Where the Money Is
FYI: From the editor
There's a lot of truth in the old cliché that you should always start looking for capital when you don't need it
I realize that I say this at my peril, given the traditional antipathy between entrepreneurs and investors, but I came away from reading this month's cover story, " The Money Hunt," with a renewed respect for the people who work in the capital markets. As a group the capital providers really do know what they're talking about -- no doubt because it's so hard to get away with faking it in their line of work. When you're charged with investing other people's money, either you produce a return or you're out. End of story.
As business analysts, moreover, capital providers are at their best when they're focusing on specific companies at specific stages of development, as the experts assembled by finance editor Jill Andresky Fraser do in "The Money Hunt." Fraser presents the pros with five companies in search of financing. The businesses range from fledgling LouVan Products, in Broken Arrow, Okla., a toy maker with $200,000 in sales and no profits, to well-established Main Medical, based in Pittsburgh, a $13-million provider of health-care services.
In offering their comments, the experts remind us how important it is to think strategically about the process of raising capital. You can draw your own conclusions from their observations, but three points jumped out at me.
- There's a lot of truth in the old cliché that you should always start looking for capital when you don't need it. Some options simply aren't available when you're trying to get cash just to stay afloat.
- Don't turn up your nose at Small Business Administration financing. Yes, the paperwork can be cumbersome, and the cost of capital is high, but the SBA lending programs fill an important gap in the credit market.
- Entrepreneurs should put aside their prejudices against big-company veterans. Seasoned executives who've retired from large competitors can bring a lot to a small business, including angel capital and a wealth of industry experience.
By the way, Fraser has a new book coming out this month, titled White Collar Sweatshop: The Deterioration of Work and Its Rewards in Corporate America. It's a departure from the subjects she writes about for Inc., but she brings her trademark reporting and writing skills to the project as she investigates work life in the new economy. The picture she paints can be described only as grim. You can't read the book without reflecting on the emotional toll that the new economy is taking on the very people who, in theory at least, should be its biggest beneficiaries.
And don't miss ...
In this month's Inc. Case Study, " Great Expectations," senior feature writer Edward O. Welles looks at MTW Corp., a 16-year-old software company that goes to extraordinary lengths to create an environment that employees will love. In an industry whose average staff turnover is 30%, MTW loses less than 7% of its workers a year. Given the high cost of replacing people these days, you might want to think about trying some of MTW's techniques.
Then there's the latest episode in the continuing adventures of E-Diaries columnist Andrew Raskin. Since his departure from the Internet company he cofounded, he's been inundated with E-mail messages offering him advice, empathy, and some very unusual job proposals.
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