Growth Springs

In an effort to channel my spring fever into something productive I’m continuing to look at new businesses.  In order to grow  (or sprout ) businesses typically need funding, and how that happens varies by the type of business.  For purposes of this post we’ll look at ventures that plan to grow into something big, and companies that just plan to grow.

For the ‘something big’ crowd there is the option of being funded by an angel investor, another name for someone who has money to invest and typically some experience being part of a start up.  Getting angel funding  isn’t a walk in the park.  You need to have done your homework and be able to quickly articulate why your business “has legs”. This is also true if you get help from a business incubator.  This description fits a number of organizations that provide both business infrastructure support as well as funding.   Going for the "soon-to-be-a-big-business" model also puts you into the space for crowd funding.  The new JOBS Act was designed to juice this concept and stop the crash between crowd investing and existing securities legislation.  We'll see if it actually works. At this point, all that is certain about crowd funding is that it allows a group of people you aren’t familiar with to invest in your business without knowing much about it or you. 

The JOBS Act was billed as improving funding options for small businesses.  This is particularly important, because small business is considered a job growth engine.  I agree with the folks at MultiFunding that while it’s not a bad thing, the JOBS Act is unlikely to be a Main Street job creator.  That’s because these are the businesses  that will grow, but are not the next big thing.  This second category  is a company that plans to grow in an established line of business.  They have a higher success rate than the ‘something big’ crowd, and they’re more likely to quickly provide stable employment.  For those types of businesses the most likely sources of capital tend to be the Small Business Administration, bootstrapping and leveraging your personal assets (credit cards, home equity loans, etc.).   Not as exciting as Angels or crowds investing in your business, but still very valuable. 

From an accountant’s perspective I’ll tell you up front what your banker wants (and if you’re using your personal credit then that will be you) is not only a viable business, but good record keeping that shows you are keeping track of where the money comes from and where it goes.  It sounds simple, but many potentially successful new ventures fail based on not paying attention to these financial fundamentals.  Perhaps more importantly in these tough times, being on top of where the money is in your business can keep it going through trouble spots.