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business formation & planning Archives

Clearbanc uses data to fund e-commerce startups

Entrepreneurs in California may be interested in the new financing company Clearbanc, which has designed a fast alternative to venture capital funding. Clearbanc provides between $10,000 and $10 million to qualifying applicants to fund online marketing efforts. The company then collects fees starting at 5 percent from monthly top-line revenue until funding is repaid. In contrast to VC funding, this arrangement does not require entrepreneurs to give up equity. A founder of Clearbanc also highlighted the company's data-based approach, which eliminates the biases often inherent in convincing VC investors to provide money.

Experts fear venture capital bubble

Venture capital firms in California and around the world invested $160 billion in startup companies in 2008. That figure is almost triple what it was just a decade ago, and many observers are worried that an unsustainable investment bubble is forming. The amount of money being invested has also risen sharply. Venture capital deals worth more than $100 million doubled in number between 2017 and 2018, and there is a growing feeling in the sector that many investors are ignoring business fundamentals and backing ideas merely because they promise revolutionary change.

What to ask before starting a business

In recent years, it has become easier to start a business for $5,000 or less. While the barrier to entry to become an entrepreneur has been lowered, it is still important to ask several financial questions prior to starting a company. For instance, prospective business owners in California should ask themselves if they are going to sell a product or service. Generally, businesses that sell products take more money to get off of the ground.

The basics of choosing to become a limited liability company

From hiring the right employees to attracting customers, new business owners in California typically have an assortment of things on their to-do lists. Another important consideration for entrepreneurs just launching a new enterprise is how they'll opt to classify their business for legal purposes. While there are several options available, one of the least complicated is to establish a business as a limited liability company, or LLC.

Startups grow through funding rounds

Many entrepreneurs in California attempt to use investment capital in an effort to scale up their companies. Typically, a startup company will go through multiple funding rounds to meet its capital needs. In exchange for funding, investors will receive an equity stake in the business. It can take anywhere from three to nine months to complete a funding round, and later rounds generally take longer to complete because of increased due diligence.

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.

Choosing incubators or accelerators for startups

California entrepreneurs may find that establishing their startup can be difficult. However, there are planning options, such as incubators and accelerators, that they can pursue in order to be able to properly launch their startup. It is important that entrepreneurs know exactly what these programs are and which one is appropriate for their situation.

Top tips on creating a startup business

Starting a business in California is relatively easy, but actually being successful tends to be more difficult. Those who are looking to start a company should look for inefficiencies in the market that they can remedy. By looking for a niche, it can be easier for a new company to compete with established players in a given industry. A business plan can help an individual create a list of potential niches.

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