By Nathan Denny and Scott Axelrod
This Private Advisory Board session on Entrepreneurship yielded just a single issue. But that issue — how to raise capital for a new business that’s barely gotten off the ground — is pretty close to the hearts of many CEOs.
Issue No. 1
This CEO is creating a service solutions business. The issue is, “How do I get my list of things done without breaking the bank?”
How can I create sufficient resources to cover all the bases and get my service solution launched, with me (so far) as the only employee?
Why It’s Important
- The CEO is the only employee at this stage, but anticipates ramping things up to the extent of having as many as 27 employees by the end of 2012.
- She estimates the financial impact at $10,000,000.
- The two biggest concerns are over-obligating the CEO’s time and controlling costs.
Clarifying Questions (Background/Understanding)
- How have you collected your contractors?
- Who does the customer pay?
- What percentage does the contractor pay you?
- What does your company look like in 6 months?
- How much revenue do you plan on making in year one?
- If you can’t find investors, how much can you invest yourself before you’d make a decision?
- How much freedom are you willing to give up (related to investors)?
- What’s in it for the customer? (You are competing with contractors.)
- Obtain business development people that can sell the product — no one will invest prior to seeing sales.
- Keep the company virtual as much as possible to keep costs down.
- Hire private contractors, not employees (to keep costs of benefits down).
- Book recommendation: “Rework” by Jason Fried (the story of a virtual, $50m company with 16 employees)
The CEO will run a test for sales and then explore alternative ways to raise capital with the goal of “not losing much control.”
Session date: Dec 14, 2011
Originally published: Dec 14, 2011