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