run based on their analysis. The poorly prepared business plan and angel investors act like culling tools and force bad ideas out of the funding process early in the process.

Crossing the Valley of Death will take a concerted effort to find multiple sources of funding in many cases. For example, young entrepreneurs can bridge the gap by vigorously blending venture capital with government tax credits. A fairly new concept is the ‘certified capital company’ in which a state issues tax credits to companies in return for making investments in young businesses ready to cross the Valley of Death. There are a number of new and creative funding concepts being introduced across the nation to stimulate job growth and economic development.

In other words, if you need angel funding or are facing the Valley of Death, rest assured that professionals familiar with the funding environment can steer you to funding arrangements you may not even be aware exist. If you see the Valley of Death looming, it only means you have been successful already.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Angel Investors Remain Committed to Business

Angel investors have been a “significant contributor to job growth” according to the University of New Hampshire Center for Venture Funding Angel Market Analysis Report. Entrepreneurs preparing business plans may also like to know that angel investments were made in healthcare (25%), industrial/energy (17%), biotechnology (14%), software (11%), media (8%) and retail (8%). In other words, angel investors invested in most industries the first half of 2011.

Government officials frequently talk about job creation. It’s interesting to learn that jobs are being created steadily through private investment in small to medium sized startups. Small business has always claimed that real job and economic growth relies on small business success more than the success of large corporations. In fact, two-thirds of new jobs in the U.S. are due to small businesses. Startups and small business expansion play critical roles in the economy and in promoting job growth. Since angel investors fund small business, that makes them just as critical to economic growth.

In 2011, angel investors created 134,130 new jobs. The angel investors also increased their seed and startup funding in the first 2 quarters of 2011. This was interpreted as a good sign because it reflects an increasing rate of small business development which means economic and job growth. If there is any doubt of the availability and economic influence of angel investors then consider the fact that the total amount of angel investments in the first 2 quarters of 2011 was $8.9 billion.

The data clearly shows that angel investors, despite their low profile, are a powerful economic force in the U.S. If you are interested in finding startup funding, rest assured there are angel investors interested in your plans.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Potential Investors Come in All Shapes and Sizes

Finding investors is probably one of the more difficult activities you will have to do as long as you own a business. It doesn’t matter if you are just starting a new business and need startup funding or have been in business for years. Locating organizations or individuals willing to invest in a business is the easy step. Convincing them to actually give you the money is the hard one.

There are three ways to get money for your business. You can use your personal resources. You can bring in investors who take part ownership. You can get a loan in which the investor requires payback but not business ownership. Since most people aren’t millionaires, the majority of business funding for start up or expansion comes from outside the business.

Networking with the Right People

Investors come in all shapes and sizes. For example, you can bring in a partner who shares equal decision making authority in the form of an equal partner, but many entrepreneurs prefer to maintain control. But there are other ways to bring in partners without giving up the majority control of the business. For example, you can find equity partners who take a less than 50% ownership stake and will function as silent partners. They have no interest in day-to-day operations as long as their investment brings expected returns.

If you have no interest in bringing in partners, there is a network of organizations, funders, banks, private investors and even other firms looking for ways to earn greater returns than they can get in the marketplace. That is especially true today with interest rates near zero and an uncertain recovery underway.  They include business incubators, angel investors, royalties agreements, Small Business Investment Companies (SBICs), venture capital and others. If you are not familiar with any of these sources then you are arbitrarily limiting your search for investors.

The network of funders also includes business loans from banks or other commercial institutions.  Many entrepreneurs avoid banks and commercial institutions believing they will not qualify for funding.  But there is money available and by developing a high quality detailed business plan with the right elements, banks are much more likely to approve new loans.  Assuming up front you will be turned down is self-defeating.

Give Investors Want They Need to Know in Your Business Plan

A good idea for a startup business or for business expansion is not enough. Investors will look for certain things before even considering your ideas whether they are angel investors or equity partners or banks when it comes to business funding.

  • Your personal qualities as evidenced by a background check
  • The ability of business decision makers to successfully steer the new business or project to success while protecting funding investors have put into the business as proven by past experience
  • Likelihood the business or project will be able to pay off the loan or return investor money with interest
  • Ability to create an agreement that is acceptable to both the investor and the entrepreneur
  • Availability of collateral depending on the type of funding

It doesn’t matter if you search for angel investors or venture capital, it will be necessary to have a well thought out business plan that addresses these components. With a good business plan, you can then join the network of people and organizations that enable new ideas to hit the market and businesses to grow through business loans and a variety of other funding sources.

Shorten the Search Time With an Intermediary

If you don’t know how to find available startup funding or you need the money quickly, your best chance of success is using an intermediary. Though you pay a small fee for the service, an intermediary helps people become imbedded in the network of investors and funders which will greatly increase chances of finding the one or more who can support your business plan.

More detailed information and useful advice about investors for your business can be found at http://www.funded.com.