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Considerations for attracting startup investors

Which new California businesses qualify as startups is a common question in entrepreneurial circles. Typically, the term "startup company" refers to a new organization that has little or no history and little or no sales. This lack of history makes a comparison with other businesses or time periods difficult or unduly speculative. Because they lack a track record of success, startups are often seen as high-risk. Investors are often more interested in a startup's core idea or technology than they are in immediate revenues or other numbers.

People who invest in startups will typically also take into account the business plan and the expertise of the business owners. There is debate as to when a startup ceases to be a startup, with one opinion being that it is not a startup company anymore once its revenues are sufficient to cover operational costs day to day. Another school of thought says it's a matter of time, with two years of operational history removing the startup moniker.

The term is most often associated with technology companies; although, any new business might be referred to as a startup. In order to appeal to investors, the entrepreneurs behind the startup might make pitches highlighting their most interesting products or their marketing and business plans. Venture capitalists or angel investors might consider investing in the company if the plans, people or products are appealing enough.

In a case where California business owners or entrepreneurs are trying to raise money to fund a startup, an attorney might be able to help. Legal counsel with experience in business formation and planning, for example, might examine the client's situation and suggest business structuring options to attract investors. An attorney might lay out the differences between partnerships, corporations and limited liability companies or draft and file the legal paperwork necessary to establish a business entity for the startup.

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