| Fact: In 2005 over 500,000 new business | | | | self-reliance on yourself. Sell your product or service |
| incorporations were organized in the United | | | | before you have inventory. If no one buys you have |
| States.Fact: Of these 500,000 new businesses less | | | | lost nothing. If you receive orders you know you have |
| than 1,000 received venture capital funding.There are | | | | a winner. More entrepreneurs successfully can start |
| vastly more entrepreneurs seeking start-up funding | | | | the road to success by bootstrapping than by any |
| than there are available funding sources and | | | | other method.Licensing |
| investment pools. This is a fact. And yet, 499,000 | | | | Since the bubble burst in 2000, we have done far |
| incorporations occurred in 2005 without the cover of | | | | more product licensing campaigns than any other deal |
| an investment funding commitment. Many of these | | | | style. Licensing requires a thorough foundation of |
| new businesses will fail. Nevertheless, the urge to seek | | | | intellectual property protection. First to market |
| the fulfillment, financial security, freedom and the | | | | advantage, a strong Unique Selling Proposition, lowest |
| satisfaction of overcoming the odds still drives us to | | | | possible of goods (while maintaining highest possible |
| try.The lingering doubt, and hurdle each of these new | | | | quality standards) and verifiable sales model.Angel |
| entrepreneurs confront is this, "where does the money | | | | Investors |
| come from"? We look at, on average, 600 | | | | There are so-called angel funds, so named because |
| submissions per year in my consulting business. The | | | | like fairies they sprinkle a little dust on potential deals of |
| absolutely, number one reason, most of these | | | | interest, just seed money basically. Angel funds tend to |
| presentations will not ever make it beyond the idea | | | | stick to specific fields (technology, wellness, software, |
| stage is an unrealistic understanding on the role of | | | | etc.) where they have great experience and contacts. |
| investment and sources of available start-up funds.My | | | | They typically take an oversized piece of equity, as |
| first assessment of an opportunity is always the idea | | | | first money in is most at risk. In addition, angels are few |
| itself. Assuming the submission passes our layered | | | | and far between, hard to find. Look at local Chamber |
| analysis, the next hurdle is the inventor or prospective | | | | of Commerce fairs and regional government |
| entrepreneur. Is he a dreamer, or a doer? And the first | | | | incubators as a source for networking |
| disqualifying trip wire for a dreamer is the expectation | | | | angels.Mezzanine Finance |
| that they can have someone incur all of the financial | | | | Once a deal has shown market potential, sales are |
| risk, 100%, while they commit nothing. When I say | | | | growing, the market is responding and the risk factor |
| nothing, I mean no patent filings, no production quality | | | | has been mitigated, mezzanine financing becomes an |
| prototypes, no qualified research, no testing, etc. They | | | | option. Usually the mezzanine round is for far more |
| have only an idea.Angel investors do exist, but even | | | | investment money than the angel-round, and the equity |
| they do not very often consider investment in dreams, | | | | percentage is not as dear. Many banks now have |
| cocktail napkin designs or untested theory. And yet we | | | | mezzanine arms to service growing, but not yet |
| eliminate 60% of the product opportunities we view, | | | | mature opportunities.Investment Bank |
| many with interesting commercial potential, simply | | | | Investment Banks are very difficult to work with |
| because the submitter can not, or will not invest in their | | | | unless a project is typically past the angel and |
| own opportunity. If you do not believe in yourself, your | | | | mezzanine funding stage. They want to see sales |
| opportunity, why would anyone else?The development | | | | traction, even if in a limited test market. Investment |
| monies for patent and trademark filing, design, | | | | Banks have exceedingly aggressive Harvest Goals, |
| research, creating working models is what the funding | | | | recognizing that even with the most heavily vetted |
| world calls 3-F money. 3-F money comes from friends, | | | | deals, only 2 in 10 or so will succeed and pay-out. |
| families or fools. This is very high risk and usually very | | | | Also, Investment Banks are not interested in small loan |
| small amounts are needed. Most of the products we | | | | amounts. It is a reality that it is easier to secure several |
| see require from $12,000 to $20,000 to put in a | | | | million dollars than several thousand for a new project. |
| professional presentation that could be of interest to | | | | They will not be interested in a local bakery. |
| investors, licensees or partners. Most of the people | | | | A strong, experienced management team is always a |
| that submit to firms like ours have jobs, homes, and | | | | top priority for Investment Banks.Small Business |
| investments. Many love to chat about their boat, | | | | Administration |
| second home or recent safari vacation. But they claim | | | | The SBA is an excellent avenue for the first time |
