One way to help finance a company in the early stages is to get customers to pay up front, said Flaschen, and, if possible, get vendors to make concessions to help the company’s revenue stream. “Even before you go out and raise money, ask ‘How can I do this with as little money as possible?’” If an entrepreneur takes less financing, then investors have less control. “The dirty little secret is, it is not a lot of fun to have a VC partner in your business. It is a lot more fun to own a majority stake, or 100%. The more you strive for that, the happier you will be.”
via Anthony Cerminaro.
josh kerbel on June 7th, 2005 at 11:15 am
As someone who actually finances smaller business with my firm’s own capital, I have to take a shot at this excerpt from Wharton.
It is very very rare for a customer to finance your business on these terms. Most businesses are not cutting edge technology start ups with some new piece of software that is going to alter the course of history and generate a zillion dollars.
Try going to Walmart, Costco, Home Depot or your local electronics retailer and see if they will pay you in advance for that shipment of widgets you are selling to them.
If you are lucky, you’ll get paid 60 days after you deliver the product, which is about 90 to 120 days after you have paid your supplier in China or East Asia for it.
Sure you can ask your customer to prepay you for the product, but unless you are something special, don’t count on it happening
Shawn on June 7th, 2005 at 5:21 pm
Easier to raise capital
A way to make it easier to raise capital is for a company to go public. Any company can go public. Companies often go public without raising capital (via Registration Statements). It does not raise capital, but having a stock symbol adds prestige therefore making it easier to raise capital. The fee usually starts at $50k. So a company would have to be trying to raise $500,000 or more to justify the fees involved.
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