It has been said a million times already on this blog – a CEO,
especially one which is seeking funds from private equity
investors, needs to understand finance. Often a basic
knowledge of sources and uses and cash flow analysis is enough, but
in many early stage investment rounds, savvy investors expect the
CEO to know the company's internal rate of return (IRR) - and
why it matters.
I meet many entrepreneurs who have served as VPs or middle managers
before embarking on their entrepreneurial...
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“What are you doing with my money?” No, it’s not your mom or
dad asking or your friend you lost a bet to on a college football
game – it’s your potential investor and they’re asking one of the
most fundamental questions in a capital raise. Why?
Because you forgot to answer it ahead of time! You’re not
alone, though, too often a sources and uses statement is
overlooked. Many entrepreneurs simply rely on the financials,
general statements in the text of the business plan or...
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Last Wednesday, I had the great opportunity to attend the 2010
Techpoint Summit. For those of you that don't know, Techpoint
is organization with the mission of "accelerating Indiana's
emerging and vibrant tech sector" (source:
www.techpoint.org). This great organization fosters and
nurtures the technology sector that is developing in Indiana.
It brings the innovators together and gives them a voice.
And, their yearly summit is an excellent example of the work they
are doing. In the same...
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The last couple of years have been strange. With the change
in the economy, many early stage companies are looking for anybody,
and I mean anybody, to invest in their capital round. As the
economy rebounds (which we are seeing in technology markets)
business owners are again able to be picky when considering angel
investors.
An angel investor (or an angel investor group or private equity
firm) should be more than just a liquid wallet. He/she
should be a strategic member of your team. They...
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Next week I am moderating the plenary panel at TechPoint’s
Innovation Summit entitled
Funding Innovation.
Check it out:
TechPoint
Innovation Summit
Also check out the
sponsors page. I
counted today, and
nine Alerding Castor
Hewitt clients are sponsors of the Summit. That is
awesome.
This year’s panel members represent private equity investors, angel
investor groups, successful entrepreneurs and grant funding
organizations which look for funding and investment opportunities
in Indiana...
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FIRM GEARS UP FOR MUCH ANTICIPATED INNOVATION SUMMIT
Alerding Castor Hewitt, LLP is no stranger to the
technology community - here in Indianapolis and in other domestic
and international markets. The firm highlights its
position in the Indianapolis market by a commitment to this
year’s Innovation Summit as the Plenary Panel Sponsor for the
second year in a row. The Summit is taking place on October
27th in downtown Indianapolis.
David Castor, Founder and Partner of the firm, will serve...
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So I have been a bit behind in blogging these past few weeks.
With the new addition to my family (my 3rd son), life has been
hectic. But, I am back and ready to role.
As a general update, Alerding Castor Hewitt continues expand as
technology legal counsel in SaaS law, funding law and
entrepreneurial law fields. We have some exciting new
Internet-based and SaaS clients. This month we helped a
client negotiate a stock purchase deal and have handled no less
than thirty SaaS or software licensing...
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I guest lectured at Purdue’s Entrepreneurship Capstone course again
last week. I love it – for an hour I talked about my
experience in entreprenuerial law, business law and funding law to
Seniors in Purdue's entreprenuership concentration program on
issues consider when structuring a new company. Honestly, I
thought I had them bored out of their minds (yes, there was that
one Greek letter wearing frat guy who was asleep about 10 rows
back), but I was impressed when we got to the Q&A time...
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Today I am preparing for a guest lecture at Purdue University's
Discovery Park this week on developing business plans and my
experience as an entrepreneur. I read a lot of business plans
- about 100 per year, and I also help draft business plans and pro
formas for business law clients and my own companies.
Here are some general guidelines to consider when developing a
business plan:
1.
Write to the intended
audience. Is the reader the leadership team or
potential investors? If to...
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I don't often blanket repost other blogs that I see, however, in
this instance, I think it is appropriate. Venkat, writing for
Professor Goldman's blog, writes an excellent analysis of the
recent ruling in the
In re: Easysaver Rewards Litigation(S.D. Cal. August 13, 2010). This is a very interesting case
in that it covers several different, more traditional causes of
action and analysis. I'm interested to see what ramification
this case is going to have on SaaS law and privacy
litigation....
