Networking Is Essential for Professionals, Too
Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the
September 12, 2001 edition of U.S. 1 Newspaper. All rights
reserved.
Launching the Start-Up Without a Rich Uncle
What is the best way to fund a start-up? “For most
people, a rich relative is still the best form of financing,”
says James Scott, founder of The CFO.com. Luckily for
entrepreneurs
without a wealthy uncle in the family tree, he says this is not the
only way to find the cash to get a new business up and running.
Scott sits on a panel discussing “Financing Alternatives: Creative
Ways of Raising Money,” on Wednesday, September 12, at 5 p.m.
at a meeting of the New Jersey Technology Council at the Fleet Bank
Training Center in Jamesburg. Other panelists include Jim Gunton
of the NJTC Venture Fund and Bruce Haislip of Elity Systems.
Cost: $50. Call 856-787-9700.
Scott, who says he was “educated entirely by the state,”
received
his undergraduate degree in economics from Rutgers in 1976 and his
Rutgers MBA in finance in 1981. He thought he would make a career
in commodity trading futures, but instead gravitated toward getting
new companies — or new divisions within companies — up and
running. On his first job, for Greater Media in East Brunswick, he
started a cable division that went from “zero to $5 million in
two years.” Other start-up opportunities followed, including a
10-year stint at Telecom Analysis Systems in Eatontown, a company
he joined early on and helped take to $20 million in sales.
“I like to bring order to chaos,” Scott says of a reason he
is drawn toward start-ups. He likes the energy level at these new
companies, and the unique opportunity they offer to “solidify
a dream by getting the resources to make it a reality.”
In his last job, Scott was CFO for KnowledgeWindow.com (formerly
VLearn),
a Princeton company that enables corporate learning over the Internet.
Two factors led to his resignation from that start-up. “I had
a bad back,” says Scott, a resident of Ocean Township. “The
51-mile trip was just too much.” The second reason was that Scott
had been mulling over an idea. Young, growing companies do not need
— and often can’t afford — a full-time CFO, but they badly
need the expertise a CFO brings. Two years ago, Scott founded his
own company to answer that need.
Setting up an office in Spring Lake, and hiring his wife, Carolyn,
also a Rutgers MBA, to handle marketing, Scott offered himself as
a virtual CFO to tech start-ups. He says he acts in this capacity
for about five companies at a time. His clients include Dovetail
Sciences
in Allentown, Pennsylvania, EnCamera Sciences Corp. in Arizona, and,
closer to home, ExpertPlan, a Cranbury company that provides Web-based
retirement plan administration.
The CFO.com was founded in 1999, some months shy of the Internet
meltdown
that caused a number of companies to drop the dot-coms from their
names in much the same way that Irish immigrants with names like
O’Reilly
and O’Meara were said to have “dropped the Os in the ocean”
as they approached Ellis Island. But Scott has no desire to distance
himself from the Internet. His company’s name offers great branding,
he says, and besides, he has not lost his faith in the power of the
Internet. “The idea of information on the Internet has changed
the way people think,” he says.
Still, in Scott’s opinion, the business model espoused by many
Internet
companies left a lot to be desired. “The whole funding thing was
overblown,” he says of the often-successful attempts of untried
entrepreneurs to raise tens of millions of dollars. “The whole
ramping up quickly thing was overblown.” And, of course, putting
revenue generation a distant third to recruiting top talent and
grabbing
market share proved disastrous.
With the dot-coms on their backs, and those who invested in them
smarting,
the venture capital outlook for tech start-ups in general has
deteriorated
badly. “If the atmosphere for tech start-ups was 10 on a scale
of one to 10, it’s down to a two or three,” says Scott. “It’s
still possible to get funding, but much harder, and at much lower
valuations.”
Here are some ways entrepreneurs can pull in the cash to get their
start-ups to the next level.
