It’s a natural impulse: When people are looking for partners on a deal, they seek out people with whom they have a lot in common. For venture investors, though, that kind of familiarity can be costly. Recent research has found that investors are more likely to work together if they share certain traits, including gender, ethnicity and educational and employment history. But doing so often reduces their chances of financial success.
So while a crop of “unicorns” have grown up, the number of new small business startups has declined. This is concerning news because small businesses have been the bedrock of the U.S. economy. A revival of small business entrepreneurship — business founders not looking to land millions in venture funding or build billion-dollar companies but focused on building strong, profitable small businesses — is one of the keys to unlocking new economic growth and stable job gains. Among all the focus on high-growth startups, we need to rediscover the pride and power in small business entrepreneurship. Here are three things that prospective entrepreneurs should consider when looking to build a new entrepreneurial business.
I am terribly irritated by the pervasive and continuously fanned misperception that Entrepreneurship equals Financing. It doesn’t. Entrepreneurship = Customers + Revenues + Profits. Financing is optional.
Exit is optional. The media is reinforcing the myth. Business schools are reinforcing the myth. And hence, they’re setting up entrepreneurs for failure. Too Early – A business can only become big if it can first get off the ground. The problem with perpetuating the myth is that most entrepreneurs try to raise money immediately and mostly bump around against solid walls.
Possible investors for your business fall into four categories: Friends and family, Crowdfunding, Angel Financing, and Venture Capital. The first two are within the reach of most businesses, while the latter two are options for a very specific – and small – group of businesses. Friends and family are the low-hanging fruit of investors. It may be easy to talk Mom and Dad, your siblings, etc., into investing in your business, and to do so with minimal paperwork. If your business does not perform to plan, however, it’s also easy to imagine the awkward discussions at the holidays when they ask about how your business – and their investment – is doing.
In last month’s column, we looked at the advantages and disadvantage of debt versus equity, or borrowing money versus having investors. This month, we’ll look at possible investors for your business. The first two are within the reach of most businesses, while the latter two are options for a very specific – and small – […]
Venture capitalists invested the most in deals worth $50 million or more since the third quarter of 2001, pumping $5.9 billion into 736 deals in the first quarter of 2011, according to a MoneyTree Report released today by PricewaterhouseCoopers and the National Venture Capital Association. Using data from Thomson Reuters, the study showed a spike […]
If you’re an entrepreneur, you’re probably going to screw up at some point. That’s ok. Entrepreneurship is a constant process of quickly testing hypotheses, failing, refining and testing again. If you’re not failing, you’re not learning, right? Well, not all fails are created equal. Some are wholly unnecessary, and I’d like to list my top […]
Small business investment companies provided $1.59 billion to small businesses in 2010, the highest single-year volume in the program’s 52-year history, according to the U.S. Small Business Administration. SBICs are for-profit venture capital firms, privately owned and managed but licensed and regulated by the SBA. The SBIC program was started in 1958 to make capital […]