Category:

Financial Concerns

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Craziest Thing I Ever Heard: Is This America?

October 7, 2012, Financial Concerns, General Thoughts, Global Trade
http://www.schoolforstartups.com/craziest-thing-i-ever-heard-is-this-america/

Well, this is certainly a crazy time in the US. With the election soon, and all the craziness thus ensuing, there are countless examples of how America has lost its way.

Typical America

I have never been more in shock at the stupid, silly things you hear every day. But this beats them all!

The US Supreme Court has a case before it now that I bet you have not heard about. On October 29th, the court will hear the case Kirtsaeng v. John Wiley & Sons. In 1997, Supap Kirtsaeng studied at Cornell University, and was shocked to learn that textbooks were much cheaper in his native Thailand. So, being a great entrepreneur, he called home, had his family buys tons of books which he sold on eBay, pocketing $1.2 million in profit. Textbook publishers sued, saying he was violating copyrights. They won.

The U.S. Court of Appeals for the Second Circuit (New York, Connecticut, and Vermont) upheld a lower court’s ruling that anything that was manufactured overseas does not qualify for the first-sale principle. This 1908 idea says that you can resell your cars, cameras, watches, or anything else without worry because the original copyright holder only had control over the first sale. If you buy a Mercedes car, the new ruling requires that you get permission from Mercedes to sell your 12 year old car. Think they will charge for it? Got some jewelry from your Italian great, great grandmother? You can’t sell it without permission!

The Supreme Court may slap this down, but seeing some of their other decisions, who knows! It is very likely that in November, you will learn it is illegal to sell your 200 year old French clock! Imagine the impact on eBay or Craigslist.

America is dying. Ask Washington, Lincoln, Roosevelt (both of them!) if they could sell their imported English items, and I am pretty sure (ok 100000% sure) that Jefferson et al would laugh at the question. This is the slippery slope. He hear that one court decision only leads to more decisions that take away our rights! And now we see it in effect.

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How to Cancel Cable

December 15, 2011, Financial Concerns, General Thoughts
http://www.schoolforstartups.com/how-to-cancel-cable/

A common excuse used against starting a business is the lack of two key resources: money and time. Well, today’s blog will help you obtain both of these. It’s simple. Cancel your cable tv subscription. Many people who “don’t have time” spend hours a week in front of the tv. And cable prices are high these days, even if you bundle. So, let’s say you spend 2 hours a day in front of the tv and $100 a month for cable. Cancel cable tv and you have just found 14 hours a week to get your business up and running. You also have $1200 of startup capital to be used during your first year of business.

Here are the basic steps to canceling cable:

  • Call your cable company
  • Tell them you no longer want cable
  • Unplug your tv for good measure
  • Or better yet, use your tv screen as a computer monitor as your start your new business
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A Friend Wrote this About Getting Money From Family

October 2, 2011, Bootstrapping, Business Ownership, Business Partners, Financial Concerns, Humor, Raising Money
http://www.schoolforstartups.com/a-friend-wrote-this-about-getting-money-from-family/

Your first section on “bootstrapping” is really great:  “Most businesses get stuck.”  I have this uncle who is a rocket scientist. (Really…a “rocket scientist”…In the 60s/70s he designed rocket propulsion systems and robotics for handling nuclear material)….So in the 80s he decided to

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School for Startups at UGA bookstore!

raise money for a company for manufacturing robotics.  Great idea and businesses do it every day…but he had NO idea how to run it as a profitable business himself.  So he went to raise money from…family.  Dad grudgingly participated (knowing better and loudly complaining in the process) because of the relationship.  Almost thirty years later the uncle still sends out investor letters, still takes “annual losses” that enable him to take fun vacations around the world. No family ever made a dime.  Dad passed away years back.

Well, we all very much still love that uncle.  It’s how we roll…Dad was smart enough not to expect anything – it was a gift for family even if the uncle didn’t take it as such.  My lesson:  NEVER NEVER EVER EVER raise money from family unless you’ve got some crazy reason to know it is a SURE bet (maybe a contract in hand or product pre-sold…maybe).  Because if you’re going to family…It’s probably because your idea isn’t strong enough to show to somebody you don’t know as well.  So even subconsciously it’s just not honest and somebody will probably loose because you wanted to play around.

