Posts tagged Fund
Getting funded is the first step toward every startup entrepreneur’s dream. But while receiving an infusion of cash from a venture capitalist or angel investor is certainly a good thing, it doesn’t necessarily mean your company’s money problems are over. Even venture-funded startups can’t afford to divert scarce cash to everyday purchases, so one big tech vendor is trying to step into that credit void.
Startup businesses, particularly those that are growing fast, are in a constant state of acquisition. Hire someone? They’ll need equipment and a place to sit. It costs money to attract customers and clients, and even more to serve and retain them.
So even after a startup gets funded, founders may still need to make tough choices about where to invest scarce capital. To make those choices easier, last week, in what it calls a “first-of-its-kind” move, Dell introduced a $100 million initiative targeted toward newly funded small businesses.
The 10% Solution
A major part of the plan is a credit fund for small businesses. To qualify for the Dell Innovators Credit Fund, a business must have received funding from a pre-selected group of VCs or angel investors (Dell is adding new firms to the initial group) within the last 90 days. Qualified businesses can then access up to 10% of their funded amount (up to $150,000) in credit offered through Dell Financial Services, with what Dell calls “accelerated, limited credit terms.“ The fund is intended to help young businesses spend their investment capital on revenue-generating activities, not on technology purchases.
The fund was the brain child of serial entrepreneur Ingrid Vanderveldt (left), Dell’s first entrepreneur-in-residence, who noticed that many “entrepreneurs, even when funded, still weren’t getting the credit they needed.”
Further impetus came from a Technology CEO Council (TCC) paper indicating “an outsized share” of new American jobs is generated by high-growth startups. In fact, the TCC reports, most years about 40% of new jobs come from the top-performing 1% of companies. Also cited in the TCC paper was a study from the McKinsey Global Institute, which shows “Web-knowledgeable [SMBs], across a range of industries outpace their less Internet-savvy counterparts in job creation by more than two to one.”
Steve Felice, Dell’s president and chief commercial officer, says the new fund gives new companies “access to technology to help fuel global growth and innovation while helping startups preserve precious equity capital for other business needs.”
Help Going Global
In fact, expanding internationally can be the key to growth for many small businesses. As Karen Mills, the administrator of the Small Business Administration points out, nearly 96% of the world’s consumers live outside the United States. Felice believes technology helps startups go global by “enabling them to get access to more markets, more countries and more supply chains.”
Of course globalization also means small businesses in foreign countries will now be competing with you for customers. But Felice says “small businesses need to realize that the world not only [provides] customers, but can offer partners as well.”
Felice is a big believer in the power of entrepreneurs: “If more of us don’t do something to help entrepreneurs get their ideas to market, economic instability will continue.” The goal of the Dell fund, Felice says, is to help entrepreneurs “fuel their great ideas.” If Dell’s move encourages other lenders to offer credit to startups, it might actually make a difference.
Disclosure: My company, GrowBiz Media, produces a newsletter for the Dell Women’s Entrepreneur Network, and I will be attending the DWEN meeting in India later this month.
View full post on ReadWriteWeb
When it comes to financing a brand-new startup, most founders find themselves stuck between the proverbial rock and hard place. While some lucky startups attract angel investors or have access to money from friends and family, the vast majority are on their own, at least at first. That’s why it’s so tempting to use credit cards to jumpstart your business. Entrepreneurs who’ve maxed out their cards warn that while it may be necessary, it can also be dangerous.
The relatively low cost of starting a tech business today has made this choice more enticing than ever. If you need only $5,000 or $10,000 to get going, is it worth the risk to put it on your cards? “I’m seeing more people using credit cards for financing,” says David Worrell, founding partner of Rock Solid Finance, which helps business owners find solutions to their financing problems. “These days nobody’s got any collateral, so it’s a choice between cash and credit cards.”
Beware Revolving Credit Charges
When Bob Herman founded Tropolis Group in 2010, he decided to finance with credit cards so he could take advantage of a cash-back rewards program and use the bounty to buy supplies for the business. So far, Herman has put about $60,000 on his credit cards, using them mostly to finance software development.
To ensure he didn’t get in over his head, Herman says, “I only put monies on the credit cards for which I know I have corresponding payments due from customers. I then pay off the cards in full each month to avoid the high interest on revolving credit.”
It hasn’t all been smooth sailing. “At one point, we had a customer not paying their bills on time for which we had already placed funds on a card,” Herman says. After diligently following up for payment, eventually he got the customer to make most of the payments. “I did have to write off a portion of the receivables but was able to recover the following month using revenues from other projects.”