| to have no money to invest in a project that they | | | | startup, minorities and women to utilize as a funding |
| state is an absolute winner, and will make millions for | | | | source. The SBA is government subsidized. That said; |
| everyone involved.This is an absolute deal killer, a | | | | it is very slow, bureaucratic and risk averse. A good |
| non-starter. We are constantly solicited to become the | | | | source of funds for traditional types of businesses, |
| inventor's partner, hundreds of times per year. | | | | such as retail, local service and light |
| Investors must see passion, commitment, confidence | | | | manufacturing.Factoring |
| and an inventor with skin (dollars) in the game. The lack | | | | Again, this is a personal favorite, as I have used |
| of personal commitment one brings to a project is | | | | receivable factoring to fund several of my startups. |
| proof that a dreamer is impersonating an | | | | Basically, a factor is a financial institution that will buy |
| entrepreneur.Friends, family and fools assist in funding, | | | | the firms purchase orders, if the orders are from top |
| investing or partnering most of the 499,000 new | | | | grade companies. For instance, the entrepreneur |
| incorporations filed in 2005. This does not include the | | | | receives a purchase order for widgets from Walgreen |
| huge number of sole proprietorships established each | | | | in the amount of $200,000. The order becomes a form |
| year. Most new businesses do not require the | | | | of collateral and a pre-negotiated percentage is |
| involvement of venture capital funding sources, blind | | | | advanced to the vendor. This is used for working |
| pools or investment banks. Their scale is too small for | | | | capital, often for completing inventory production. The |
| consideration by firms seeking larger investment | | | | open balance, less factoring fees, is credited when |
| opportunities with huge harvest (cash out) | | | | Walgreen pays the invoice amount. Virtually every dry |
| potential.Many entrepreneurs have used credit cards, | | | | goods manufacturer factors invoices.In summary there |
| personal savings, a home equity loan, sell that antique | | | | are many funding options available depending on the |
| car, tap a retirement account, or utilize an inheritance to | | | | size, scalability and current status of the new business |
| fund their new enterprise. Just remember however, | | | | opportunity, no entrepreneur should ever attempt to |
| this is high risk and more business start-ups fail than | | | | approach funding sources without a customized |
| succeed. Nevertheless, securing the initial development | | | | business plan, exciting presentation materials and |
| funds in this way shows commitment and can | | | | strong financial projections. The most likely source of |
| advance a project to the point where deal placement | | | | funding for 99% of all new ventures will be personal |
| is a real possibility.During the 1990's a gold rush | | | | resources, friends, family and fools.Geoff Ficke has |
| mentality occurred that distorted the financial markets. | | | | been a serial entrepreneur for almost 50 years. As a |
| Money for many investment types was readily | | | | small boy, earning his spending money doing odd jobs |
| available. Due diligence was morphed by theory and | | | | in the neighborhood, he learned the value of selling |
| new age abstract business models. The sky was the | | | | himself, offering service and value for money.After |
| limit.Well the sky was not the limit. The bubble burst | | | | putting himself through the University of Kentucky (B.A. |
| and in the first decade of the 21st century we are | | | | Broadcast Journalism, 1969) and serving in the United |
| now in an investment cycle where cynicism rules. | | | | States Marine Corp, Mr. Ficke commenced a career in |
| Every deal is thoroughly vetted and re-vetted. Terms | | | | the cosmetic industry. After rising to National Sales |
| are very strident. A submission must be absolutely | | | | Manager for Vidal Sassoon Hair Care at age 28, he |
| professionally researched and presented. The market | | | | then launched a number of ventures, including Rubigo |
| allows for no shortcuts or errors in assumptions made. | | | | Cosmetics, Parfums Pierre Wulff Paris, Le Bain |
| With this reality in hand, and the knowledge that | | | | Couture and Fashion Fragrance.Mr. Ficke and his |
| self-funding, or 3-F funding are the most prevalent | | | | consulting firm, Duquesa Marketing, Inc. ( has assisted |
| options for startup monies, are there any other | | | | businesses large and small, domestic and international, |
| options? What are they? There are several, and I will | | | | entrepreneurs, inventors and students in new product |
| be writing specifically in more detail on each. | | | | development, capital formation, licensing, marketing, |
| Consider:Bootstrapping | | | | sales and business plans and successful |
| My personal favorite, as I successfully started my first | | | | implementation of his customized strategies. He is a |
| business by bootstrapping. What is bootstrapping? | | | | Senior Fellow at the Page Center for Entrepreneurial |
| Simply stated, this is an avenue to start your business | | | | Studies, Business School, Miami University, Oxford, |
| without borrowing, giving up any equity, total | | | | Ohio. |