Upstart: Gamechangers

Below are two startup companies that are making big splashes in their industries. They are run by young entrepreneurs and even though they are off and running they have a lot of questions on how to move forward. Which companies model do you like best? What do you see as obstacles or opportunities? Each profile also has a handful of questions from the founders for you to answer!

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http://under30ceo.com/startup-hot-seat-napkin-labs-vs-warrior-tea/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Under30CEOAll+(Under30CEO)

On the face of it, 2010 looks like a bad time to start a new business. Early stage capital, whether it is venture funds, angel investors or bank loans, remains tight. And while technically the recession has passed, consumers and businesses are still keeping a tight hand on their wallets. Despite the obstacles, however, start-up formation has increased recently, possibly due to laid-off workers deciding to pursue their entrepreneurial dreams.

At the same time, high unemployment has expanded the talent pool for start-ups looking to hire. For those who can find creative solutions to the financing challenge, starting a new business now may turn out to be perfect timing. “The recession is a great time to start a company,” says David Wessels, an adjunct professor of finance at Wharton.

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http://knowledge.wharton.upenn.edu/article.cfm?articleid=2600

Here’s how to launch a shoestring business with virtually nothing.

You’re out of work. The job listings are thin. You have no money to start your own business. Maybe you don’t even have a computer to assist in conducting a proper job search.

Rest easy, we’re here to help. We’ve scoured the earth for ten solid business ideas–endeavors that you can mostly start up with little more than a smartphone and a Gmail address, and that you could get under way tomorrow if you absolutely had to.

http://www.entrepreneur.com/article/217259

Adapted from THE WALL STREET JOURNAL COMPLETE SMALL BUSINESS GUIDEBOOK (Three Rivers Press).

Many people start a business because they want to support themselves doing what they love. Too often, though, they neglect to focus on the numbers side of the business. Creative types, especially, often say they’re turned off by the “unappealing,” “complicated” or “just plain boring” aspect of financial management.

If you want to be successful, you’ll need to ramp up your accounting knowledge. While you can certainly rely on an accountant, bookkeeper, or trusted employee to provide advice on your company’s finances, it’s critical that you gain a comfortable understanding of the numbers. As the owner, you’ll need to make important decisions concerning the purchase of inventory or equipment, expansion into new markets or the hiring of more employees. To do so, you’ll need to have a handle on your company’s finances.

Consider these words from an accountant who advises business owners in New Zealand: “You can’t change the past but you can usually influence the future.” When times are tough, you’ll want to know where every penny is going so you can figure out where to cut or reduce future spending. And when business is booming, you’ll want to be able to track your progress, too.

How One Business Owner Conquered the Numbers

Wendy Goldstein’s story is like that of many entrepreneurs: she wanted to turn her passion into a business. After graduating from Ohio State with a degree in fashion merchandising, Ms. Goldstein opened up Costume Specialists in 1981, selling custom-made costumes to corporations, schools and theater companies. Ms. Goldstein, who knew little about accounting or finance, served as the creative force behind the Columbus, Ohio, company, while her husband managed the books.

About ten years later, Ms. Goldstein’s personal life suffered a blow as she and her husband decided to go their separate ways. And just as devastating, Costume Specialists had sunk deep into debt, despite $600,000 in annual revenues. During the divorce, Ms. Goldstein had to decide whether to fold the floundering business (her husband wasn’t interested in keeping it) and declare bankruptcy or try to salvage what was left. “I just remember standing in front of the window, crying my eyes out,” she remembers. “This was my passion. I thought I was going to lose the whole thing.” That’s when she had her aha moment, thinking: “Excuse me, but goddamn it, I worked so hard, I am not going to lose it now!”

Ms. Goldstein rolled her sleeves up and got to work. First priority? Getting to know her company’s finances—something she’d made the mistake of never doing before. At the time, she had an eighteen-year-old college student working part-time on the books. She called him into her office and said, “Okay, I need to know every Friday these three things: how much money we have in the bank, how much people owe me and how much I owe people.” She remembers him laughing and saying, “You mean you want cash flow, accounts receivable and accounts payable.” Her response was: “I don’t care what you call it. I just need to know it!”

Today, nearly two decades later, Ms. Goldstein still gets those reports every Friday. And the company that was on the brink of collapse now makes $2.8 million in annual revenues, employs 41 people and has four different divisions, including a retail shop and a custom cleaning-and-storage business.

Read more

• Accounting 101: How to Keep Financial Records
• A Cash Crisis
• For Rent: Chief Financial Officer

Ms. Goldstein credits much of the company’s success to her ability to read financial statements. Aside from working with her bookkeeper, she took classes and workshops, many offered by the Small Business Administration, on basic financial management, and she peppered her banker with questions every time she had a meeting. She got the company out of debt by listing each creditor, starting with the ones that had the highest interest rates or penalties. Then she made a list of all of the company’s expenses, figuring out areas where she could save money—even if it was only $10—and use it to pay off debt. “We just had to figure out how to whittle it away,” she says. “We did it in little bits.”

