Funding Startups Through Joint Ventures

Funding Startups Through Joint Ventures

Why It Might Be Smart To Form A Partnership With An Established Business

Entrepreneurs with brand-new pre-revenue companies, developmental-stage enterprises (DSEs) and fledgling companies having won their first client contracts are, generally speaking, desperately in need of capital. And, generally speaking, most funding sources shy away from companies with limited operating histories and limited tangible collateral assets. Yet these intrepid (but naive) newcomers insist on shopping the capital markets in search of either an investor or lender who will make them the “special exception” and grant them free rein and total discretion with a pile of money. Shopping in this marketplace is all too often a waste of time.

A more viable alternative for any one of these entities in need of cash might be to form a joint venture with an established and synergistic (or complementary) company. Not only do some of these existing companies have capital and credit lines of their own, but in many cases their management teams [at the senior level] have business acumen, contacts and other non-financial resources that can be leveraged by their younger counterpart in the joint venture relationship.

The key, of course, is in finding the right joint venture partner. In order to insure a productive, long-lasting (and non-traumatizing), entrepreneurs might give serious thought to utilizing the services of an outside management consulting firm or agency to facilitate the matchmaking process and to advise and assist in negotiating terms. In the immediate term, this may cost a bit of money, but in the near-term and the longer term, engaging the services of an independent third-party professional firm may save you the costs of a meandering, time-consuming, trial-and-error process.

Give some sincere thought to either financing your startup though a joint venture, or, if you are a well-established organization, to seeking out fresh, new co-venturing and licensing opportunities through an impartial, experienced consultant. In a well-crafted joint venture, all parties win.

If you have questions or thoughts regarding this brief article, please contact me via email at douglas.castle@yahoo.com .

As always, thank you for reading me. - Douglas Castle

Tags, Labels And Key Terms For This Article:

startups, joint ventures, funding, finance, venture capital, credit, incubators, accelerators, Douglas Castle, entrepreneur,

IS YOUR PROJECT OR BUSINESS UNFUNDABLE?

Why Your “Project” May Be Unfundable

Generally Speaking, Nobody Wants To “Put You Into Business”.

Funds Are Won By Businesses And Not By “Exciting Possibilities”.

Do You Have A Dedicated Management Team In Place To Operate Your Business Or Project?

Would You Like To Know What It Takes To Make Your Business Or Project FUNDABLE?

Were You Aware That Putting Words Into Quotes Implies A Kind Of “Sarcasm,” And Does Not Add Emphasis?

...Taking Steps To Make It Fundable

By: Douglas Castle

Most projects and nascent enterprises are inventions without sponsorship, dream careers which no company has yet been formed to provide, or are segregated outgrowths of existing businesses which are laden with bills (liabilities ) from the failed operation that ventured out a bit too far – and would like to have a third party (read: “patsy”) reimburse or otherwise cover those expenses to keep them from being acknowledged as sunk costs or losses.

In short, the majority of projects and startup companies are not structured and assembled as true businesses in search of capital; they are more like hobbies, options, dreams or gambles. And true project finance sources and venture capital investors are hesitant to deploy capital into hobbies, options, dreams or gambles – they prefer to invest in an organized business or project with a clear plan, a committed sponsorship, a management team in place (or in contract to be hired), and some progress already made toward meeting its objectives.

Here's a checklist of informational items which will serve you well if you are in search of project funding or venture capital. It is fairly safe to assume (and for me to say) that the more of these items which you address and the better that you handle them, the more likely it is that will succeed in winning that ever-elusive infusion of capital. The items on this checklist are in no particular order of importance or priority, and the list itself is geared toward either startup entrepreneurial enterprises or early-stage (but having great growth potential) companies.

Some of the items may not be applicable to your specific business, so use your best judgment. Also - a number of the items are redundant or will contain redundant pieces of information - don’t be a minimalist - be redundant (and repetitious, if necessary) with any of the items on the list which apply to your company or project are applicable.

There are numerous ways to get your point across, and it’s best to utilize all of them. Yes, overkill is advised, And before you issue the Plan to anyone for his or her consideration, have them execute a Non-Disclosure, Non-Circumvention And Confidentiality Agreement - this will let them know that you are serious, and that you have something of value to protect. Here’s the list:

