Sheltowee Outpost

All Posts Author: Alex Day

Valuations and other mysteries of the dark arts- Top five factors in valuing a startup

Sep 02 2014
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Valuations and other mysteries of the dark arts- Top five factors in valuing a startup

You have your company formed and you are ready to raise the money.  So how much is that new company worth?  This is about as easy to answer as how many angels can dance on the head of a pin.  There are many, many factors that go into this.  But the ultimate answer is that your company is worth, what you can get someone to pay you for it.  Below are the five top factors that will influence the valuation of your company.

Five Steps to Creating Value out of an Idea

Aug 24 2014
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Five Steps to Creating Value out of an Idea

Ideas are a dime a dozen and just an "idea" is worth nothing.  If you have an idea and you want to turn that idea into a valuable asset, there are some things that you need to do.  Investors do not invest in ideas.  They invest in companies.  And you will absolutely have at least one investor.  You may be the only investor, but you will have an investor if the idea moves forward at all.  Below are some of the first steps you can take to generate value out of your idea.  These are the minimal steps you should take on your own before you even think about seeking outside investment dollars. 

4 Reasons You Should NOT Operate Your Business as a Sole Proprietorship

Aug 18 2014
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4 Reasons You Should NOT Operate Your Business as a Sole Proprietorship

Today I want to get down to some very basic concepts.  I want to cover why you should never run your business as a sole proprietorship.  First lets cover the difference between a business that is operated as a sole proprietorship and one that is operated as an LLC (our preferred method of establishing a legal entity for a business).  A sole proprietorship is when you have a business and you run it in your name.  There is no legal difference between you and your business. Any debt you incur is personal debt and you are directly and personally responsible for it.  Any liabilities you incur, whether financial or legal, you are responsible for them.  There is no legal distinction between you and your business. 

Entrepreneurs Fail- Even in the Fly Over Country

Aug 11 2014
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Entrepreneurs Fail- Even in the Fly Over Country

I really prided myself as an entrepreneur.  I had started a company.  I had kept it going.  Made a decent living.  I had not set the world on fire, but hey, I was still around.  And then it happened.  I got my big chance.  I started a company, raised money and had over a million dollars invested.  Sales were increasing. But overhead was increasing faster.  The business model was almost working, we just needed more capital to build out infrastructure.  It was 2009 and capital sources had dried up.  Money could not be raised.  So I did what entrepreneurs do, I bet the farm on it.  In December of 2009 I secured a small round of financing with my family farm securing the note.  I put it all in.  And in early February of 2010… it was gone.  Sales had dried up.  The management team got spooked and were working on other projects… and I was completely tapped out.  I had put everything I had accrued into the business… and it failed.  As with many businesses it was not a quick failure.  It was a slow lingering death that was spread out over the next several months.  There was the humility of failure. There were the friends who had invested and lost their money.  And there was the cleanup of the aftermath.  In all we had invested over a million dollars and it failed.  That was NOT supposed to happen.  It was supposed to be the fairy tale ending where you bet the farm and win.  I bet the farm and lost and was later forced to sell the farm that had been in my family for over 6 generations. 

Maybe It's Not Just About the Money!

Aug 04 2014
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Maybe It's Not Just About the Money!

Startups spend an inordinate amount of time chasing money.  In many cases this can become an all-consuming effort.  I know that I have found myself suffering from the "if I only had the money to do x".  Parting investors from their money can be very difficult (as it should be).  But I like to challenge startups with what can you do with what you have?  We often think that money is a cure all.  Trust me, as someone with significant experience, it is not.  In some cases the worst thing that could happen to a startup is that they easily get the funding they are seeking. 

Why I am investing in Sheltowee's Business in a Box

Jul 28 2014
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Why I am investing in Sheltowee's Business in a Box

Sheltowee's Business in a Box is a project on which I have been spending considerable time.  It is being designed as a resource for entrepreneurs, but also contains important and helpful information for a much broader audience.  In this blog post I want to share some of the reasons I think that this will serve a need.

