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Can You Spot A Thriving Business?

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June 19, 2019

Pop quiz time.  Which of the following measures highest on a scale of thriving companies?

A. Apple

B. Away

C. Tesla

D. Beyond Meat

The real question is: how would you know? 

My favourite duo, Merriam-Webster, defines thrive in a multitude of ways, but most applicable is to “grow vigorously,” “to gain wealth,” and “to progress toward or realize a goal in spite of circumstances.” That sounds a bit like startup life and also difficult to quantify uniformly.

Overall sustainability, resilience to economic cycles or fickle consumer preferences starts with a strong financial foundation.  Not surprisingly, there a number of resources full of helpful tips to consider when navigating the pathway raising additional capital, such as Art of Startup Fundraising, Venture Deals, Founder’s Pocket Guide.   So this week, we’re back to financing basics and sharing a few insights to increase your dollars and cents:

Who Do You Owe?

From Sallie Mae, the mortgage company and AMEX, debt is not an unfamiliar concept.  Depending on the circumstances and stage of your business, taking on debt may be ideal. 

Though most beneficial when serviced by an upward stream of profit and reasonable repayment rates, debt permits a higher degree of control and continuous ownership.  From SAFE, KISS, and convertible notes, understanding the terms, conditions and scenarios under which to take on a debt liability plays a substantial role in business growth. 

Ultimately debt is concerned with leveraging the strength of a business today for retained autonomy tomorrow.

What Do You Own?

With each round of financing, the answer is usually less and less.  Ownership rights in a business have value, which often comes at a price.  Whether the source of capital is derived from venture capita, crowdfunding, angel investors, or the public (through IPO),  the swiftness, large distributions, and lack of repayment obligations makes equity financing attracting. 

Yet, balancing flexible capital with becoming beholden to new shareholders often results in a loss or limited control over the strategy and direction for your company’s growth. 

Who Can Play That Game?

Finally, if Derek Jeter can own 4% of the Miami Marlins, then certainly, company founders can expand the scope of who can realize a return on investing in their ventures.

Take for example, New Belgium, as craft beer is near and dear to our hearts.  Instead of selling on the open market, co-founder Kim Jordan opted to transfer ownership to its employees using an ESOP (Employee Stock Ownership Plan) — a little known mechanism that acknowledges the value of sweat equity and employee dedication. 

In your quest to access more capital, keep in mind that the value of a thriving business is measured by more than debt, equity, and other financing options in between.

Cheers,

Venture Cafe Miami

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