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Benefits of getting funding for your business from a venture capitalists (VCs) firm.


In my last blog, I have provided you with multiple reasons on why you shouldn’t consider takVenture Capitalistsing funds from a Venture Capitalist (VC). Apart from the constant stream of funding from these VCs, there are other benefits that comes inherent with working with VC firms. And hence, in this blog I would like to tell you the other side of the story.

Free management consulting: If you are a first time business owner, or slightly weak in handling all the aspects of the new business, then it might not be a bad idea for you to pick an experienced VC with some knowledge /expertise that you might not have. If you pick a VC, who has started his/her own business before, then he might be of a great help in writing a strong business plan, making a killer product, or keeping your finances straight.  In order to get the best VC for your venture, do your self assessment first, and then find out a partner who compliments you. Because most VC firms will have equity in your firm, their desire to help manage your company could be a boon to you if you don’t have those skills.

Access to free workforce: Most of the time, as a new business owner, you might not know everything that you need to know about opening up your own business, but you can get some outside help. And this kind of help is mostly available with many VC firms. Most of the VC firms provide expert business consultants on their payroll who can help you with things like marketing, distribution, research, and more. Having this open channel of help with the expertise that your organization might lack can improve your ability to compete in your space.

Find the brightest talent: Recruiting intelligent and hardworking people for your startup is going to be a challenge for you. But if you have a well connected VC as your partner, then the firm can help you find people with the specialized skills needed to help your business grow. Some firms even have HR people to help the companies they’ve invested in staff key rolls. This can be of huge benefit to you who want to mitigate the risks associated with hiring the wrong people for key rolls.

Although your banker or other financing source has an interest in your success, sometimes you will be better off by taking the funding from a VC firm, for all of the above reasons. Please share your comments here, if you agree/disagree with my blog.

Thanks – Bhavin Gandhi

 
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Posted by on August 13, 2014 in 21st Century, Leadership, Management

 

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Why should you not take funds from venture capitalists (VCs)?


Venture CapitalistDuring my career, I have helped numerous businesses in creating their business plans and acquire their initial funding. Though most of the time, I have connected these new business owners with the venture capitalists (VCs) that I knew, it might not be the right kind of the funding option for many businesses. Following are the few reasons for that.

Selling your equity: I don’t think that giving up your equity is necessarily a pitfall if your investors have the knowledge and the contacts required for your business. VCs can sometimes help you build a thriving and growing business. But they can have many pitfalls as well. Most VC firms require you to give up an equity position. It won’t be small part of your business as well, most of the times they are looking for at least 30-60%of the equity in your business. If you (by chance) choose a wrong investor, then it might create future problems while  selling your company.

No immediate funding: Unlike the bank loans and other kind of funding, VC’s funding is not immediately available. Most of the VCs set goals and milestones for the release of funds. 80% of the time, funding is released in stages and is usually allocated for growth and expansion of the business. I’m editorializing here, but expansion with an eye toward sale or public offering might not always be the best kind of growth.

You are not the only manager: Most of the time, VCs want to be added as a member of your company’s executive team. Don’t get me wrong, this is not always the worst thing to happen. If this is your first business venture, an experienced VC on your executive group will be a huge help. But you can also be put in a difficult situation, if you guys have any disagreement regarding a decision. Most of the VCs wants to lead the company to the path that will reap their anticipated financial reward, not necessarily the best decisions for the company’s future.

Business secrets become public: When you approach a bank or other small business finance company, it’s customary to expect that they will sign a non-disclosure agreement regarding your business plan and what you want to do. This is not the case with venture capitalists. As I have mentioned earlier, most of the VCs want to be invested in the company in the executive position, or as a decision maker, and hence, most of the time they refuse to sign such agreements.

You can’t call all the shots anymore: Don’t get me wrong. Having multiple people on your board of advisory will help you to understand multiple opinions (view points), and then take an educated decision. But if you happen to choose a wrong investor for some reason, that might not workout well for you. One of the biggest challenge that you will face after accepting the funds from a venture capitalists is to give up many of the key decision taking powers, which you would otherwise have. VCs usually want a lot of influence over key decisions and they don’t always agree with the founder. Their equity position gives them a seat at the table when it’s time to make important decisions.

I hope, my view points will help you to think twice before accepting some kind of a funding from VCs. Please share your comments here, if you agree/disagree with my blog.

Thanks – Bhavin Gandhi

 
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Posted by on July 15, 2014 in 21st Century, Leadership, Management

 

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How to kick-start your part-time business without going broke?


