Venture Capital

Venture Capital: What Every Company and Private Investor Should Invest In VC is presume to be a risky investment ‑ with the proper team, it can be risk free or risk reduced: a great idea and it includes tremendous opportunities and tax benefits, all rolled into one! Investments are either categorized, by the IRS, as passive or active. Those who prefer passive include anyone who buys normal shares in any stock market. Passive shares are not a negative, unsafe investment but they are passive, since stock market investors hand their cash to their favorite stock brokers and begin crossing their fingers and, ever so often, take a look at the newspapers to see how their stock is faring. For most of those passive investors, they want to see their stock at a larger number than when they bought it. A few of those others hope that their numbers have gone down. Most such passive investments offer little or no leverage, tax benefits or have protection against loss. Finally, they are usually illiquidCone cannot get any part of their cash back for days or weeks.  A different investing approach seems like it carries a high risk and is used only by very astute investors who had millions of dollars available. Meaning, what was considered to be one of the riskiest investments in existence is in fact, one of the safest! That investment tool is VENTURE CAPITAL. My suggestion, to protect your investment and get it as high as feasible, includes not simply seeking out and interviewing the hundreds of venture capital firms spread out across America, but instead, review your needs and preferences with your attorney and CPA and invest locally in your own community via its entrepreneurs.  Most venture capitalists choose to do two mechanical things; invest millions of dollars into a project and by‑pass 95% of all business plans that come to them for financing. While that may be an industrial norm, it need not be.  As a budding venture capitalist, you can invest any amount that you feel comfortable guiding; I say guiding because a venture capitalist WALKs the entrepreneurs site at least daily during the first month of operation and 2x that for the rest of the first year and as often as both investor and entrepreneur feel is desirable for the rest of the relationship. While some investors want strictly hands‑off relationships, it is actually better for the investor to stay, to some degree, hands on.  Let me elaborate; Entrepreneurs are, by nature, independent beings. They have their own vision [which should be different from others or why else are they opening up their UNIQUE shop?] By opening, they bring energy, vision and a matrix and hybrid of others skills and ideas. However, one of the (temporary, hopefully) negative things they also bring to their shop is singular focus; it must be MY way or no way and if I am not thinking about it, either someone else needs to be or it is not important. The my way or the highway is how entrepreneurs PRECLUDE themselves from thinking like managers‑and managers guide the entire operation‑not just the singular focus that the entrepreneur has. The manager needs to consider how much credit to offer customers [if any], when to drop or raise prices, when to hire and release, and a consider a myriad of other things or processes so that the entrepreneur can keep his ‑her‑ eye on the winning idea that intrigued the investor in the first place. As a matter of fact, sometimes, what permits some entrepreneurs to succeed is that they find their competition‑perhaps other entrepreneurs, who have excessive laser beam focus and are forgetting one or more other critical components of business. If the excessively focused entrepreneur is not willing to look at [his/her] weaknesses, the competition surely will!  A good manager will ID these weaknesses, sit down with the entrepreneur [so as not to usurp responsibilities] an arrange to plug the gap in mis application of something. For this reason, it is understood that a new and growing business needs both the innovative vision of the entrepreneur And the wide‑view of the manager. These areas of focus DO conflict, often., according to my peers, there is, at least, a temporary solution. Prior to opening up the new office/store, the entrepreneur states in his/her business plan, that when he hires his first manager, he will also come to agreement on a mediator‑or consultant or arbitrator. This ON CALL only person will be available to listen to squabbles and offer an on the spot [if feasible] answer to the problem and this answer, will, for x hours, days or weeks, be the way things operate regarding that area of disagreement. This way, both the visionary and the manager can continue operating the entire company and the disturbance or disagreement can be the "monkey" or responsibility of the mediator. You can decide, with your advisors, what amount per business suits your comfort level and how many investments you can make per annum. Some retirees are now putting as little as $50,000 into a foundation or other fund they create and  issue checks in amounts as small as $2,000 or $5,000. Using this approach, the person with some investment dollars gets to be directly involved in his/her fields of interest, working hand‑in‑hand with all age entrepreneurs and entrepreneurial trainees. This investment approach I am discussing is different from foundation grant money. THIS approach is not a grant but an investment. It trades cash investments for an equity stake in a new or expanding company and the investor becomes, at least for a while, a P.T. employee of the firm! [CEO, 2 owner or otherwise.] The entrepreneur‑INVESTOR works within the company 'x' hours a week at those tasks previously agreed upon between the investor and the business creator. The investor handles the cash, for the security of the firm, and collects a percentage of the net profit, again, on a cycle as previously agreed to [daily, weekly, whatever]. The investor uses his CPA and attorney to both protect his investment and to cut the immediate operating costs of the company [paying both from the revenue of the new firm or from the future profits, whatever was previously agreed upon]. By having the investor work within the firm daily, the investment is protected as much as can be, and ideas for improvement can be put to use immediately and waste eliminated. Often times, it is advisable to seek out a retail business consultant to use macro skills and evaluate the company on all management tasks/objectives.  An investor can receive from 25% to over 3,000 percent return on his money.  Just what are the risks of investing in small, new [local to you] firms? A; The entrepreneur fibs about doing research and skewers the results [or does none at all.] [solution; have a research analyst examine the quantity and expansiveness of the surveys taken‑see how applicable the questions and confirm the size of the sampling survey.] B; The entrepreneur has no way of knowing that research elsewhere has more engineering dollars than he does and just after he opens up and begins to get purchase orders for his gizmo, a newer, fancier gizmo with more advantages and benefits comes on the market. [solution; do not open a business with only one "trick pony." Have another side show available and have 2‑10 other cousins in the oven being roasted‑which means, since inevitably whatever you create, it will be met with competition soon. To keep a market advantage, one must out invent oneself! Come out with the newer gizmo to your own gizmo faster than the competition can. C; People can get bored with your "trick pony." [Solution, discover different uses for your gizmo‑not related to its intended use!] D; You need more customers trying what you have before others "jump on board." [Solution: give away dozens to fraternities or other blabber mouths so as to create BUZZ.] E; Your innovation is cyclical; winter ski gizmo, swimming gizmo, etc. [Solution: take it to places that are experiencing the same weather you were when you invented it. Non‑world travelers forget that when it is summer in N. America, it is winter\ below the equator.] F: Big competitors try to bad mouth your gizmo. That is actually a good thing cause it means they are afraid of its market ability and they want you to walk away from it. There are a dozen or two other things to deal with; that is why you have a consultant, attorney and manager. Never get complacent. While every business includes risks, these are reduced since the company has the vision of the entrepreneur, the business savvy of the investor, the breath vision of the business consultant, a retained attorney and CPA. Usually, those 5 people can do the work of 10 and again wind up cutting the expenses of the company, helping to assure a profit to the firm. The U.S. has over 1,000,000 millionaires. If every one of them financed 1 new business start‑up per month, unemployment in the US would disappear within 24 months!     2009-07-03T15:47:50Z

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venture-capital-0

2009-07-03T12:39:46Z

2009-07-03T19:40:05Z

Getting financed the Silicon Valley way

Venture Capital

2009-07-03T19:40:05Z