Grow Smart Business


Search Articles

Posts Tagged ‘Capital Access’

The Venture Capital World Keeps Getting Smaller

May 2nd, 2013 ::

By Maria Valdez Haubrich

Are you seeking venture capital to grow your small business? Then you’ll find a little good news, but mostly bad news, in the continued consolidation of U.S. venture capital firms. Venture capital firms raised $4.1 billion from 35 funds in the first quarter of 2013, according to the latest report from Thomson Reuters and the National Venture Capital Association (NVCA).

The good news: That’s an increase of 22 percent compared to the level of dollar commitments raised during the fourth quarter of 2012. The bad news? It’s a 14 percent decrease in terms of the number of funds.

Measured in terms of the number of funds, the first quarter of 2013 was the slowest quarter for venture capital fundraising since the third quarter of 2003. In addition, the majority of the total fundraising (57 percent) came from the top five venture capital funds, three of which are based in Massachusetts (Battery Ventures X, Third Rock Ventures III and Spark Capital IV).

“The first quarter venture fundraising activity really demonstrates the contracting and consolidating nature” of venture capital today, John Taylor, head of research for NVCA, said in announcing the report’s results. “The lack of a strong exit market is keeping many funds that would like to be raising money away from investors until they can demonstrate a track record. This dynamic is keeping the number of funds raised low.”

The trend is going to continue, Taylor says, warning entrepreneurs they should be prepared for fewer funds in 2013, and noting that this will ultimately decrease investment levels from traditional firms.

The NVCA reports that there were 30 follow-on funds and five new funds raised during the first quarter of 2013, for a 6-to-1 ratio of follow-on to new funds. (A “new” fund is defined as the first fund at a newly established venture capital firm.) Based on dollars raised, follow-on funds account for 98 percent of total dollar commitments made during the first quarter of 2013. This continues a trend that’s been going on during the past five years, in which time follow-on fund dollars have accounted for a whopping 92 percent of total venture capital fundraising.

Image by Flickr user tuppus (Creative Commons)

Web.com Small Business Tip of the Day: Banks Optimistic About Small Businesses

April 26th, 2013 ::

If you’ve been holding off on applying for a small business loan, now might be the time to make your move. A recent survey conducted for FICO, an analytics software company, revealed 62 percent of U.S. banks are optimistic that the demands for small business loans would be met in the next six months. In addition, 89 percent of banks surveyed said the approval rate for small business loans would hold steady or increase, and 79 percent of respondents believe the delinquency rate on small business loans would remain flat or decrease in the same time period. The survey results could mean small businesses would have more capital to begin investing and hiring again.

U.S. Crowdfunding More Than Doubled Last Year

April 23rd, 2013 ::

By Maria Valdez Haubrich

Crowdfunding—a method of soliciting small donations of money from large groups of people online—is growing exponentially, according to new data from research firm massolution. According to the company’s annual 2013CF – Crowdfunding Industry Report of more than 308 crowdfunding platforms (CFPs), CFPs worldwide raised $2.7 billion in 2012–an 81 percent increase compared to 2011.

CFPs successfully financed more than 1 million crowdfunding campaigns, with 95 percent of these taking place in North America and Europe.  In North America alone, crowdfunding volume more than doubled, growing by 105 percent to hit $1.6 billion. This year, massolution expects worldwide crowdfunding volume to top $5 billion, largely thanks to new laws in the U.S. that will enable crowdfunding to expand beyond simply seeking donations or rewards-based contributions, and actually seek equity investments.

The current report focused on lending-based, donation-based and reward-based crowdfunding. However, thanks to the Jumpstart Our Business Startups (JOBS) Act signed into law last April, which will allow non-accredited investors to make investments in companies in return for equity, equity-based crowdfunding is expected to grow substantially in 2013 and beyond.

The SEC still needs to revise several key sections of the act before equity-based crowdfunding can take place in the U.S. While the SEC has failed to meet deadlines for doing so, the regulations are expected to be set by the end of the year.

What types of campaigns are most likely to get funded via crowdfunding? Massolution identified the five most popular types of crowdfunding campaigns and found social causes still lead the pack; nearly 30 percent of all crowdfunding activity involves social issues.

