Entrepreneurship

JPNguyen
Mon, 15 Jan 2007 02:03:32 +0000

Entrepreneurialship doesn’t always require capital on your part. Entrepreneurs, of course, need money to successfully launch a product line or market a product. However, many entrepreneurs have successfully used different avenues such as raising capital. You will learn a lot about raising capital in the coming years.

Here are a few ways to raise capital and a short summary of how the process goes.


Angel investors (family and friends or not for profit organizations such as the Tech Coast Angels - www.techcoastangels.com - an organization that I love)
Venture capitalists - Garage Technology Ventures www.garage.com - GKM Ventures www.gkmventures.com
Debt - Loans etc


Entrepreneur A develops a cool gadget and product and he wants to sell it to the public. Entrepreneur A then writes an executive summary and asks all his employees to sign a non disclosure agreement to prevent a trade secret leak. He or She then proceeds to pitch the gadget to venture capitalists. Entrepreneur A is very careful to not divulge the schematics of the gadget but he emphasizes the important need that the gadget fulfills. He then proceeds to show current sales volume, production costs, sales outlets, and forcasted expansion(bottom up of course). When I say bottom up, I mean, “We will have twenty sales teams around the country with twenty members per sales team. The minimum order will be 10 units. If each sales person sold 1 order per day, we would sell 96,000 units per year. Our manufacturing facility is capable of producing 125,000 units per year with costs inline and no diseconomies of scale at 100,000 units. At $40 per unit, our sales revenue for the first year will be 3.8 million.”

Venture capitalist A questions and learns more about the business and the entrepreneur’s knowledge of the marketplace.

The two proceed to dinner at the four seasons and continue to talk more about the business and hang out over a $200 bottle of wine.

The next day, the venture capitalist talks it over with his partners, analysts and associates. They crunch the numbers and feel that the deal is possible.

The entrepreneur comes back in and a check is waiting for him.

The venture capitalists receives some odd percentage of the company, check signing previlleges, and a seat on the board to advise and vote erroneous motions. And the entrepreneur has capital to successfully launch his product line.

5 years pass and the valuation of the company has grown 5000 percent. The investors would like to exit and receive their cash. The company is then sold or merges with another company. The entreprenur may have started with nothing but cashed out with millions. That’s the great thing about this country, the wealthy don’t neccessarily keep the common man down.