The Overlooked Entrepreneur

Jul 21 2014
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The Overlooked Entrepreneur

I have defined entrepreneur, (one who assumes the risk), but let's really look at what an entrepreneur is.  "Entrepreneur" has become a widely used term in pop culture.  And it generally refers to that young kid that came up with an internet idea and hit it big.  And I mean no disrespect to that culture.  They are doing amazing things and driving amazing technological innovations.  Unfortunately community leaders have come to expect that this is what an "entrepreneur" is and when they develop programs and try to create a culture for entrepreneurism, it is this class of entrepreneur they have in mind.

I am going to tell you about the most important class of entrepreneurs that we have.  Can you tell me what the one absolutely essential profession is in the world?  Not the oldest profession, but the most important.  Give up.  It is the farmer.  And the farmer epitomizes the entrepreneur.  Having grown up in farming country in rural Kentucky and rural Michigan, and coming from a heritage of small farmers, I have a tremendous respect and admiration for the family farmer.  The fact of the matter is, is that none of us eat, if the community of farmers do not do their jobs. 

Challenges for those of us in Fly Over Country

Jul 14 2014
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Challenges for those of us in Fly Over Country

I have been working with technology startups for over 20 years.  There are areas of the country where the startup thrives.  Places like Silicon Valley, Boston, and New York City.  When you visit these places, places such as Kentucky, Indiana and Tennessee are considered "fly-over" country.  They are just places the "important people" have to fly over to get back and forth between these corridors of commerce.  I have had people look me in the eye and tell me that we can never be successful in Kentucky, because all of our good entrepreneurs will come to Silicon Valley.  Now keep in mind, in these areas, the idea of the entrepreneur is the pop culture idea of the Mark Zuckerberg of Facebook or the Larry Page of Google.  I want to talk about what we can do in "Fly Over Country" to create a culture that is conducive to the true entrepreneur, the small business owner who never makes it to be a billion dollar company. 

Success! It might not be what you think it is.

Jul 06 2014
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Success!  It might not be what you think it is.

Success! It is that for which we all strive. But what is "success"? As an entrepreneur or, an aspiring entrepreneur, we have to be very careful how we define this. For many it is obvious. I start a company, I grow it, I cash out for a billion dollars!!! Then I am successful. This is a trap, and one to which I have fallen prey. I started Sheltowee over 14 years ago. And by my initial definition (the one which I just posited), I am an abject failure. The reason we characterize Sheltowee as a "non-traditional Venture Capital firm" is that we don't have the hundreds of millions of dollars to invest that most traditional venture capital firms have. Our cash investments are very small, but we do invest the talent of our managing partners to the portfolio companies in which we invest. I am admittedly biased on this, but I truly believe that for the very early stage entrepreneur the resources that we bring to the table are more valuable than a large cash injection, and will bring m ...

Illegal Immigrants Are the Ultimate Entrepreneurs- And Will be the Salvation of the United States

Jun 29 2014
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Illegal Immigrants Are the Ultimate Entrepreneurs- And Will be the Salvation of the United States

When I was a young man growing up in south Central Kentucky, I, like most of my family and neighbors, worked in the fields to earn money.  I hauled hay, worked in tobacco and helped work cattle.  This was, and still is, hard work.  Well today you don't see many Americans working in the fields.  Apparently as we have become more affluent, it is beneath a teen ager to work in the fields.  You now see immigrant workers in central Kentucky, which was something you never saw when I was growing up. 

When it comes to manual labor you are seeing this shift all around the United States.  People who have come to this country to do the work that we just won't do.  And the fact of the matter is that many of the people that come here, do so illegally.  Now I grew up about as conservative as you can get.  And I still strongly identify with conservative movements.  But on one topic I strongly disagree with many of my conservative brethren, and that is on the topic of immigration.  Where many of my conservative colleagues see this as an ill that will destroy our way of life, I see it as a feature that will save America.