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GUEST post: Emily Jones

August 4, 2011, Bootstrapping, Business Ownership, Financial Concerns, Venture Capital
http://www.schoolforstartups.com/guest-post-emily-jones/

Venture-Debt Financing Is Not Against Entrepreneurs

Usually, to raise capital, entrepreneurs offer investors preferred stocks in their fresh ventures. Preferred stocks terms always have powerful
shield for investors, and in the end, the company incur no debt.

Venture debt is another form of financing companies. Here, investors lend the money to the company instead of buying an ownership.

For instance, UTFC Financing Solutions LLC, a Utah based venture debt firm, lends entrepreneurs. Here, UTFC reserves the right to purchase a
portion of the firm at any time.

Many critics see such provisions as ‘backward’ and ‘anti-entrepreneur’. However, many critics provide sufficient grounds why early-stage debt may be a ‘preferred’ option.

If we compare in a standard investment scenario, we will see that the use of venture debt over equity decreases by 10 percent the value of the
company the entrepreneur has to give to investors. It could be even $1.5 million just through a single round. Now, if the firm becomes successful, the
millions of dollars that the founder profits, keeps or share with his employees. This is certainly positive for the entrepreneurs.

But, why an investor should do a debt deal if it is positive to the entrepreneur. They would do as they get more of the company. Again, why
debt investors give up the percentage? Actually, here they get reduced risk and priority over equity investors.

However, many critics say, this does not work in the end-especially not with tech companies. It has seen that many tech companies have
been blessed by venture debt.

Actually, each situation is different. Preferred stocks might be right sometimes. However, venture debt is also another way to tread on.

Emily Jones is a contributory guest columnist for various websites and communities including Oak View Law Group and CMFA . She has completed her Graduation in Finance and is currently working with an Investment company located in California. She has written some great articles on topics like bankruptcy, investment opportunities, debt management,  debt settlement programs and more.

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Alternative Startup Funding Options

June 16, 2011, Banking, Financial Concerns, Raising Money, Venture Capital
http://www.schoolforstartups.com/alternative-startup-funding-options/

This morning’s Wall Street Journal included a great article about peer-to-peer loans to get your business up and running. Entrepreneurs who have had trouble obtaining loans from banks and other lending services are finding that peer-to-peer websites offer the loans they need. And the terms can be quite appealing to investors as well. Since the risk is spread over a number of investors, these investors have the chance for a nice return on their money with mitigated risk.

You can read the full article here.

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Internet Bubble 2?

February 21, 2011, Facebook, Financial Concerns, Venture Capital
http://www.schoolforstartups.com/internet-bubble-2/

Today, the Financial Times reported on the exploding values of several net firms, raising the question, “Are we entering another internet bubble?”  No, we are not, but we are seeing runaway stupidity again!  And, as always the center of the stupidity is Twitter.

Zynga, a gaming company that sells virtual goods to people playing online games, has revenues approaching $2.5-3 billion.  recently it was valued at $5 billion in a private transaction, and is trying to raise another round of funds at a $9 billion valuation.  I think anyone that buys anything “virtual” is beyond a moron.  For example, people buy imaginary, non-existent fertilizer to make their plants grow faster on FarmVille, a Facebook game.  Morons.

Zynga, Facebook, and Groupon all make sense.  I see it.  The valuations are stupid high, but they will produce revenue to justify it, especially Groupon, which I think is by far the best of the group.  But $8 billion for Twitter with maybe $100 million in revenue?  Only the morons dumb enough to Twitter would invest at that ratio.  I don’t care if its a category killer, its still stupid.

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Wow, How Things Change….

February 16, 2011, Financial Concerns, General Thoughts
http://www.schoolforstartups.com/wow-how-things-change/

My old students will remember a lecture I do called, “Its Getting Better All the Time.”  The thesis, obviously, is that the world is always becoming a better place, by just about every single measure. 

But look at his data.  Maybe I need to rethink my lecture…..