However, business and entrepreneurship campaigns are moving up in the ranks, with 16.9 percent of crowdfunding activity last year coming from this category. In fact, massolution reports that last year’s growth in lending volumes was primarily due to crowdfunded microloans and community-driven loans to small and midsized businesses.

Films and performing arts accounted for 11.9 percent of all crowdfunding activity in 2012, and music and recording arts accounted for 7.5 percent. The emerging category last year was energy and environment, which accounted for 5.9 percent of crowdfunding activity.

A few interesting trends massolution points out that could have implications for small businesses:

  • Crowdfunding is no longer just for small companies seeking to fund individual projects, but is poised to become a means by which big corporations and even institutions could raise funds. This could mean even greater competition in the crowdfunding space, making it harder for small companies to stand out.
  • At the same time, new platforms are likely to emerge dedicated to smaller companies and even specific industries, which could make it easier to find financing within these platforms.
  • In fact, there’s even opportunity for entrepreneurs to start their own crowdfunding platforms to target underserved niches.

Image by Flickr user James Cridland (Creative Commons)

Web.com Small Business Tip of the Day: Crowdfunding Fees

April 22nd, 2013 ::

If you’re considering using a crowdfunding website to finance a product launch, you’re not alone. Global crowdfunding grew 81 percent to $2.7 billion last year and successfully funded more than 1 million campaigns. But did you know you most likely have to pay fees to participate? Depending on how much money you need to raise, crowdfunding may or may not be a viable option for you once you consider how much the crowdfunding website charges in fees. Kickstarter, one of the most popular crowdfunding sites, charges a 5 percent fee for every successful project. Some sites charge even more for projects that don’t meet fundraising goals, so check the fine print before you sign up.

Web.com Small Business Toolkit: CrowdIt (Crowdfunding Site)

April 17th, 2013 ::


Although it’s not “officially” launching until June 4, 2013, CrowdIt is creating buzz for its crowdfunding projects by previewing early submission through its new “carousel.” In addition, projects submitted by June 1, 2013 are eligible to win $10,000 from CrowdIt based on which project reaches the highest amount of funding by August 18, 2013. CrowdIt acts as a virtual incubator and is taking a new approach to crowdfunding by including peer-review feedback, mentoring and business networking as part of its offering. Flexible funding options mean you can request full or partial funding based upon the unique needs of your crowdfunding campaign.

Web.com Small Business Toolkit: Good Clean Fund (Crowdfunding Tool)

April 10th, 2013 ::

Good Clean Fund

Looking for an alternative crowdfunding source? Check out Good Clean Fund which promises more features and functionality (like a drag and drop editor) than Kickstarter—and it’s free. Good Clean Fund requires you to use PayPal or Stripe (to collect your money) and then you can begin to build your campaign. Enter in the basic details, connect with your Facebook and/or Twitter account, and you’re pretty much done. To make your crowdfunding campaign more enticing for investors, add videos, images and comments and more. You can easily play with the design of your crowdfunding page and update it during your campaign—you’re in charge.

Web.com Small Business Toolkit: Eileen Fisher Business Grant Program (Grants for Women Entrepreneurs)

April 1st, 2013 ::

Eileen Fisher Business Grant Program

Designer Eileen Fisher started her business with just $350 in her savings account. Now she wants to help other women by inviting women-owned businesses to apply for her ninth annual Business Grant Program for Women Entrepreneurs. The program celebrates top women founders of innovative companies that foster environmental and economic health in their communities. Up to five grants of $12,500 each will be awarded to prospective applicants. Recipients will also attend a two-day conference in New York City, meeting with past beneficiaries and Eileen Fisher teams, in early 2014. Only for-profit businesses or for-profit/nonprofit hybrids (social enterprises) will be considered for this grant. The deadline is May 31, 2013.

Web.com Small Business Toolkit: ProHatch (Crowdfunding)

March 14th, 2013 ::


Interested in crowdfunding to raise capital for your business? Start by educating yourself on this source of startup capital by signing up with ProHatch’s Online Crowdfunding Incubator Program for Small Businesses. The Online Crowdfunding Incubator provides free information and consultation on how to effectively prepare your business to successfully and quickly raise capital through crowdfunding–via social media and other online tools. “Coffee & The Crowd” is an online webinar training program series that gives participants an opportunity to enjoy a free cup of Starbucks coffee, compliments of ProHatch, while being educated on the latest information about crowdfunding and business preparation by both ProHatch and industry experts. Register now; participation takes place this week.

