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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | MAY 14, 2003 ENTREPRENEUR'S BYLINE By Mark Csordos Young, Entrepreneurial -- and Broke Now that venture capitalists have rediscovered caution, credit-card advances, savings, and family members are back in style
That was then and this is now. Now, we are in hard times. If ever it was true back then about VCs easily handing over millions to twentysomething entrepreneurial hopefuls, it isn't true any longer. For one thing, VCs are looking to invest large sums, usually seven figures, in a business and realize healthy returns in just three to seven years. Few company builders, and even fewer of those who are young, fit that profile. If you are looking for $100,000, that might seem like a lot of money to you, but it's not worth the VC's time. Fortunately, for those of you looking to do what I did in 1995 -- that is, build a business when you've barely left a college campus -- and to do it now, when the easy money is gone and hard times are upon us, there are other ways to raise money. All evoke a simpler entrepreneurial era, and all have their pros and cons. Let's take a look at each. Break Open Your Piggy Bank. My wife didn't want me to do it, but when I needed money for C&S Mystery Shopping, I often went no further than my passbook account. I took out $2,500 to start the company and another $7,500 to keep it going. All those nickels and dimes I had saved from my paper route, working on a lunch wagon, and stocking shelves at a grocery store were used to buy a fax machine, letterhead, business cards, and also to front funding for expenses, such as dinners at Pizza Hut before the 60-day receivable period passed. (My company used shoppers to test how employees treated customers at many national and local businesses.) It's nice to use other people's money, but you have to have enough faith in your own business to put your own hard-earned cash on the line as well. If you don't, why would others? The Bank of Mom and Dad. Well, your parents would invest -- and you know why. I never turned to my own parents, because I had enough in my bank account. However, depending upon your parents' financial situation, they may have the money you need to start your business. The positive aspect of borrowing from your parents is that they probably won't reject your business plan, they may not charge you interest, and they will still love you if you are late in paying them back. Jeff Bezos, the billionaire founder of Amazon.com, got a loan from his folks, so you would be in good company. I met one twentysomething entrepreneur who had to borrow $10,000 from his sister to make payroll until a client paid him. The drawback is that, if you can't pay your family back, it could hurt them financially -- and there could be some resentment from other family members. Credit Cards. At C&S Mystery Shoppers, I routinely used two credit cards for expenses, charging as much as $3,000 and paying it back when receivables came in, because cards were easier than cash for record-keeping purposes. One day, I was on my way to meet a successful entrepreneur, and I was listening to one of his books on tape. I was amazed when I got to his office. His home and separate office building were on lakefront property. I was told he often took clients jet skiing on the lake. I thought, "This isn't bad for someone who maxxed out on a few Visas."
 Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation. Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | MAY |
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