“I advise using revolving credit only if you will receive value from a cash-back or points program, and if you’re sure you can pay off the balances in full each month to avoid high interest charges,” says Herman. The strategy has paid off for Tropolis Group, which now includes AppTropolis, BagTropolis, IT Tropolis and ShipTropolis. Sales have doubled year-over-year since launch, and Herman expects them to double again in 2012.
Don’t Forget to Pay Off Your Cards
Vincent Turner, founder and CEO of Planwise, a startup that helps people better visualize the future financial impact of their life plans, learned the risks of financing with credit cards the hard way from a previous startup. Before getting venture funding, Turner had used a personal credit card to get the company going. When a group of investors bought out the original investors in 2010, he recalls, “they raised heaps of additional money, but were never prudent enough to pay off the $8,000 debt on my credit card.”
As the company began to flounder, Turner stepped back, not realizing the investors had never paid off his card – they were just servicing the debt. When the business went bust, responsibility for the card debt ended up back with Turner: “Now the bank is hounding me for full repayment.”
The experience shaped how Turner funded Planwise. “We never make any commitment to spend money unless it is fully funded,” vows Turner, who financed the startup himself and then secured angel investors. He does have a business credit card, but its credit limit is $5,000 and he uses it only for small purchases.
Both Turner and Herman are playing it smart, according to Worrell. “As a tool to help you grow or manage your finances, I think a credit card is even more essential than ever,” he says. But you need to be careful about how much you spend, and never charge more than you can afford to pay off.
Also important: “Always match the source of money with the use,” Worrell advises. “For example, use a credit card for short-term [needs] and pay it off in the short term.” You shouldn’t use credit cards to pay salaries or rent, but you could use them to buy supplies or finance a short-term project.
View full post on ReadWriteWeb
Google billionaires Eric Schmidt and Larry Page have decided to provide funding for an interesting space exploration start-up named Planetary Resources. The new company, which is focused on natural resources and space exploration, plans to mine natural resources from asteroids and add trillions of dollars to the global GDP. In addition to the Google executives, [...]
Follow SEJ on Twitter @sejournal
View full post on Search Engine Journal
Former ReadWriteWeb COO Sean Ammirati has joined Birchmere Ventures as a lead partner. He will lead its lab division, Birchmere Labs, an early stage seed and studio that focuses on commerce initiatives and community-driven commerce – two areas that Ammirati sees expanding in the future. Sean has worked closely with ReadWriteWeb over the past two years, leading up to our acquisition by SAY Media this past December.
“Part of the thinking is that there’s more innovation around payments, transaction-based revenue models and startups, so we think it’s an interesting focus area,” Ammirati tells ReadWriteWeb. He likens Birchmere Labs to Betaworks in New York. The venture is brand new and as such Ammirati does not have any companies lined up. “We are being anti-stealth, and we want to be transparent about the things we are working on,” says Ammirati. “There’s too much we try to keep secret in technology. We’re actually talking to people. Being transparent is a better way to get your business going.”
As a software entrepreneur, Sean focuses on venture backed startups. He was the co-founder and CEO of mSpoke, LinkedIn’s first acquisition. He is an Adjunct of Entrepreneurship at the Tepper School of Business at Carnegie Mellon University and also served as a research fellow at Carnegie Mellon’s Software Industry Center.
His new work with Birchmere Labs brings together his interest in the growing commerce space. Sean penned this ReadWriteStart story about the growing commerce space last year. He suggests that consumer technology will be commercialized by enabling purchases and taking a percentage of the transactions over the next few years. The combination of commerce and mobile is where he sees the future.
“There’a ton of pop in the mobile space, and I feel like, in one way, shape or form, mobile payments are going to happen,” he says. “Like the Square stuff, maybe the NFC stuff. And there’s also the ability to to do things on top of existing platforms.” For this he points to CardSpring (not related to Birchmere Labs), a platform that makes it possible for developers to create applications for payment cards and terminals.
“In the same way people built SMS on top of Twilio, we’ll hopefully be one to build things on top of the CardSpring platform,” says Ammirati. “It’s taking something very complicated, of interacting with credit card, processing, all these payments, and being able to do something similar to Square or NFC technology.”
We here at ReadWriteWeb wish Sean all the best on his new endeavor. Thank you for helping make ReadWriteWeb what it is today.
Image courtesy of Sean Ammirati’s LinkedIn profile.
View full post on ReadWriteWeb
BrightEdge Raises $12.6 Million to Fund Market and Company Expansion
MarketWatch (press release)
BrightEdge pioneered enterprise-grade search engine optimization (SEO) in 2008 by delivering the first and only cloud-based platform that systematically allowed enterprises to grow their web site traffic and revenue through organic search.