Ms. Goldstein eventually moved her handwritten system onto QuickBooks, a popular accounting software. She reviews her balance sheet and profit-and-loss statement on a quarterly basis, and her receivables, payables and cash flow reports weekly. In 2001, she was able to diversify her client base by purchasing a company that makes inflatable costumes (think Michelin Man) for $7 million.

When the economy melted in September 2008, Ms. Goldstein says good record keeping allowed her to methodically strip away expenses rather than panic. To cope with a 50 percent drop in income from her costume manufacturing business, Ms. Goldstein scanned the reports, calculated she’d need to cut $40,000 to $50,000 in expenses a month, then started slashing where she could. She immediately stopped paying for employees’ parking (a small but costly perk) and renegotiated contracts to save on shipping costs. She switched her employees to health savings accounts from more costly traditional health insurance plans. Needing to save more, she reduced employees’ salaries by 10% and laid off seven people—a painful but necessary decision. Having an intimate knowledge of your company finances “is huge,” she says. “It allows you to react quickly.”

Ms. Goldstein says she shocked herself because she’d never thought she’d have the accounting skills to run a business. “I still can’t believe I figured it out,” she laughs. But it’s allowed her to continue doing what she loves, nearly thirty years after starting up.

Apple Inc. Chief Executive Officer Steve Jobs is accelerating the rate of acquisitions as his company vies with Google Inc. for mobile technologies and talent.

Apple said it bought two closely held companies last week, mobile-application startup Siri Inc. and semiconductor designer Intrinsity. Those deals came after January’s takeover of mobile- ad network Quattro Wireless and the December buyout of online music service LaLa Inc. Terms weren’t disclosed.

The timing of those purchases suggests Apple may be feeling pressure from Google, which has announced nine takeovers this year as it moves into new markets including mobile devices and the software and advertising that run on them. Apple got a new rival in the growing smartphone market last week when Hewlett- Packard Co. struck a deal to buy Palm Inc. for $1.2 billion.

“The pace has really picked up, there seems to be a strategic shift,” said Charlie Wolf, an analyst with Needham & Co. in New York. “It looks like there’s an acquisition frenzy going on between Google and Apple in the sense that there’s an increasing urgency on Apple’s part to stay even if not ahead of Google in the phone space and apps space.”

Apple, the maker of the iPhone, now counts Google and its Android operating system for smartphones as a rival in the rapidly growing market for mobile devices, software and ads. Worldwide smartphone shipments will jump 36 percent to 247 million units this year, researcher ISuppli Corp. estimates. The U.S. market leader is BlackBerry maker Research In Motion Ltd. with a 42 percent share, according to ComScore Inc.

Decide Now

With more than $23.1 billion in cash, Apple has plenty of money to keep purchasing small startups. To avoid publicity and possible rival bids, Apple in some cases has offered a target only a three-hour period in which to accept the terms of a sale, according to one executive with knowledge of the situation.      Patent filings may provide clues to potential targets, said Will Stofega, program manager at researcher IDC in Framingham, Massachusetts. Apple recently sought patent protection for mobile purchasing and touch-screen technology, he said.

A would-be acquisition in wireless payments is Vivotech Inc., a Santa Clara, California-based maker of technology that lets users wave their phone by a cash register to pay for items, Stofega said. Apple rival Nokia Oyj is an investor in a payment service called Obopay Inc. Vivotech CEO Michael Mullagh didn’t immediately respond to a request for comment.

‘Smaller’ Targets

Apple declined to comment on potential targets or its acquisition strategy, said Steve Dowling, a spokesman for the Cupertino, California-based company.

“Apple buys smaller technology companies from time to time, and we generally do not comment on our purpose or plans,” he said. Since returning to Apple as CEO in 1997, Jobs has made 13 acquisitions, according to Bloomberg data. Of those, five happened in the past seven months alone.

Apple rose $5.26 to $266.35 at 4 p.m. in Nasdaq Stock Market trading. The shares have jumped 26 percent this year. Google gained $4.91 to $530.60 and has declined 14 percent this year.

Another reason behind Apple’s spending spree may be that it wants to keep certain startups out of Google’s hands, Needham’s Wolf said, recalling that Apple and Google’s sparred last year over mobile-ad market leader AdMob Inc.

Jobs, speaking at a company event last month, said Apple tried to buy AdMob before Google came in and “snatched them up because they didn’t want us to have them.” Google’s $750 million takeover of AdMob is pending government approval.

‘Land Grab’

“They learned a good lesson with AdMob” because they had to settle for “second-fiddle Quattro,” said Brian Marshall, an analyst with Broadpoint AmTech in San Francisco. “They’ve got the resources. They have the team to do acquisitions now. It’s a technology land grab right now.”

Google, owner of the world’s most popular search engine, also is more acquisitive after pulling back during the financial crisis last year. Last week, the Mountain View, California-based company agreed to buy LabPixies, an Israeli developer of mini- applications such as games and calendars that Internet users can post on their personal pages. Over the weekend, Google announced the purchase of Bump Technologies Inc., a maker of 3-D software.

