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Part 2/2

For the first 3 or 4 businesses I got involved with, I didn’t know what a business plan was but I could see where we were going. I could communicate direction and I could work with others to figure out how to get there.
Even later when I had access to a business plan (usually provided by an entrepreneur wanting capital) they were never correct.

3) know venture capital is expensive and it can mean you get huge returns too! With the right ingredients you can quadruple your business. Even if you gave half to investors you made twice as much.

Half! You say. Half! Your kidding aren’t you. Two of my most successful investments were 50/50 partnerships. We would get 50 shares each for $50 each. We would then loan in capital required at a low rate of interest.
When the companies started to make a profit and built retained earnings, shareholder debt could be paid back. Interesting enough this was also when we could get bank financing.

The concept of $1 for common shares and most all the money loaned in is called “Thin Capitalization”. It’s not only fair to shareholders but can have some great tax advantages as cash flow out is repayment of debt. Check it out with your tax adviser.

And look, nothing personal but if I’m at a party and it’s 1am, just slip me your business card or call me at the office.

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