Corrections or additions?
<B>Abhay Joshi, founder of Discovery Semiconductors
at 186 Princeton-Hightstown Road, has acquired so many overseas
in 1999 that now 40 percent of his output is shipped abroad. And this
fits in with Joshi’s current advice.
The genie of the information revolution is out of the bottle, he says,
and we can’t put it back. Global competition is here. "I think
in the next 10 years we will face competition not just from Japan
and Western Europe but from all over the world. There will be a much
more level playing field between different world economies," he
says. Companies in the so-called "Third World" will have
of affluence and be able to compete against companies like Microsoft.
And there will be pockets of deep poverty in the wealthier nations.
Result: "There will be opportunity but there will also be anxiety
for a lot of people. I don’t think Americans are ready for it yet,
as you saw in Seattle," says Joshi, referring to the trade
demonstrations. "There is a genuine fear that companies with low
wages can compete."
His prescription: "America has to be an inventor/investor nation.
If it starts fighting to keep its logging and textile jobs it is going
to lose. America has only 250 million people out of 5 or 6 billion
in the world, and the rest of the world will not be stupid forever.
The major problem in the United States is the poor public education
system. If the kids are not educated properly, other countries are
going to get ahead of us."
Joshi’s firm produces monolithic opto-electronic integrated circuits,
costing from several hundred to tens of thousands of dollars, for
the microwave and fiberoptic components of the telecommunications
industry, as well as for the defense and space industries. Since
of 1999, when he spoke at the New Jersey Entrepreneurial
Network meeting, he has added four workers for a total of 14. He
by the advice he gave then (U.S. 1, April 28, 1999).
Following his own tip — that entrepreneurs should network to find
resources — he recently leveraged his contacts to land a $360,000
low-interest loan for working capital and equipment purchase from
the New Jersey Economic Development Authority (EDA) and Summit Bank
(see story below). But overall, Joshi says, success depends on faith
in one’s vision:
miles south of Bombay, and came to the United States in 1986 for
study at New Jersey Institute of Technology. He founded his company
in 1993, at age 28.
wife, Sharon, for her emotional support and also his father, who gave
both moral support and some money at crucial moments.
one year Joshi was without a paying job.
down, I was fortunate to have really nice people helping me,"
"Randy Harmon of the Technology Help Desk was a good resource
in the early stages and he keeps on helping us. He tries to bring
information on doing business to the entrepreneur," says Joshi.
early days of the venture, that is when you get really cold feet,"
he says. "You are an untested guy and nobody believes in you.
That is why you need to have a strong ambition and a strong faith
in the vision."
to leverage the Small Business Innovation Research program, worked
for him. "The chances of winning with a proposal for the SBIR
were one in ten. The chances of winning with a business plan for a
venture capital guy were probably 1 in 100."
successful. Says Joshi: "The business of semiconductors and
is cutthroat competitive. Don’t call me a success. Don’t praise me
too much. You cannot sit on your laurels."
First and second stage companies often need professional
help getting capital. One of the less well-known sources is the New
Jersey Economic Development Authority, which has two capital
Program for second stage companies with high tech products. This
program, which can yield from $100,000 to $3 million in low-interest
loans, pairs the EDA with commercial banks. EDA’s participation will
be at a below-market rate with the bank lending at its normal lending
rate. The EDA will review and consider companies that have:
earlier stage technology businesses that have risked their own capital
to develop new technologies and need additional funds to bring their
products to market. Businesses may apply for financing from $25,000
to $200,000 if they meet most of the following requirements:
of loan programs. For details, contact EDA’s Commercial Lending
at 609-292-0187 or E-mail firstname.lastname@example.org
Another funding option is for very young businesses
of all sorts — they do not need to be technology-based. New
can attend the Entrepreneurial Training Institute (ETI)
by the New Jersey Development Authority for Small Businesses,
and Women’s Enterprises (NJDA).
All EDI students develop a business plan, and these plans are
to a "panel review" by lawyers, bankers, and accountants.
They are prime candidates to qualify for $20,000 to $100,000 loans
from the Trenton Business Assistance Corporation
TBAC has a MicroLoan program that is funded by the Small Business
Administration, whereas the NJDA’s fund is derived from casino
David W. Schafer
Training Institute in U.S. 1. He took the course, did his business
plan, and had his business funded to the tune of $21,000 by the
Business Assistance Corporation (U.S. 1, September 22, 1999). Then
he quit his day job to launch a home-based business on Clover Lane,
a golf portal with a database that keeps and calculates handicaps
given in 10 locations around the state, costs about $225, including
the textbook. Call the NJDA at 609-292-1890 or E-mail:
for an ETI schedule.
