Entrepreneurship Tips — Financing

Sure, as long as they own 100% of the stock, they can do pretty much anything they want, within tax laws of course. They can pay themselves any salary, issue dividends, make a loan to themselves, etc.  However, the minute one other person owns one single share of stock, this changes dramatically. Now they have what is called “A fiduciary duty” to the other shareholder(s) to do only things that are in the best interest of the company. This has a very high legal standard called “Utmost good faith”. And if you violate this principle, then you can be sued...

Raising money is very difficult and only possible for companies that can grow large and provide a nice return to investors that warrants the risk. This is for “Equity” or stock sales. Debt can be used with home equity loans, credit cards, friends and family though if you are just starting and have no product or team. I recommend you do not start a company without at least 6 months personal expenses in the bank. Most of your input to create value (so shares can be sold for something over $0.00) will be from sweat equity. This “bootstrapping” creates value...

You cannot grow a company without some investment in sales and/or marketing. The question is really your time versus capital and which would generate the best results (ROI, speed, quality of leads, etc.).  If your business model and products are sound, you should likely raise some capital, as it will be needed for more than marketing.  It is nearly impossible to build a significant business without some capital and/or sweat equity invested.  You cannot create something out of nothing.Social media allows unpaid marketing and is the most obvious strategy. This can be time-consuming but is also rapid to measure and...

Valuation increase is all about reduction in the risk by achieving new milestones. Any startup worth outside investment has risks because it is doing something new, driven by innovation. If it is not new (differentiated in the market) it cannot demand the high gross margins needed to grow rapidly and pay investors the high return needed for that risk. Each risk that is removed by proving metrics around it is eliminated from the list and bumps the valuation significantly, sometimes by 2X or 3X even. This can mean millions more cash in a financing round and millions more net worth...

This was a question from a prospective Entrepreneur.  Maybe one that believes that he/she can create a company without any outside investors. Well, whenever you use the word “All” in a sentence you are almost always wrong, but it is true that the vast majority of startups and any company wishing to grow rapidly (scale) will require either outside investors, founder capital investment and/or sweat equity (founders working long-term for only equity). This is because you cannot create something out of nothing. Like in physics, matter cannot be created or destroyed, it only changes form. Cash investment must be converted...