| 1. The Next 12 Months Will Be Very Darwinian. Unlike | | | | trend, take the extra time to look for potential |
| the past few years, only the smart and the strong | | | | employees who are not as focused on the "rapid rise |
| companies will do well in the next couple of years, as | | | | to riches" and may be willing to trade a friendly and |
| there is simply not enough fat in capital markets or | | | | flexible atmosphere for the higher salaries offered by |
| the workforce to take the weak along for the ride. | | | | your larger competitors. |
| There will be more focus on protecting and building | | | | 5. Make Technology Your Friend. As executives of |
| on what you have, rather than focusing on rapid | | | | growing companies, you will need to use the Internet |
| growth. Entrepreneurs must be flexible and highly | | | | and available communications technologies more |
| responsive to market changes and customer needs, | | | | strategically than ever before in order to survive in |
| and should be extra careful in the management and | | | | the highly competitive business environment that the |
| use of precious resources. The party is not over but | | | | next few years will bring. The entrepreneurship boom |
| the bouncer at the door just got a lot bigger and is | | | | of the last 10 years means that more companies of |
| being more selective about who gets in to the party | | | | all sizes will be competing for the same customers |
| (and who stays in!). | | | | and available market share. It is critical that you take |
| 2. Growth Must Be Strategic and Creative. The | | | | advantage of internet-based resources to gather |
| capital markets for smaller and mid-sized companies | | | | competitive data, generate new leads, enjoy |
| will not be as accessible nor as affordable as they | | | | opportunities for cost-savings, and learn new |
| were pre 2008. Therefore, your plans to raise capital | | | | information that will help you manage your business |
| to grow your business going forward must be much | | | | and level the playing field in competing against larger |
| more strategic and creative than ever before, with a | | | | companies. |
| greater focus on strategic investors partnering, | | | | So what does it take to survive and manage growth |
| licensing, alliances and even domestic and international | | | | in this volatile environment? |
| franchising as strategies for expansion, as set forth in | | | | I believe that to continue to flourish, emerging |
| greater detail below. | | | | growth companies need to put (and keep) in place |
| 3. Valuations Must Be Realistic. If you have been | | | | for 2010 and beyond the following: |
| lucky enough to raise capital over the past few | | | | • A strategy and commitment to protecting and |
| quarters, don't expect the sky-high valuations that | | | | leveraging the company's intellectual property; |
| entrepreneurial companies enjoyed over the past | | | | • An experienced and mature management team |
| few years. Venture investors have returned to | | | | that knows how to actually make money, not just |
| ground level and realize that many of their | | | | raise money; |
| investments will not qualify for an initial public offering | | | | • A business model that will produce sustainable |
| twelve months later! Therefore, be prepared to give | | | | and durable revenue streams (e.g., targeted |
| up more ownership for smaller amounts of capital and | | | | customers who can actually pay your bills); |
| possibly even more control if you need to raise | | | | • A genuine understanding of the strengths, |
| equity capital. The capital markets are now focused | | | | weaknesses (and likely next moves) of your |
| on very specific opportunities, not large-scale sectors | | | | competitors; |
| or trends. There is no forgiveness or room for | | | | • A corporate culture which is more focused on |
| mediocrity just because your company is in a "hot | | | | financial performance and financial tables than pool |
| sector." You need to get more creative and | | | | tables and chill-out rooms; and |
| aggressive in your search for capital and uncover | | | | • A leadership vision which is more focused on |
| new stones, such as strategic financing from | | | | keeping your eyes on the road rather than searching |
| customers, vendors or corporate venture capitalists, | | | | for the next exit strategy. |
| all three of these sources are expected to grow | | | | Virtually all capital formation strategies (or, put simply, |
| significantly going forward. | | | | ways of raising money) revolve around a balancing of |
| 4. You Will Need to Hire the Strong-Willed and the | | | | four critical factors: Risk, Reward, Control and Capital. |
| Patient. It has always been difficult for emerging | | | | You and your source of funds will each have your |
| business owners to compete with their larger | | | | own ideas as to how these factors should be |
| competitors to recruit and retain qualified personnel. | | | | weighted and balanced. Once a meeting of the minds |
| The early-state business owners' most recent "secret | | | | takes place on these key elements, you'll be able to |
| weapon" to attract human capital has been the | | | | do the deal. |
| promise and potential upside of stock options. But | | | | Risk. Private Equity investors want to take steps to |
| the qualified workers of the past few quarters have | | | | mitigate their risk, which they can do with a strong |
| been sufficiently burned by worthless options, failed | | | | management team, a well-written business plan and |
| IPOs and dilutive mergers so that these plans may no | | | | the leadership to execute the plan. |
| longer serve as an effective carrot. To combat this | | | | |