1. Comprehensive Business Plan¹;
2. Executive Summary;
3. “Deck” Or Short Video About The Company [Virtually Everybody Loves The Movies];
4. Amount Of Investment (Capital) In The Business By Principal Officers And/Or Members Of The Management Team
5. Biographies (Resumes) And Responsibilities Of Principal Officers Or Management Team And Any Letters Of Intent Regarding Employment Or Engagement;
6. Proper Name Of Business, Domicile, Office Address, Registered Agent Address;
7. Analysis Of The Competitive Landscape;
8. Recital Of The Features And Benefits Which Will Make Your Company’s Product Or Service Different From (And Superior To) That Of The Competition, Whom You Intend To Disrupt And Displace;
9. Federal Taxpayer EIN [Employer Tax Identification Number];
10. Certificate And Articles Of Incorporation, Articles Of Formation, Or Articles Of Organization, As Appropriate;
11. Company By-Laws, As Appropriate;
12. Shareholder Agreement, Or Operating Agreement, Or Partnership Agreement, As Applicable;
13. DUNS # Of Business [Register Your Business With Dun & Bradstreet And Other Similar Business Information And Listing Services];
14. Most Recent Balance Sheet;
15. Most Recent Income Statement;
16. Pro Forma Balance Sheet;
17. Copy Of Most Recent Bank Statement;
18. Income and Cash Flow Forecast (First Quarter Shown Month-By-Month -- Second, Third And Fourth Quarters Shown Quarter-By-Quarter -- Second, Third, Fourth And Fifth Year Shown Year-By-Year);
19. Information About Key Vendors And Suppliers;
20. Information About Key Distributors, Dealers, Agents, Representatives, Etc.;
21. Sample Of Purchase Order From Vendor;
22. Website/Blog Coordinates For Company [You MUST Have A Website (Even If It Is Merely A PDF Document) Or Blog;
23. Anticipated Timing (Demand) And Application Of Proceeds Required;
24. Copies Of All Licenses, Permits And Insurance Policies Necessary To Conducting Your Business Or Undertaking And Executing Your Project;
25. Copies Of All Other Pertinent Agreements, Research Studies (Validating Your Concept) And Other Documents.

NOTE 1: The Comprehensive Business Plan should generally include all of the popular and commonly written chapters (http://bit.ly/TheBPLAN), plus, you should incorporate the following features and special touches to make it more powerful, serious and urgent:

1. A SWOT Analysis;
2. A LEGAL NOTICE AND DISCLAIMER (A Sample Follows For Purposes Of Illustration. Sadly, It’s Best To Craft One And To Then Have Your Lawyer Review And Edit It Before You Put It On The Cover Of Your Business Plan). It Makes Your Plan Look More Like A Serious Offering Document, Even If No Offering Is Involved;
3. A Detailed TABLE OF CONTENTS (Replete With Page Numbers And Roman Numerals For Each Section);
4. A GLOSSARY Of Technical Terms And Acronyms [Never Use An Acronym Without Defining It In Words];
5. An EXIT STRATEGY Section, Even If You Intend To Stay And Build The Business Forever - Always Show A Prospective Investor The (Ahem) Door To Capital Recoupment And A Heady Gain;
6. A VALUATION Model Section - How Valuable Is Your Business Now, And How Valuable Will It Become? How Is This Valuation Justified?
7. An INDUSTRY ANALYSIS Section.

NOTE 1A: Here’s a sample of the LEGAL NOTICE AND DISCLAIMER, as promised earlier:

NOTE: THIS DOCUMENT CONTAINS INFORMATION WHICH IS HIGHLY CONFIDENTIAL AND PROPRIETARY TO DOUGLAS CASTLE, COPYRIGHT© 2017, WITH ALL RIGHTS RESERVED. THIS DOCUMENT DOES NOT CONTAIN AND SHOULD NOT BE CONSTRUED AS CONTAINING LEGAL, FINANCIAL, TAX, INVESTMENT, ACCOUNTING, SCIENTIFIC, TECHNICAL OR ECONOMIC ADVICE. THIS DOCUMENT DOES NOT CONTAIN AN OFFER FOR THE SALE OF SECURITIES OF ANY TYPE IN ANY ENTITY, NOR DOES IT CONTAIN A SOLICITATION OF INVESTOR INTEREST IN THE PURCHASE OR SALE OF SECURITIES OF ANY TYPE IN ANY ENTITY. THIS DOCUMENT MAY NOT BE REPRODUCED OR DISTRIBUTED IN WHOLE OR PART WITHOUT THE PRIOR WRITTEN PERMISSION OF DOUGLAS CASTLE; ANY OTHER REPRODUCTION OR DISTRIBUTION OF THIS DOCUMENT, IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL. FINANCIAL INFORMATION CONTAINED WITHIN THIS DOCUMENT IS FORWARD-LOOKING, UNAUDITED, FOR ILLUSTRATIVE PURPOSES ONLY AND IS BASED UPON ASSUMPTIONS AND ESTIMATES DEEMED REASONABLE BY DOUGLAS CASTLE. THERE CAN, HOWEVER,  BE NO GUARANTEE THAT ANY PROJECTED FINANCIAL OR OTHER OBJECTIVES OR RESULTS CAN OR WILL BE ATTAINED RELATING TO THE SUBJECT MATTER HEREOF, AND ACCORDINGLY, NO GUARANTEE OF THE ATTAINMENT OF ANY PROJECTED FINANCIAL OR OTHER OBJECTIVES OR RESULTS IS GIVEN OR MADE HEREBY.

There it is. Build your own Legal Notice And Disclaimer, and have your attorney review and edit it before you use it. Hoohah!

Incidentally, never just send a business plan or any other information or files to a prospective benefactor or financier. Any information sent to anybody important to your future warrants a well-written (also edited and carefully proofread) letter of transmittal and a phone call in advance of any emails or snail mail submissions.

But enough of this! It’s time to get to work on making your business or project fundable.

I wish you the best of luck.

Thank you, as always, for reading me. - Douglas

p.s. If you have any questions or comments regarding this article, you may reach me directly at douglas.castle@yahoo.com. Please be certain to place the words “Question Or Comment About An Article” in the subject line of your email. While I try to answer most of my email, I cannot guarantee a response, and I cannot guarantee timeliness.