Two Federal Programs Offer Money With Few Strings Attached

Posted on September 21, 2008 by Admin

Tatjana Rosev, Los Alamos Nat'l Lab Communications Office

The next-best thing to free money is available through two federal programs for small businesses involved in technology and innovation.

Small Business Innovation Research (SBIR) is the larger of the two programs, and it will provide about $2.5 billion this year in grants and contracts to small and start-up businesses to develop products, technology or services that solve pressing problems in agriculture, defense, education, energy, transportation, the environment, space exploration, health and other areas. Small Business Technology Transfer (STTR) requires the small or start-up business to team with a nonprofit research entity, such as a university or federal laboratory, and generally involves a transfer of technology, know-how or expertise from that institution to the company’s project.

Eleven federal agencies — including the Department of Defense, Department of Energy, National Institutes of Health, NASA and National Science Foundation — offer SBIR grants, and five offer STTR grants. Both programs provide money that doesn’t have to be repaid, and the business doesn’t have to surrender equity. But, as federal programs, the grants are subject to federal procurement regulations.
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Obtaining Credit – Even When Lenders Are Leery

Posted on September 14, 2008 by Admin

Les Mathews, Mesa Capital Partners

The worldwide credit crunch has tightened credit availability for even the largest companies, and that has also made it more difficult for smaller companies to obtain credit for expansion and working capital. Banks, the traditional sources of loans for smaller businesses, have been forced to raise credit standards and make more cautious loans to smaller businesses, which causes a significant reduction in credit availability, higher borrowing costs and more restrictive credit terms.

As a result, smaller companies, the mainstay of New Mexico’s economy, are seeking more innovative ways to finance their operations and growth. This is particularly true for the state’s early-stage businesses: Most have no history of generating positive cash flows, and most have few unencumbered assets and minimal or negative net worth — all of which make them seem too risky in the eyes of loan officers at traditional banks.

Many owners of early-stage businesses have tried to overcome this problem by offering their personal residences as collateral for business loans. But with the mortgage market meltdown and stagnancy in the residential real-estate market, banks are getting more cautious about hedging bets even on this traditionally most stable and secure form of collateral.

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Current Venture Investment Opportunities: The End of the Beginning

Posted on September 7, 2008 by Admin

Trevor Loy, Managing Partner, Flywheel Ventures

With America’s high-tech industries showing signs of maturity, some observers have predicted the demise of the venture-capital economy. Were it true, this would be troubling news, as entrepreneurs funded by venture capital have been the flywheel of the American economy in recent decades, producing 10 percent of all private-sector jobs and 10 percent of gross domestic product from investments of just two-tenths of a percent of GDP in the past 30 years.

Those of us in the business of investing venture capital see maturity in high-tech sectors as the short-term masking of a promising adjustment by entrepreneurs and investors to the changing realities of expanding global market opportunities with a broader base of technology innovations than ever before.

A World of Needs

In recent years, many international markets for innovation-based products — especially energy, physical infrastructure, human health, mobile computing and communications and security — have grown faster than the U.S. market for those products. Because developing economies need to satisfy their needs in more sustainable ways for cost and environmental reasons, a higher level of technological innovation is called for. Given that the venture-capital industry’s core skill is investing in highly innovative technologies to address large, rapidly growing markets, we believe venture-capital investment is more broadly relevant than ever.
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Financing Decisions in the Real World

Posted on August 31, 2008 by Admin

Tom Stephenson, Managing General Partner, Verge Fund

Raising equity capital for your business never happens in a vacuum. External forces inevitably affect when and how and where you hunt for investors, just as they affect your decision about how much money you’ll need to support your company for a few years until you start showing a profit.

External forces include the financing market — the universe of people and institutions that constitute funding sources for your company — as well as the larger business market in which you operate. Understanding these forces will help you develop a strategy for fundraising.

Beware the bubble

Pure financial investors are in the game to make the most money they can from their investment in your company. But even they can make mistakes and act impulsively.

Investors have no more insight than you do into how a market or an individual company will evolve. They, too, can misread the economic signs and underestimate or overestimate the market appeal of a particular product or service. Their fallibility is one reason why certain market segments get “hot” and others get “cold.”
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Equity Funding: Milestones That Matter in the Life of Your Businesses

Posted on August 24, 2008 by Admin

Tom Stephenson, Managing General Partner, Verge Fund

Creating a road map with meaningful milestones for the development of your business will help you determine how much equity capital to raise and when to raise it in such a way that you maximize ownership of your company over time.

Many entrepreneurs who decide to share ownership in their companies in exchange for capital investment identify goals that substantially increase the value of their business when reached, and they schedule financing rounds to follow these achievements.

If your product requires pre-approval from a federal agency such as the Food and Drug Administration or United States Department of Agriculture, for example, clearing this hurdle represents a success that makes your business more valuable and attractive to investors. If you raise just enough money to accomplish this goal and carry you through another three months — until you can complete your next round of fundraising and deal with unexpected costs — you can increase the amount of equity that you and your earliest investors maintain in the company.