View full post on SEO – Google News
According to recent reports, Google is exploring the possibility of financing an acquisition of Yahoo’s core products. Although Google has reportedly held early discussions with two-private equity firms, they have not yet presented a formal offer; it remains to be seen whether or not they will present a bid. Yahoo, which has an audience of over 700 million unique monthly visitors, has attracted the attention of many potential buyers over the last several months.
Although a Yahoo deal might allow Google to leverage Yahoo to promote Google Plus, advertisements, and other core products, it is unlikely that a Google-Yahoo partnership would be approved by the Justice Department. When Google discussed a potential advertising partnership with Yahoo in 2008, it quickly fell apart due to antitrust scrutiny.
Since Yahoo’s former CEO Carol Bartz was unexpectedly fired in early September, Tim Morse has filled the role of interim CEO and CFO. Under Morse’s leadership, the company and board of directors have been shopping itself to a list of buyers that now includes: Google, Microsoft, Alibaba Group, and a number of private equity firms.
The China-based Alibaba Group, of which Yahoo owns over 40%, has indicated “significant interest” in purchasing Yahoo in order to regain the large Alibaba stake. However, with Yahoo’s stake in Alibaba alone worth over $12 billion, the purchase price for Yahoo is expected to exceed $20 billion. At this time, it is unknown if Alibaba has been able secure financing or if they have presented a formal offer.
Although Yahoo has shrunk significantly over the past several years, it is currently the second largest search engine in the world. During Yahoo’s third-quarter earnings and operations report last Tuesday, interim CEO Morse declined to answer analysts’ questions regarding acquisitions and Yahoo’s immediate plans.
Follow SEJ on Twitter @sejournal
View full post on Search Engine Journal
Twilio announced at its first-ever developers’ conference in San Francisco this morning a new product called Twilio Connect that will help app developers provide messaging and call functions within apps while also helping them monetize their efforts. Twilio takes care of the billing of the end user of an app for any phone calls and SMS allowing developers to price their products using software-as-a-service model.
It is an interesting concept for developers looking to add communication functionality to their apps while also getting paid. App monetization is one of the largest problems facing developers currently and Twilio takes that to heart. In that regard, Twilio is also teaming up with venture capitalist Dave McClure and super angel Ron Conway to set up a seed fund to developers using Twilio Connect.
“So, you build your app once. It works. So, now you connect your app to a Twilio account owned by somebody else who then pays for the usage incurred by your app,” said Jeff Lawson, CEO and co-founder of Twilio. “You [the developer] don’t have to worry about paying for the usage because they [the other Twilio account user] will pay us directly.”
The interesting part about Twilio connect is that it cuts the burden of abundant usage out of the developer’s lap. Every start up wants a lot of users. Yet, if they are not ready to scale, one consumer using 10 GB of data through the app could blow the budget for the entire app. Twilio is launching Connect with Mobile Commons, Optimizely, GoodData and MuleSoft.
Essentially, Twilio is trying to disrupt the connectivity and payment platform of enterprise service providers like Cisco. By moving communications to the cloud and providing pay-as-you-go billing that does not hang over the developers’ head, Twilio has a chance to grow rapidly in both the consumer app development community and the enterprise. Twilio Client, the first major launch of Twilio communications services as a platform, has been widely adopted and used by such enterprise companies as ZenDesk. Companies such as GroupMe, AirBnB and Intuit are using Twilio to provide secure and safe voice and text services within their apps as well.
On the seed fund side, Twilio is announcing that is has another round of its Twilio Fund (this time called Connect, appropriately) for developers that are using Twilio’s new service in their applications. The fund is $250,000 with the average payout around $25,000, run and funded by McClure with Conway matching any investment that goes into the fund.
On Hacker News the other day, the top story was “Twilio has an incredible API” by a user named DickeyTK that used Twilio to set up a service similar to freeconferencecall.com. His biggest concern was that he would not be able to foot the Twilio bill if the service blew up. Lawson saw this on Sunday but knew that he could not tell DickeyTK that the answer to his problems were going to be announced at Twilio’s conference today.
Another minor announcement to come out of Twilio today was that they have added “presence,” or the ability to see if a user is available, busy or not taking communications, to Twilio Client with one line of code. Now, this may not seem like such a big deal because presence has been around for a while with AOL, Gmail, Facebook and the enterprise communications companies, but presence is not easy to pull off.
Developers – What do you think of Twilio Connect? Is this the type of service that will not only help you implement communication technology but also assist you in getting paid? Let us know in the comments.
View full post on ReadWriteWeb