PartTimeBusinessHave you ever thought of starting your own business? If so, were you successful in doing so? If not, what is holding you back? Have you ever thought about it? Though I might not be an expert on the subject, I have some experience in starting my own part-time gig, which I would like to share here with you. In this blog post, I will provide you with some advice on how to kick-start your part-time business that you have always thought about, but you didn’t know where to start.

Calculate before you jump-in: Let’s say, you are making $4000/month from your current full time job, and you are saving around $400/month or so. Now, let’s assume that you want to open up a new part-time business of photography, and you are unsure about it being successful or not. In this situation, instead of jumping into the business directly, and getting loans from other people to start your business, you can just calculate the worst case scenario. Assuming that your equipment, advertisements and operational costs being $4000, you can save this much money in 10 months. Let’s say, if you can make this much amount of money in 10 months through your photography contracts, it might not be a bad business after all. Other thing that you want to calculate before entering into the business is….how much will be your operating costs vs. how much money you are expecting to make. Though it might not give you a perfect answer, it will give you a definitive starting point of your finances.

Test your business model: Once you are convinced that you really want to start your part-time business, and once you have done all of the calculations, now it’s the time to test your business model. In order to test your business idea, you might want to meet with your prospective customers to test the assumptions of your business. For example: If you want to open up a new photography business, it would be a good idea to take 1-2 contracts for free. This will not only build up your portfolio, and provide you with some good references, but it will also test your business model. If customer feedback suggests any changes to your current strategy, then go back and modify the appropriate building blocks of your business. And repeat this process with other prospective customers, until you have some amount of confidence in implementing the same business model for money.

Jump in: Once you have tested your business model, now it’s the time to jump in and make some real money. In order to do this, you should capitalize your older customer base to expand your business. Word of mouth definitely helps you to get some business (at least in my experience). Obviously, having some external help from some advertising contractors wouldn’t hurt either. Once your business is up and running, you should continuously assess your business’ profit potential every month. You might have couple of months with some losses, but make sure that you can afford these losses through your current full-time job’s savings. If you are continuously losing money in your business, which can’t be recuperated through your primary job, then it might be the time to get out. On the contrary, if you are making enough profit from your business for more than 6 months, and if you can sustain yourself from that profit, then maybe it’s the time to convert your part time gig into a full blown business.

I hope, these tricks will help you kick-start your own part-time business within few months. Do you guys have any other ideas regarding this subject? If so, please share your ideas through comments below. My readers would be delighted to hear your take on this.

Thanks – Bhavin Gandhi

 
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Posted by on January 30, 2014 in 21st Century, Leadership, Management

 

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Make your Mom-and-Pop business globally accessible in this mobile era


SmallBusinessToday’s buyers are finding new ways to shop and make purchases. With help of the Internet and various mobile devices, today’s consumers can shop wherever they want.They are surfing with small screens, using mobile apps, and taking charge of the e-commerce experience more than ever before. Thus, in this blog post I am going to provide you with few simple tips on how to make your business more accessible in this mobile era.

List your business online: In order to make your business searchable in this Google era, you need to list your business where mobile shoppers hang out. Even if you have a small website for your business, make sure you’re on the local directory of Google Places, Bing Business, and Yahoo Local Business. You should also make sure that your business is listed on the review site such as Yelp. List your products on venues like eBay Local Shopping. People love to look up reviews on their mobile devices, so make sure you’re there.

Make your site mobile accessible: In order to attract today’s mobile generation, you need to make sure that your website or online store is compatible with the mobile devices. If you are not one of those big companies, who can afford to have their own IT staff to make/update their mobile site, then you can get your own mobile site by signing up with a third party hosting services, such as Mobify. While selecting this third party service providers, make sure to check for its performance and ease of use. It should be easy for your shoppers to tap the the “Buy Now” button, and buy your product quickly.

Make your business social: If you are one of those Mom-and-Pop store, who can’t afford to have multiple employees working on your social media strategy, then its ok. You can still create a Facebook fan page for your business, and have a Twitter and a LinkedIn page for your business. Being a small business, you might not have dedicated time to publicize these social media profiles everywhere. Thus, you should take the advantage of your existing clientele by providing them incentives to like your Facebook page or follow your profile on Twitter. This approach will definitely make your business more searchable in the social media search on these new mobile devices.

Do you have any other ideas through which you can make your local business more searchable in this mobile era? I would love to hear your ideas (if any).

Thanks – Bhavin Gandhi

 
 

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