Startups have an inherent flaw: they mostly fail. Even with overwhelming talent, outstanding early product trials, and an all-star team, success is still unlikely. We’ve all heard the statistic that one out of ten startups make it. It’s not a secret. We all go in with two eyes open. It appeared that ViewPoint was no exception. (Location 72)
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From there, they bring an entrepreneurial approach to build value. (Location 87)
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Existing businesses provide established markets, so they don’t have to worry whether they are too early or whether another company with more funding will beat them to market share—or in some cases, worry about creating a market from scratch. (Location 92)
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Further, many successful small businesses have been operating for decades. (Location 95)
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I acquired the company in early 2015 with a low six-figure investment and a bank loan. (Location 107)
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In the first eleven months, my team more than doubled the marketable value of the company, simply by bringing a complimentary level of innovation into an established and stable business. (Location 112)
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This was accomplished at a fraction of the cost and a fraction of the time, and provided 100 percent ownership of the company. (Location 118)
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Compare this to raising capital by selling company stock while simultaneously trying to find product/market fit…all while under the stress of managing a cash flow negative burn. It’s no wonder startup founders sometimes confuse equity investment with revenue. (Location 128)
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First, I’d say that in my experience, very few entrepreneurs raising capital to launch startups are rich, so I’m not sure the comparison is all that valid. (Location 133)
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Banks offer loans to buyers for up to 90 percent of the purchase price, using the assets of the business as collateral. (Location 136)
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The financing of these deals is typically done in one fell swoop, with you bringing a “down payment” or “equity infusion” and the bank providing the balance. (Location 137)
The VC game is one of portfolio management. Meaning there needs to be a sizeable enough portfolio for VC backing to make sense. (Location 191)
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This provides capital for eight to fourteen companies per fund. Three winners pay for the fund and it’s return, while nine entrepreneurs get a shot “at bat” in a game that only accepts home runs. (Location 193)
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Most people simply don’t understand that you can buy a substantial and scalable existing business for under $100,000 down. (Location 255)
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In fact, almost everybody who starts down the path of acquiring a business never pulls the trigger. I believe the reason is that they lack a process to get them from where they are today to where they want to go. (Location 276)
Conversely, a startup is considered one of the riskiest investments around. And rightfully so. As we’ve seen, the infrastructure, proof of concept, product market fit, and revenue all need to be built from zero. That translates as any return to an investor is unlikely, so the average positive return needs to be very high to compensate for the risk. (Location 328)
As a result, companies under $1 million in revenue might sell for two to three times their cash flow, while large, publicly traded companies comfortably trade at a price-to-earnings ratio in the twenties or well beyond. You can buy McDonald’s or Apple today on the open stock market for eighteen to twenty-five times their earnings. (Location 333)