Turn those pockets inside out. “I won’t work withsomeone who hasn’t put in his own time and his own money,” saysScott. Investors have the same criteria, so the owner of a newbusinesshas to be prepared to dig into his own savings, and perhaps evenmortgagehis house or sell some assets to get the business going before heasks outsiders to provide funding.Review all of the company’s assets. Scott has consultedto Bluejeanmedia.com, an Internet publisher that put up storiesreaderssent in. The company is now in bankruptcy, he says, but its ownerretains the rights to the content readers sent in, and has put ittogether into a book. She is using the book, says Scott, to”financea comeback.” The lesson here is that companies, and especiallytech companies, often have assets they never consider valuable, andthat these assets can be used as capital.Some of these assets can be used as collateral, too. That is the casewith ExpertPlan, one of Scott’s clients. “They have about 100plans,” he says of the 401 (k) plans the company administers.”They’re adding about 10 or 20 a month.” These plans havevalue to anyone who might consider purchasing ExpertPlan, Scottexplains,in the same way that each cable subscriber adds value to a cablecompany,and each water customer adds value to a water company. In the caseof ExpertPlan, Scott figures each 401 (k) plan adds $10,000 to thecompany’s value. That is money ExpertPlan can use as collateral, saysScott, who is in the process of helping the company raise $2.5million.Choose landlords, vendors, and alliance partnerscarefully.”There are landlords in New Jersey no one should work with,”says Scott. These are the landlords that require personal guaranteeson office leases, and show no inclination to bend with the winds ofeconomic change. Others will work with tenants, perhaps helping themthrough a cash crunch. “You want to do business with goodpeople,”says Scott. Establish a network of vendors, customers, businesspartners,and landlords, and do your part by helping them out — perhapsby sending business their way.Network like crazy. The advice Scott offers toentrepreneurslooking for capital is the same advice so often given to job seekers— network, network, network. Let absolutely everyone know youare working at funding your company. “Tell vendors, customers,your accountant, everyone in the family. No source should beoverlooked.”Know where to find angels. Many entrepreneurs spend theirdays going to meetings and funding fairs to meet angel investors.This isn’t the best approach, says Scott. A better tactic is toresearchyour company’s industry so well that you are aware of all of theplayers.Among them are recently retired executives, some of whom may wantto stay in the game. These are valuable contacts, and, with luck,one might decide to fund your company.But even if an angel can’t be induced to bite, all is not lost.”A lot of people think money is going to solve all theirproblems,”says Scott, “but that is not the case. Almost any business canbe built slowly.” A big infusion of cash is nice, but a solidbusiness plan is better.Top Of PageNetworking Is Essential for Professionals, TooWith her frequent court appearances and complicatedlove life, Ally McBeal doesn’t appear to spend a lot of timenetworking.TV attorneys — even those trying to make sense of dimpled chads— seem to be living a glamorous life. To mesmerized TV audiences,the practice of law looks like all drama, all the time. But, accordingto Julie Battista, a real life attorney who is an associatewith Pepper Hamilton, networking, an activity not known for inspiringexciting fiction, is something no successful attorney can overlook.Battista joins a panel speaking on “Networking for Success”at a meeting of the Central Jersey Women’s Network on Thursday,September13, at 6 p.m. at the Wyndam Mt. Laurel. Other panelists include EdKelleher of Kelleher Associates, a company specializing in careertransition counseling, and Robin Hurd-Graham, a corporatetrainer.Cost: $35. Call 908-281-9234.Battista, a graduate of West Virginia University (Class of 1990) whoholds a J.D. from Temple, says “people don’t think of lawyerswhen they think of networking.” Lawyers themselves give littlethought to the process of building contacts to build business, shesays, at least they don’t early on in their careers. “It’s nottaught in law school,” she says.Law firms don’t spend a lot of time talking with their new associatesabout networking, either. Yet a solid roster of clients is one ofthe main things a law firm looks at when it decides which of itsassociateswill make partner. Becoming a partner in a firm is the goal of mostlawyers in group practice. The partners, each receiving a share ofthe firm’s profits, make far more than associates do. And, what’smore, in most cases, an attorney is not allowed to remain on as anassociate past the time — perhaps his sixth or 10th year out oflaw school — that the firm grants partnerships.Even after partnership is attained, income varies among a firm’spartners,and an important determinant in any one partner’s share is the amountof business he brings in. Networking is an important tool in bringingin business, and Battista says that is the case not only in law.”It’strue in accounting, insurance, consulting, and in other serviceprofessionals,”she points out.These are some of Battista’s networking suggestions:Start Early. This is a tough one, she admits. The firstyears in practice are an intense time for attorneys, who are expectedto quickly come up to speed on legal procedures and, typically, tobill lots of hours. Still, Battista says, if attorneys get involvedin networking early on, they will have time to develop and deepenrelationships with young professionals in other fields. As thesecontactsmove up in their organizations, they will be in a position to handwork to friends. Those who jump into networking years later, perhapswhen they are being considered for partner, will not have the sameopportunity to develop real friendships.Keep in touch. Even young attorneys, busy as they are,should make time to keep up with friends from college and law school,and with family and other friends too. “Now, with E-mail, it’seasy,” says Battista. Just write a quick note, or forward aninterestingarticle. Anything to keep the friendships going. And remember, shesays, to keep the relationship reciprocal, offering help, leads, andwork referrals, and not just expecting to be on the receiving end.Try networking events. “I found one of my biggestclients at a presentation/networking event,” Battista says. Sheknows many attorneys are not comfortable at networking gatherings,but says the effort can pay off. Anyone who just can’t stand thethoughtof wading into a room of strangers, though, can still make valuablecontacts. Battista suggests volunteer work or joining a sports group,”something where you’re comfortable.”Speak up. Battista describes herself as outgoing. Sheenjoys networking, and is even happy to speak in front of a crowd.Making presentations, she says, is an excellent way to meetprospectiveclients. So valuable is this tool that she suggests those who aretimid about speaking might try joining a group like Toastmasters,which offers coaching and support to those who want to get up in frontof an audience.Be persistent. The big client Battista met at a networkingevent had a lawyer on staff when she met him, and was happy with hiswork. She stayed in touch with her new contact for more than a year,and when his attorney stepped down, she was ready to step into hisplace, bringing “substantial” business into her firm.Actually, even though Ally McBeal is never shown attendingChamberof Commerce events or speaking at Rotary meetings, she often isportrayedas doing one of the things Battista says is most important innetworking.In winning cases, and often going to great lengths to make clientshappy — even going so far as attending a prom with a client inone episode — she sets herself up to reap referrals from existingclients. Battista calls this”internal networking,” and says it isone of the best ways to win new business.Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