  January 2009 Today % chg Source
Avg. retail price/gallon gas in U.S. $1.83 $3.104 69.6% 1
Crude oil, European Brent (barrel) $43.48 $99.02 127.7% 2
Crude oil, West TX Inter. (barrel) $38.74 $91.38 135.9% 2
Gold: London (per troy oz.) $853.25 $1,369.50 60.5% 2
Corn, No.2 yellow, Central IL $3.56 $6.33 78.1% 2
Soybeans, No. 1 yellow, IL $9.66 $13.75 42.3% 2
Sugar, cane, raw, world, lb. fob $13.37 $35.39 164.7% 2
Unemployment rate, non-farm, overall 7.6% 9.4% 23.7% 3
Unemployment rate, blacks 12.6% 15.8% 25.4% 3
Number of unemployed 11,616,000 14,485,000 24.7% 3
Number of fed. employees, ex. military (curr = 12/10 prelim) 2,779,000 2,840,000 2.2% 3
Real median household income (2008 v 2009) $50,112 $49,777 -0.7% 4
Number of food stamp recipients (curr = 10/10) 31,983,716 43,200,878 35.1% 5
Number of unemployment benefit recipients (curr = 12/10) 7,526,598 9,193,838 22.2% 6
Number of long-term unemployed 2,600,000 6,400,000 146.2% 3
Poverty rate, individuals (2008 v 2009) 13.2% 14.3% 8.3% 4
People in poverty in U.S. (2008 v 2009) 39,800,000 43,600,000 9.5% 4
U.S. rank in Economic Freedom World Rankings 5 9 n/a 10
Present Situation Index (curr = 12/10) 29.9 23.5 -21.4% 11
Failed banks (curr = 2010 + 2011 to date) 140 164 17.1% 12
U.S. dollar versus Japanese yen exchange rate 89.76 82.03 -8.6% 2
U.S. money supply, M1, in billions (curr = 12/10 prelim) 1,575.1 1,865.7 18.4% 13
U.S. money supply, M2, in billions (curr = 12/10 prelim) 8,310.9 8,852.3 6.5% 13
National debt, in trillions $10.627 $14.052 32.2% 14

Sources:
(1) U.S. Energy Information Administration; (2) Wall Street Journal; (3) Bureau of Labor Statistics; (4) Census Bureau; (5) USDA; (6) U.S. Dept. of Labor; (7) FHFA; (8) Standard & Poor’s/Case-Shiller; (9) RealtyTrac; (10) Heritage Foundation and WSJ; (11) The Conference Board; (12) FDIC; (13) Federal Reserve; (14) U.S. Treasury

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What to learn from Huffington Post sale

February 8, 2011, Bootstrapping, Business Ownership, Financial Concerns
http://www.schoolforstartups.com/what-to-learn-from-huffington-post-sale/

Yesterday, it was announced that Arianna Huffington and team sold her online blog  and community space to AOL for $315 million.

AOL spent 40% of their on hand cash to acquire the blog, and paid a huge premium, paying almost 30 times earnings.  The Huffington team apparently insisted on cash only ($300 million of the $315 million will be paid in cash).  This implies to me they have very little faith in the long term prospects of the merger.  And, giving up 40% of your cash?  Crazy.  AOL reinforces their role as the worst merger partner ever.  Remember how well Time Warner worked out for all?  Hey Ted Turner, still think that merger was better than sex?

But what I really wanted to point out is Arianna’s cut.  She is the founder, the face of the site, the CEO, everything.  Her name is the company name.  However, she owned only 5.7% of the company!  She only pockets $18 million, which is about one tenth what she got after divorcing her suddenly gay husband.

At The Entrepreneur School we harp on growing slowly and maintaining control of your company.  Arianna made the decision to grow fast, but that required a lot of outside money.  Was it worth it?

Remember, entrepreneurs that accept outside cash end up, on average, owning 4% of their firms.

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Lower Your Phone Bill

January 21, 2011, Financial Concerns
http://www.schoolforstartups.com/lower-your-phone-bill/

Lower Phone BillI called my wife from Hong Kong last December. I used my iPhone, talked for 8 minutes and got a $20 bill.

This month, I called a contact in Hong Kong from my home in Atlanta. I used my iPhone. We talked for 8 minutes and the bill was $0.

Why the difference? I used my iPhone both times. But, the first call was made on the phone. The second call was made using the Skype app and was made over a wifi network.

As a small business owner, you are likely already using Skype or Google Voice for any international call that you make. Or at least you should be. But what happens if you need to make an international call while you are out of your office or home?

Here is an excellent article from CNN about how to make all your calls without being connected to AT&T. In fact, the article shows how you can use an iPod instead of an iPhone. Read it here.

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Small business regulations

January 19, 2011, Financial Concerns, Government
http://www.schoolforstartups.com/small-business-regulations/

The Small Business Administration has released a study saying that America spends, or loses, $1.75 trillion a year on regulations! That is more than all collected taxes! The Competitive Enterprise Institute estimates that rules that individually cost society over $100 million a year has exploded, growing at the fastest level ever.

And this is before the new regulations of health care and small business reporting are included! Ouch.

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