Startup Fundraising: Friends, Family, And Accredited Investors

When it comes to startups’ earliest funding sources, beyond founders’ personal liquidity (or debt capacity) friends and family are usually the first places founders turn to for help getting their startups going. But there are significant risks to tapping those close to you for funds. And I’m not just talking about the obvious possibility of emotions becoming wrapped up in funding decisions or the potential negative impacts to your personal relationships. Of course, you need to be transparent about the risks and make sure that your family, friends, and close associates understand and only invest money that they are willing to lose. Startup Fundraising: What You Don’t Know Can Hurt You The risk I’m thinking of though is running afoul of U.S. securities laws. To be specific, I’m talking about the Securities Act of 1933. It set requirements for companies’ stock issuance. You might be wondering what that has to …
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6 Ways To Increase Your Odds of Landing Venture Capital

This guest post was contributed by BJ Lackland, CEO of Lighter Capital. Running a growing tech startup with steadily increasing revenues might put you on the right track to being a successful business owner, but it doesn’t mean you’re on an easy path to securing venture capital. Competition for funding is stiff and VCs are extremely selective. In fact, less than 1% of U.S. startups get venture capital. Here are six common ways VCs narrow down the list when they consider companies for investment. Number 1: Big idea and Big Market Venture capitalists seek a large return on investment (typically 10 times their initial cash within 5-7 years); so they search for companies with a standout idea that matches a breakout market. Is your idea too obvious? Are there many competitors in your space? You might have a great idea, but an idea is not a product, nor is it …
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Startup Funding: Choosing Your Best Option

What do you need to consider when you’re on the road to startup funding? How do you make the best choice among the array of available funding options? Our How to Successfully Fund Your Startup webinar with R. Branden Harper Director, of Lighter Capital and Sirk Roh, Early Growth Financial Services’ COO, covered the full range of startup funding options and what you should keep in mind as you prepare to raise. Startup Funding Options There are two broad categories of startup funding: traditional financing and alternatives. Traditional funding vehicles include equity and convertible debt funding via angels, VCs, and incubators. Alternative encompass loan and venture debt as well as revenue-based financing. Factors like your startup’s stage and the nature of your business will help you narrow down the options to the one that is most suitable for you at a given time. The best way to approach your funding …
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Business Insurance: How to Make Sure Your Startup’s Covered

This guest post by Carl Niedbala originally appeared on Orrick’s Total Access blog. Buying insurance can be a daunting task, particularly for venture-backed startups. The market for relevant insurance products tends to be fragmented and a finding a broker who understands tech can be tough. Sometimes, just getting the ball rolling can be confusing. With that in mind, here’s an introduction to purchasing insurance: Do: Vet Your Broker While there are some generalists out there, most brokers earn success by mastering an industry. Make sure that your broker fully understands your business model and where the inherent risks to your company lie. A good broker will look at your company from all angles and leave no stone unturned. How do you make this choice? Same as any business partner, vendor, or service provider. Ask your investors and fellow founders for their opinions and recommendations. Do research on potential broker-partners and …
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Crowdfunding: Startup Tax and Accounting Impacts

It seems that you can’t read about startup funding these days without hearing about someone’s wildly successful crowdfunding campaign. There’s also no shortage of cautionary tales either; just read the press around HealBe. To be clear, I am talking about crowdsourced or peer-to-peer funding offered by sites like Indiegogo and KickStarter, not equity crowdfunding, which though technically legal since 2012, is still awaiting a legal framework for implementation. Crowdsourced funding enables startups or individuals to raise small amounts to fund anything from an upcoming project launch to medical bills, to product research. The contributions don’t result in equity positions but usually are recognized in some way, say via t-shirts, products, or name recognition. Benefits of Crowdfunding Raising funds in this way has several benefits: The obvious one is no-strings-attached funding: i.e., no dilution of ownership, board oversight, or mandatory financial reporting requirements to the contributors. Importantly, it also gives startups …
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Startups And Owner’s Draws: The 411

This guest post by Robert W. Ditmer was originally published on Justworks. In many businesses, workers are paid wages or a salary, compensation that is subject to income tax withholding and employer taxes. But sole proprietors, partners in a partnership, and members of a limited liability company are not paid wages because they are considered to be self-employed. So how do such individuals take money out of the business? They do so via an “owner’s draw,” sometimes known as just a “draw.” What Are Owner’s Draws? Technically, an owner’s draw is a distribution from the owner’s equity account, an account that represents the owner’s investment in the business. Owner’s equity is made up of any funds that have been invested in the business, the individual’s share of any profit as well as any deductions that have been taken from the account. That means an owner can take a draw from …
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Startup Acquisition: How to Attract Potential Buyers

A couple of questions on Quora about whether there’s a “buyer wanted” listing service for startup owners who want to sell their businesses prompted me to write this post. To my knowledge, there isn’t one (yet), but the questions got me thinking. What can entrepreneurs do to increase the appeal of their startups for potential acquirers? People start businesses for lots of reasons: hopefully visions of a huge payout at exit aren’t the primary motivator to pursue entrepreneurship. But given that planning for an eventual startup exit is something founders should address from day one, and since most exits are through acquisitions, it makes sense to keep that possibility in mind and to avoid any screamingly obvious blunders that could close off one route to exit. How to think about startup acquisition 1. Pick the right market. Target one that has significant growth prospects in a field that has existing …
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Using Trademarks to Protect Your Brand

Guest post contributed by Tricia Meyer, Managing Attorney at Meyer Law. As an entrepreneur, you know branding is important. You undoubtedly spent hours brainstorming your company name, logo and slogan. Your name and your brand set you apart and help establish your identity in the marketplace. You should put as much effort into protecting them. Here are tips to help you establish and protect your brand: 1. Search all available federal, state, local and county databases This should be done before you’ve gone to market. Check to ensure that no other companies are using the name you’ve chosen. Keep in mind that trademark laws are accommodating and you can be liable for infringement on someone else’s trademark even if they haven’t formally registered it. Choosing a name that is already in use, even if unregistered, exposes you to the risk of a lawsuit. It will always be easier to choose …
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Early Growth Financial Services Welcomes New Tax Director

Originally published on PRWeb. San Francisco, CA (PRWEB) February 26, 2015 Early Growth Financial Services (EGFS), an accounting and financial services firm that specializes in providing a range of outsourced financial support to early-stage companies, announces the hiring of Andy Kapur to head its Tax Practice. Andy will direct tax efforts for the nine markets that EGFS currently operates in, bringing his 15 years of global tax experience to bear in working with EGFS’ 450+ clients. Kapur is a licensed CPA with over 15 years of financial experience serving publicly traded and private companies whose operations often span international tax jurisdictions. He has extensive experience advising clients and devising tax strategies, managing tax reporting and analyzing corporate tax structures. His domain expertise spans a number of industries including computer software, medical devices, and biotech. His specialities include preparing tax disclosures for SEC filings, implementing stock option plans, sales and use …
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Setting up Your Startup Accounting: What to Do When

When your business is in its early days, your main, and definitely most important, areas of focus are product development and customer acquisition. While it won’t be your primary focus, your startup accounting is equally important to get right, in order to build a strong foundation to help you reach your strategic goals. In a recent webinar, Sirk Roh covered what you should be thinking and doing in terms of setting up an accounting system both when you’re just starting up and after you’ve raised a round of funding. While you’re in pre-funding mode: Set up your accounting structure and financial and cash management. Then keep things as simple as possible for as long as possible (i.e., until you reach a pain point). But while you want to keep things simple, make sure you choose a low-cost system that will scale with your startup. Otherwise, you’ll spend a lot of …
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