As for competing with Apple, Google won’t discuss other companies’ acquisition strategies, spokesman Andrew Pederson said in an e-mailed statement.

Last year, Apple hired a Goldman Sachs Group Inc. investment banker, Adrian Perica, to help the company develop deals, people close to the company said earlier this year. They say they believe Perica is the first dedicated M&A specialist on Jobs’s staff.

Risk Aversion

Even with the new attention to M&A, Jobs, 55, likely will maintain his strategy of focusing on smaller companies rather than taking on the risks of integrating large ones into Apple’s culture, Wolf said.

Counting long-term investments that the company can “liquidate in a day,” Apple had $41.7 billion in cash at the end of the last quarter, Broadpoint’s Marshall said. In comparison, Google had about $26.5 billion, he said.

Apple finance chief Peter Oppenheimer, speaking this month on a call with analysts, said the company’s investment priority continues to be “preservation of capital, which has served us well in the current environment.”

Investors said they’re happy to see Apple put some of its cash to use.

“I want them to reinvest their cash in the business,” said Michael Obuchowski, managing director at First Empire Asset Management Inc. in Hauppauge, New York, which oversees $3.8 billion in assets including Apple shares. “They are sitting on more than $30 billion in cash that is earning close to nothing.”

–With assistance from Douglas MacMillan in New York, Olga Kharif in Portland, Oregon, and Ian King, Brian Womack and Peter Burrows in San Francisco. Editors: Stephen West, Nick Turner.

To contact the reporters on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

http://www.businessweek.com/news/2010-05-03/apple-steps-up-pace-of-deals-in-race-for-startups-update3-.html

There comes a time in the lives of most investors when they hear—or overhear—talk about a hot startup, often one just getting off the ground. The question many investors have is whether they can get in on the action before such a company goes public. The answer is: “Yes, but….” Opportunities for individuals to get in on these private capital deals are very limited, both because there’s often great interest from large venture capital funds and because regulations all but prohibit small investors from taking part.

Related Story: The Next Energy Innovators
Video: Investing in Startups

Of course, knowing someone on the inside, such as a founder or board member, is the best route to participating in a private fund-raising. Short of that, some advisers say it’s worth trying to contact the firm’s investor relations representative. To gain credibility, some companies may be eager to attract a particular type of investor, such as those who work in the field where the products will be sold. William Doyle, CEO of Duluth (Ga.) startup Vystar, which raised three rounds of private capital to develop an allergy-free latex product, Vytex, sought investors in the medical profession. “It lent validity to our project,” he says.

Don’t expect financial advisers to get you in on these opportunities—and don’t expect them to embrace the prospect of your doing so. Experienced advisers often treat the idea of investing in a single, private company with deserved skepticism. After all, they see many fads come and go and know the returns on major venture capital funds come from a few winning selections amid a sea of failures. Milo Benningfield, a San Francisco adviser, says private startups are like baby sea turtles that must rush across the beach past predators to survive. “If a good tech idea can even hatch, it has merely won the right to try to cross the sand and then faces even greater threats in open water,” he says.

Also keep in mind that most private companies require that investors meet the Securities & Exchange Commission’s definition of an “accredited investor.” That includes a person who makes at least $200,000 a year (or $300,000 jointly with a spouse) or has a net worth of at least $1 million. Those levels will likely be raised as regulators tighten rules in the wake of the many fraud schemes exposed since the market crash, says financial adviser Keith Springer, president of Sacramento’s Capital Financial Advisory Services. “After Bernie Madoff and [Allen] Stanford, it’s going to get much harder for individuals to invest.”

If you do qualify as an accredited investor but lack connections, some alternatives gaining popularity may provide access. These include SecondMarket in New York and SharesPost in Santa Monica, Calif., which function something like stock exchanges for trading shares of private companies. SharesPost operates like an automated eBay auction, allowing buyers to bid directly on shares. SecondMarket offers several purchasing options, including the traditional method in which a human go-between matches up buy and sell orders.

Because shares of private companies are subject to a host of restrictions that don’t apply to shares of public companies, the process of buying and selling can take much longer to complete. “We may be talking to investors for days or weeks before shares are sold,” says SecondMarket Chief Strategy Officer Jeremy Smith. Sellers are often employees of private companies, such as Facebook, who have been awarded shares as part of their compensation. Since a lack of information can make valuing shares tough, SharesPost offers free research reports on companies it lists. SecondMarket sells reports.

If you get in early, be prepared to wait. In the case of “most small companies, you’re looking at a five- to seven-year investment before you could profit,” says Vystar’s Doyle.

GETTING IN EARLY
Things to consider before investing in a hot growth company that hasn’t yet gone public

1. Do you qualify as an “accredited investor” under the current SEC definition?

2. Do you have reliable information about the company’s finances?

3. Can you gain entrée through personal connections to the company, its existing investors, or its board? Do you work in the same field as the company, which could make you a more attractive investor?

4. Have current shareholders listed to sell on one of the secondary market platforms?

http://www.businessweek.com/blogs/personal_finance/archives/2009/07/startups.html