| You've come up with the best idea since sliced bread, | | | | stock. Yikes, I am not even through the first year and I |
| figured out a business name and formed a corporation. | | | | have given up 40% of the equity! |
| There is, however, one small problem. You need | | | | What happens in year two when I need a $100,000? I |
| money. Welcome to the world of investing. | | | | give up more stock and suddenly own less than 50% |
| Business Funds | | | | of the business. Inevitably, this leads to feelings of |
| Unless Bill Gates is your friend, money is going to be a | | | | resentment and bitterness. "It was my idea, but now |
| problem for every new business. Even the might | | | | these blood suckers are going to get most of the |
| Google had to hunt for cash with one of the founders | | | | money and they aren't even working on the business." |
| of Sun Microsystems finally kicking down a much | | | | This sentiment is so common that it would be |
| needed $100,000. Whether you decide to pimp your | | | | laughable if it weren't so depressing. |
| business plan to anyone breathing or beg your | | | | As a general rule, you should only sell ownership in a |
| step-mother for funds, here are some issues to | | | | business as an absolute last resort. Instead, try to get |
| consider. | | | | loans from investors, banks, home equity lines and |
| Investors are looking for the best deal, to wit, the most | | | | even credit cards. |
| stock possible in an entity. If you are asking them for | | | | If you must sell stock to raise funds, be very careful |
| cash, they have the leverage. Don't be so desperate | | | | when valuing the stock. You should place a value on |
| that you give away the farm. All to often, I speak with | | | | each share as though the company was already a |
| individuals who started a business on a whim and have | | | | raging success, not just starting out. Further, make sure |
| become disillusioned because they have lost equity in | | | | you sell only small allotments of stock such as three to |
| the business. | | | | five percent. If you owned IBM, how much of the |
| Assume I start a corporation and need funds. My | | | | ownership would you sell for $20,000? |
| neighbor agrees to kick in $20,000 for 20% of the | | | | In Closing |
| stock. Things go great, but four months later I need | | | | When starting a corporation, guard equity as though it |
| another $50,000 for inventory and cash flow. My aunt | | | | is the Holy Grail. If you don't, you risk becoming a |
| agrees to kick in $50,000 for another 20% of the | | | | disillusioned shareholder down the road. |