What NOT to do When Starting a Business

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Original article by Kaleb Roedel for NNBV

Earlier this month, small business experts and local entrepreneurs gathered at the University of Nevada, Reno Innevation Center for the StartUp Financing Panel, hosted by StartUpNV. The panel shared their insights on the ins and outs of financing a new business venture in Northern Nevada.

  1. Don’t be a zombie company.
    What is a zombie company? According to the NNBV article, “a startup that raises a ton of money at high valuations and then stagnates, shrinking the returns of entire funds and hurting investor returns.” Jeff Saling, executive director of StartUpNV continued to explain that zombie companies hurt investors because “your money’s dead, it’s not going anywhere.” StartUpNV has added an anti-zombie clause to its convertible note, which means that if a startup becomes a zombie, investors are protected. For example, the clause could allow the investor to “take 5 percent of a startup’s gross sales until it’s paid back two times the amount it was loaned, plus the interest rate at that point,” according to the article.

  2. Don’t seek out venture capital if you don’t plan to sell.
    “If you don’t plan to sell your company — if you want to keep your business for a very long time — then venture capital is not the right thing for you,” said Grace Chou, director of the Innevation Center. “Because, eventually, you need to have an exit; you need to sell your company or have an IPO (initial public offering).” So, make sure you have an exit strategy if you’re seeking out support from venture capitalists like the Reno Seed Fund.

Looking for more advice on funding a startup in Northern Nevada? Read the full NNBV article.

Chris Ewing