Case Study

Why doesn't Lance Miller worry about raising money? Because he's found a better way to secure his company's finances

In the good old days--meaning, as recently as a year ago--it was easy for entrepreneurs with growth on their minds to devote more energy to raising cash than to managing cash flow. A lot of money was out there chasing deals. At the same time, in many industries (particularly those experiencing consolidation or reconfigurations as a result of new technologies), there was enormous pressure to grow fast, and immediately.

Yet again, a new age of capital is dawning. Market volatility, shrinking financing opportunities, and heated competition for money are imposing a new discipline--or should we say, the old discipline--on business owners. Sound cash-flow management is the name of today's game. For a fair number of entrepreneurs, especially those in the start-up and early phases of operation, it may be the main source of financing. While such an approach may force companies to grow more slowly, at least at first, it may also result in stronger long-term prospects and, eventually, better financing potential.

To Lance Miller and his partners, Phil Underhill and Mohammed Kabir, the new realities make good sense. Miller, formerly a top executive at a major New York City bank, joined forces last fall with the two established technology consultants to start up Integration Logic Inc., which produces customizable productivity and E-commerce applications for Internet, intranet, and extranet users. So how much capital has the trio tried to raise so far? Absolutely none.

"I come from the old school," says chief executive Miller, "which means that I focus on profitability and cash flow above all else. My partners and I agree there is a strong need for our products in the marketplace right now. We want to be able to satisfy that need, not to get so distracted chasing after money that we wind up missing our competitive moment. Quite frankly," he says, "we get scared when we look at companies that have raised money and are now burning through it in situations where their business fundamentals are still weak. At the end of the day, how many of them are going to be around?"

Miller says that he and his partners, with their sights set on long-term success, are following three business fundamentals in order to reach their goals: "Achieve and maintain profitability from day one. Keep cash flow positive. Create real company value by building our customer base and our product base." Those achievements, he believes, will stand them in good stead when they do seek outside funding. "Just think how much stronger our position will be if we put off raising capital until we can demonstrate our achievement of those fundamentals, rather than simply having a good story to tell," he says.

Acknowledging that Integration Logic must pursue its growth strategy on "Internet time"--meaning quickly--Miller hopes that the company will be in a strong-enough position to raise $1 million to $5 million from private-equity investors sometime this quarter. "We have plans for some killer applications, strategic marketing ties with some very good advertising and public-relations agencies, and, so far, a great response from our customers." He pauses. "I've spent 15 years in corporate finance and know how to talk to investors. If we just wait until we're able to prove how solid our business plan is, this company will be unstoppable."