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I was reminded today of something told to me by a friend last
year:
Good people who are smart
ask good questions
Bad people who are smart ask bad questions
Good people who are not smart ask bad questions
In business we are always looking for answers – but what we
really want are good answers. Today the issue is never
whether we have enough data (we arguably have too much), it is
whether we can properly utilize that data to make better
decisions. I see this especially in my Internet Law /...
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I work with a national angel investor group that invites members
(investors) to join on two general rules:
1. You cannot be a jerk;
2. You have to invest in companies.
The President of this organization has removed a couple of members
this year because they received rule #1 complaints from other
members.
In my funding law practice I represent and/or work with several
private equity firms, angel investor groups and private equity
funds. Most funds and angel investor groups run into this
jerk...
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I attended an angel investor group meeting today. This was an
interesting group - only 10 or so people, each of very high net
worth, looking for large investment opportunities. They
remind me more of a private equity firm with the types of deals
they are considering, but they invest individually - maintaining
the typical angel investor dynamic.
One investor is a recently retired C-level executive of a fortune
100 company. He told me about his approach to investments -
questions he works...
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FIRM JOINS INNOVATION SUMMIT AS SPONSOR
For the second year in a row, the
firm committed to this year’s Innovation Summit as the Plenary
Panel Sponsor.
This annual event brings together entrepreneurs,
executives and policymakers for learning, dialogue and debate on
the central challenge of today’s economy – turning today’s ideas
into tomorrow’s business breakthroughs. The Summit includes keynote
speakers, breakout sessions on a variety of innovation related
topics, and dozens of trade and...
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It’s not often that we at Alerding Castor Hewitt, LLP run into
issues regarding the payment of commissions for our business law,
SaaS law, and Indiana technology clients. When the subject does arise, however, it usually
occurs when an employee separates from employment and makes a wage
claim for unpaid commissions. The
debate about whether the commissions are wages centers on whether
the employee was entitled to the commission at the time of sale OR
when the client pays for the product,...
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I read many business plans for early stage companies - most of whom
are seeking some sort of seed or early round capital funding from
private equity investors. One of the largest discrepancies
I see in plans is in the expense models regarding allocation
of salaries.
Post-revenue, most businesses will find salaries (including
benefits) falling somewhere between 30% and 55% of their net
revenue. But what about pre-revenue companies that are
looking to use early capital to launch? I read a...
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One of my favorite movie scenes is from
The Jerk.
Navin Johnson is working at a carnival guessing peoples
weight. He is talking to Frosty, his boss:
Navin R. Johnson:
[bleakly] I've already given away eight pencils, two hoola dolls,
and an ashtray, and I've only taken in fifteen dollars.
Frosty: Navin, you have taken in fifteen dollars
and given away fifty cents worth of crap, which gives us a net
profit of fourteen dollars and fifty cents.
Navin R. Johnson: Ah... It's a profit deal. Takes
the...
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I read a Guy Kawasaki blog post this week where he walked through
six reasons why an abundance of capital can hurt an early stage
business. In my entreprenurial law / funding law practice I
work with a lot of business owners through capital strategies and
the private equity processes. Honestly, the drafting of a
private placement memorandum is the easy part of my practice.
The hard part is creating the proper capital structure for
the long term growth and success and reaching investors who...
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There is a great article in the July-August edition of the Harvard
Business Review entitled
The Early Bird Really Does Get the
Worm. The article summarizes a study which found a
correlation between "morning people" and career
success. This is based on a number of traits which are
commonly found in morning people.
Traits
Agreeable
Optimistic
Stable
Proactive
Conscientious
Satisfied with Life
Being a morning person, of course I loved this! Most days I
am the first in the office. I love getting...
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I read around 2 new business plans per week – about 100 per
year. Some private equity investors I know read upwards of 10
per week – or about 500 per year. When you are reviewing that
many of anything, you get impatient. That is why I encourage
business owners writing plans for private equity investors or angel
investor groups to be succinct.
Get to the point. What does your company do? What pain
are you solving in the market? How will you do that at a
profit?
Business summaries should...
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