Reaching these milestones also means you’ve reduced the risk for investors and greatly improves your chances of finding new partners and greater amounts of capital.
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Equity Capital: Show Me the Money – But How Much?

Posted on August 17, 2008 by Admin

Tom Stephenson, Managing General Partner, The Verge Fund

Once you’ve decided to finance your new business with equity capital and reconciled yourself to sharing ownership with a partner or partners for several years, it’s time to decide how much money you should raise and when to do it.

It’s not as simple as predicting how much cash you’ll need in the early years and setting off to raise that amount all at once. What you decide at the beginning has a great bearing on how much of your business you’ll own a few years down the road when it becomes self-sustaining.

If you decide instead to raise the money in multiple rounds, you give up less equity in the long run. You might even become established enough to forgo further equity financing and instead borrow money through a traditional loan.

Transaction costs and investor needs often frame this funding decision.

Understand transaction costs

Raising money costs money — and time. The biggest time-consumer involves managing the equity-investment transaction: reviewing documents, preparing due-diligence materials and negotiating specifics of the deal.
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Springboard Gives Entrepreneurs a Boost

Posted on August 10, 2008 by Admin

Tatjana Rosev, Los Alamos Nat’l Lab Communications Office

The most successful entrepreneurs recognize the benefits of networking with external experts — service providers, industry consultants, venture capitalists, business coaches and successful CEOs — when starting or building a company, especially when the economic forecast is uncertain and entrepreneurial confidence is at an ebb.

But there’s more to effective networking than passing out business cards and attending seminars to meet and interact with influential others. It also requires connecting with individuals locally and nationally who have a vested interest in helping entrepreneurs take their companies to the next stage.

Wise Counsel

Business coaching is a powerful, collaborative relationship between an entrepreneur and a coach/consultant who is more versed and better established in a particular industry or discipline than the business owner and has better access to human and financial resources. Being trained by a coach how to identify, evaluate and overcome obstacles to growth can help the entrepreneur achieve his or her goals faster and more effectively. Northern New Mexico Connect’s Springboard program offers free coaching to technology entrepreneurs in Northern New Mexico whose companies are at various stages of development.
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Event/Competition Offers More Tools to Woman-Owned Businesses

Posted on August 3, 2008 by Admin

Catherine E. Zacher, NM State Coordinator, Count Me In For Women's Economic Independence

New Mexico is committed to the success of the tens of thousands of small businesses that drive the state’s economy, including the 62,710 owned by women, according to Lt. Gov. Diane Denish.

Lt. Governor Denish ran a successful research and fundraising business called The Target Group for 12 years before embarking on her political career. As lieutenant governor, she has championed initiatives to attract capital investment in New Mexico businesses, including an upcoming event/competition that aims to increase the percentage of woman-owned New Mexico businesses that generate $1 million or more in revenue.

The national organization Count Me In for Women’s Economic Independence meets Sept. 18th in Albuquerque, and its goal is to inspire female entrepreneurs to transform their fledgling businesses into million-dollar ventures.

According to the 2004 census, only 1,655 of the state’s woman-owned businesses reported annual revenue at or above $1 million. If that number grew to 6,800 by 2010, the state’s economy would grow by $6.8 billion and 46,000 more jobs would be created.
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Improving the Availability of Capital for our Businesses

Posted on July 27, 2008 by Admin

Lt. Governor Diane Denish

New Mexico business owners now have two new web-based business tools at their fingertips: Ed, a calendar of business meetings, networking events and economic development activities across our state; and A2C – short for Access to Capital, a comprehensive listing of capital providers, including banks, micro-lenders, venture capital providers and more.

Along with this launch, I’d like to tell you about the work this administration has undertaken to improve the financing environment for small businesses. A2C and Ed resulted from a partnership of the New Mexico Economic Development Department, New Mexico Finance Authority, New Mexico Small Business Development Center Network and New Mexico Venture Capital Association. It was developed and maintained by New Mexico Community Capital. Both sites are continuously updated – A2C as an online directory of places to begin a search for financing, and Ed as a one-stop calendar of business events.

The vast majority of businesses in our state have fewer than 25 employees. I believe their growth and success is the cornerstone of expanding our state’s economy. That’s why, as New Mexico’s Lieutenant Governor, one of my highest priorities has been to improve the environment for these firms.
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Stimulus Bill Has Benefits for Small Business

Posted on July 20, 2008 by Admin

John C. Woosley, CPA and U.S. Small Business Administration New Mexico District Director

While individual tax rebates got the most attention with passage of the Economic Stimulus Act of 2008 earlier this year, the bill contained many provisions with far greater benefit for small businesses. These provisions are important because small businesses drive our economy.

A few temporary changes designed to spur investment in tangible property can dramatically reduce the 2007 or 2008 tax year liability for small businesses. One raises the limit on property that can be written off at once instead of depreciated over time from $128,000 to $250,000. Another allows 50 percent of the cost of eligible property exceeding $250,000 to be written off — and the remaining 50 percent is still eligible for first-year depreciation.

With far more deductions for business-related property purchased this year than the law normally allows, businesses stand to recover a far larger portion of the price of the property placed in service this year through tax savings than they normally would.