Bootstrapping Legal Work

I have generally hesitated on relying on bootstrapping legal work when it comes to complex legal work.  However, I have run into more and more entrepreneurs who do just that.

During our recent vacation, we spent one night with our old friends Joe and Nancy Rankin in Cary, NC. 

Joe has successfully navigated the patent process on his own for several products he has developed.  His business, SECTION8 tactical Inc., offers products to assist competitive shooters, tactical officers, and military personnel with their daily operations.

He said that doing your own patent work takes a great deal of time, patience and attention to detail.  But, he insists, it can be done.  For simple products like the ones he offers, this strategy can make sense. 

Here is a link to his product website.

Unplugged!

This will be my last post for several days.  Mrs. C. and I are taking a trip to celebrate our 30th wedding anniversary — off to the beach, playing some golf, and visiting old friends along the way. 

I will be going “off the grid”, but I plan to plug back in and start writing again soon after Memorial Day. 

VC Activity Reflects Slowing Economy

According to the latest report from the National Venture Capital Association, venture capital investments were down 8.5% during the first quarter of 2008 when compared to the last quarter of 2007.  The report also found that deal flow was also down.

The decrease in new deals landing on the desk of VCs and the fewer deals being funded are both consistent with the slowdown in the economy. 

“Despite the current economic downturn in the United States, venture capitalists are still putting money to work across multiple industries and stages of development,” said Mark Heesen, president of the NVCA. “The continued interest in the life sciences and clean technology industries, as well as the traditional IT sectors, reflects the long term investment horizon buy topamax cheap that the venture industry has always embraced. We do not expect to see significant declines in investment levels in the coming year. However, the dollars going to later stage investments could increase if the IPO window remains closed for an extended period of time and venture capitalists have to sustain companies longer than expected.”

This part of the report actually concerns me more than the slowing flow of deals.  VCs had already become more cautious in 2007, pursuing more later stage deals.  With angels also pursing their investments into later stage deals, there is an alarming shortage of money for seed and early stage ventures.

The drag on these shifts might be felt on the economy for years to come. 

Entrepreneurs See Short Recession, But…

The NFIB Index of Small Business Optimism rose 1.9 points in April to 91.5 (1986=100). Half of the gain was due to an improved outlook for business conditions 6 months out, and a quarter was from improved earnings trends. Improved earnings during a slowdown seems to indicate that business owners saw this soft economy coming and took steps to cut costs. 

However, the net percent of owners reporting higher average selling prices rose again this month.  And the percent of owners citing inflation as their No. 1 problem was up to the highest reading since 1982. The number of those planning to raise prices also rose significantly. 

Inflation is starting to hit main street.

Students Start Microfinance Programs

From MyFox Chattanooga (via Ben Cunningham):

When Larry Thomas couldn’t get a bank loan for his struggling construction business, he turned to Yale University students less than half his age.

Elmseed Enterprise Program, which provides small loans and intensive technical support primarily to low income and other disadvantaged entrepreneurs, is the first micro-financing program in the country run by college students, organizers say. It sparked a similar initiative last year by Harvard University students, while Georgetown students are planning a program in Washington D.C., Rutgers in New Jersey and others such as the University of Rochester in New York are considering starting programs.

 

Be More than an Entrepreneur

In my Tennessean column this week I write about the importance of defining our lives by more than what we do for a living.

<blockquote>We seem to create folk heroes out of entrepreneurs who expend Herculean efforts to achieve success in their businesses.

And while this is good to a point, if entrepreneurial success comes at the expense of our marriages, our families, our faith, and our friendships, it is a hollow victory.</blockquote>

 

Women Entrepreneurs Just as Successful, But Less Confident in Start-up

A new global study from The Global Entrepreneurship Monitor (GEM) reports that women entrepreneurs are a key contributor to economic growth in low/middle income countries, particularly in Latin America and the Caribbean.
Among the findings:

  • There is no gender difference in the survival rate of women’s businesses versus those of men in high-income countries.
  • Women who are employed and have built a social network of entrepreneurs are more likely to become entrepreneurs. The social and economic benefits of working are driving women’s entrepreneurship more than increased education or household income.
  • Women tend to be less optimistic and self-confident than men about starting a business. But once involved in entrepreneurial activity, women’s confidence builds, and they are more likely to know other entrepreneurs, and exploit viable opportunities just like their male counterparts. Given difference in how various cultures around the globe view economic independence among women, the initial lack of confidence is not surprising. The good news is that once they take the entrepreneurial plunge, they gain confidence. Entrepreneurship has not only economic implications, but social implications for women as well.
  • Fear of failure is also higher for women in all country groups compared to their male counterparts. Women in Europe and Asia low/middle income countries had the highest fear of failure rates (40.3%) compared to women in Latin America and the Caribbean (34.2%), and women in high-income countries (27.1%).

A good way to help women entrepreneurs is to join with those of us who give micro-loans through Kiva. I just made eight micro-loans to aspiring women entrepreneurs around the globe.

What Tight Credit Can Mean for Small Business

The federal reserve announced that bank credit has tightened. Not startling news, but the implications might catch small business owners by surprise.
The first impact is on new loans. Tighter credit standards means that banks will be even more conservative on business lending. Higher standards for cash flow, personal credit history, collateral requirements, and performance standards. Business loans that might have been approved a year ago, might no longer meet this new standards.
The second impact is on existing loans. This is where the surprise might hit hard on many small businesses. Many entrepreneurs assume that business loans work like personal loans — you make your payments on time and the bank leaves you alone. Not true. Making payments on time is only one of several criteria that bankers will be watching. They will look hard at all of those loan covenants and performance expectations that many of us gloss over the the excitement of getting a loan for a new project.
During tight credit times, these restrictions become much more important for a bank to watch — they are judged on how well they meet performance standards by the federal regulators. For example, a common condition is to maintain a certain debt coverage ratio, which measures how comfortably your cash flow covers your loan obligations. If you dip below the agreed upon ratio, the bank may step in and require you to improve your performance. If you don’t, the bank can call your loan even if you never missed or were late with a payment.
The bank’s portfolio of loans comes under tighter scrutiny during tough times like this, and they will pass that scrutiny along to their business loans.
Once a bank asks you to move your loan, you have to find another bank that will take on your loan. During good economic times, this is somewhat easier. But during times like these, all banks are under the gun to improve, so this becomes a much more difficult task.
Yet another reason to get back to basics during tough economic times. It becomes even more critical to improve cash flow and bring down debt.

Starting-up is not the Goal

If the dot.com era taught us anything it should have been the difference between a financing scheme and starting a real business. A real business has legs. A real business lasts, endures, grows, adapts and prospers.
Sadly, I still see countless examples of people confusing simply raising a bunch of money and launching a business that creates real economic development.
Andy Tabar sent along this link to a posting from the blog written by the company 37signals.

Suggesting startups — specifically tech startups — don’t need to look for revenue opportunities now is akin to spoiling a child and shielding them from the outside world: They’re far less prepared when they eventually have to leave the house for the first time.
A poorly run startup is a poorly run business. A wonderfully run startup is a wonderfully run business. I don’t believe there are many great startups that are bad businesses. Maybe less than 1%. If the business is bad the startup is bad. A great idea, maybe, but a great business, no.
So if you start something up, start a business, don’t start a startup.

The Voice Behind the Words

I’ve been told that I have a face for radio and a voice for newspaper……
That being said, you can hear an interview I did for the podcast Patrons of Change here.
For those of you who are technology challenged just click the “play” button directly under the title. I say this only because it took this Luddite blogger about 10 minutes to figure out how to make it play….