SBA Proposes Changes to 2 Small Business Loan Programs

March 14th, 2013 ::

By Karen Axelton

Are you seeking financing for your small business? Then you may be happy to know that the SBA is proposing changes to two of its popular small business loans that would result in streamlined paperwork and easier access to capital for small businesses.

“Streamlining and simplifying has been a key focus of our agency over the last few years,” said SBA Administrator Karen Mills. “The changes are the latest steps to reduce paperwork burden, with our eye on the larger goal of expanding access to capital and giving entrepreneurs and small business owners the financial resources to grow and create jobs.”

The proposed changes affect the 7(a) and 504 loan programs, and include:

Eliminating the Personal Resource Test: Small business borrowers will no longer have to obtain a maximum level of personal finance resources in order to qualify for a 7(a) or 504 loan. This will streamline the loan process by eliminating currently complicated regulations lenders use to determine how much collateral is required.

Revising the Rule on Affiliation: This change will expand access to SBA loans to businesses that, under current rules, wouldn’t qualify as small businesses under SBA’s size standards because they are associated with other companies. It also would streamline 504 loan applications and reduce paperwork requirements for both the 504 and 7(a) loan applications.

Eliminating the Nine-Month Rule for the 504 Loan Program: This change would remove a restriction that requires a business to include in its 504 project only expenses incurred nine months prior to submitting the loan application. The new rule would let businesses include expenses incurred at any time—such as costs for projects that were put on hold for more than nine months due to a natural disaster.

The 504 and 7(a) loan programs are the SBA’s biggest lending programs. The 504 program provides long-term fixed asset financing that small businesses can use to buy or improve land, buildings or equipment. The 7(a) loan program helps eligible small businesses access credit when they have been turned down elsewhere.

For more detailed information on the new proposed rules and their benefits, visit http://www.sba.gov/content/revised-oca-regulations-504-and-7a-loan-program.

Image by Flickr user mrsdkrebs (Creative Commons)

Small Business Optimism Takes a Nosedive Post-Election

December 13th, 2012 ::

By Maria Valdez Haubrich

The recent presidential election seems to have put small business owners into a tailspin—at least, it has if the latest Wells Fargo/Gallup Small Business Index is any indication. In November (post-election), the Index dropped to -11, down from 17 in July. Entrepreneurs have not been this pessimistic about their businesses since July 2010.

The Index measures small business owners’ current feelings about their businesses, including financial status, ease of getting capital and credit, sales, cash flow, number of jobs. In the first two quarters of the year, small business owners were becoming increasingly optimistic, and the Index hit a high of 23 in May. (For comparison, before the Great Recession hit in 2008, the Index was almost always above 100.)

In November, small business owners’ future expectations for their financial situation, cash flow, capital spending and hiring during the next 12 months all worsened significantly, Gallup says. Specifically:

  • One in five small business owners (21 percent) believe the number of jobs at their company will decrease over the next 12 months. That’s the highest percentage Gallup has measured since the Index began in 2003.
  • One in three (34%) predict their company’s capital spending will decrease over the next 12 months — the highest percentage since July 2010.
  • Some 30 percent of small business owners expect “poor” cash flow during the next 12 months — the highest Gallup has measured to date.
  • Some 28 percent expect to be in a “poor” financial position 12 months from now — the highest Gallup has measured to date.

While future expectations were primarily responsible for the overall drop in the Index, the small business owners’ assessments of their current operating conditions also declined in November, falling 9 points to -10.

The results suggest small business owners, who were previously fairly neutral about current operating conditions, have become pessimistic not only about the future but the present as well.

“As entrepreneurs, small-business owners tend to be optimistic by nature, and relatively more optimistic about the future than the present,” Gallup’s results note. Will the small business owners’ outlook lead to a weakened economy going forward? If small business owners live up to their plans to cut capital spending and reduce the number of jobs at their companies, it could do so.

How do you feel about the results? Do they jibe with your outlook?

Image by Flickr user M Hildingh (Creative Commons)