E-mail: email@example.com) offers SBA Microloans from $1,000
to $25,000 to qualified non-profit organizations. TBAC, acting as
the intermediary, assists women, low income individuals, and minority
entrepreneurs who cannot obtain conventional bank financing yet have
the capabilities to operate a successful business.
a microloan program for mall businesses, minority owned, and
enterprises. The average loan size is $40,000 to $50,000. For details,
contact EDA’s Commercial Lending Division at 609-292-0187 or E-mail
The backing of a loan from the United States Small Business
(SBA) offers certain financial benefits: less money down, longer
terms, and lower interest rates.
The SBAExpress and the SBA LowDoc
businesses’ need for business loans under $150,000. The SBA LowDoc
program has a one-page application which to be forwarded to the SBA,
and applicants provide additional information to the banks as they
require them. Both programs assure a 36-hour turn-around on loan
simplify the process for participating lenders and borrowers, and
provide systematic reconsideration of all loans that are not approved
SBA’s Women’s Prequalification Loan Program can be applied to
woman-owned, for-profit small business concerns or those owned by
minorities and veterans. The maximum loan amount is $250,000. For
information about any of the loan programs call 973-645-2432.
In addition to its lending activities, the SBA New Jersey District
Office provides business counseling through its network of Service
Corps of Retired Executives (SCORE) chapters (973-645-2434) and
New Jersey Small Business Development Centers (SBDCs, 800-432-1565).
You can also make use of the state-of-the-art facilities and research
libraries at the SBA’s Business Information Centers (BIC) in Newark
and Camden. BICs also frequently conduct workshops. Call 973-645-3968
for more information.
One way to get a good loan is to write an excellent
business plan, and the way to do that is to use Herb Spiegel’s
Biz Planner, a workbook and matching spreadsheet template diskette
that sells for $10. Add $5 if you are requesting it by mail.
On his home page (http://www.mccc.edu/~hss) Spiegel, director of
Mercer College’s Small Business Development Center, has links and/or
actual information on literally everything you need to know about
starting a business. His Frequently Asked Questions on small business
loans are particularly pertinent.
More than 95 percent of all people who want to start a business obtain
their starting capital from their own pockets and from relatives,
friends, and acquaintances.
ventures who are affectionately called "wannabees."
in flashing red letters.
but they don’t tell you what kind of business you should go into.
They can help you evaluate whether to buy a certain business, but
they don’t do career counseling. They can recommend sources of
but they don’t locate or provide your financing. They can give you
a blueprint for writing your business plan and review your plan step
by step, but they don’t write your business plan.
Other services offered by the SBDC counselors include procurement
counseling, site evaluation, business liquidation help, recordkeeping
recommendations, and legal formation advice.
Center , Box B, Trenton 08690. 609-586-4800, extension 3469.
can provide loans ranging from $20,000 to $100,000. Call the Mercer
County Division of Economic Development at 609-989-6555.
to $250,000 to both for-profit and not-for profit businesses. Loans
are to emerging and existing businesses that are committed to create
employment for low income citizens and develop skill-sets as a means
for livelihood. Call 609-989-7766.
Trenton 08625. John Tesoriero, executive director. 609-984-1671; fax,
609-292-5920. E-mail: firstname.lastname@example.org.
This commission offers from $50,000 to $250,000 in technology transfer
funds for projects that will be completed in 12 months or less,
those that also have outside investors. Recipients are expected to
match state dollars and pay royalties on successful technologies but
are not going into debt (which must often be repaid independent of
the company success) or giving up equity (which gives the investor
certain ownership and management rights). Eligible companies will
be located in New Jersey or be willing to move here and stay five
system, matches entrepreneurs with angel investors. Stash R. Lisowski
directs ACE at the NJIT Enterprise Development Center
Luther King Boulevard, Newark 07102, 973-643-5740; fax 973-643-5839,
Entrepreneurs can get on ACE-Net by completing a standardized form
to enter a prospectus. The system is on the Internet, and the deal
listings can only be perused by obtaining a password (for a $450 fee).
General information on ACE-Net can also be found at its website,
Investors can sign in from home, and the system can be set up to
the investor information on pertinent companies from pre-selected
08807. Al Warr, director. 908-526-1500. Countrywide assistance for
assisting businesses at any stage of growth and development, including
start-up, fund raising, and tax problems — employing client
meetings, seminars, presentations, and other means of assistance.
Free classes on Wednesday mornings at 10 a.m.
Wednesdays at noon at the Doral Forrestal, $45. 609-279-0010. Venture
capitalists, angels, investment bankers, bankers, entrepreneurs, and
would-be entrepreneurs meet here.
at McAteer’s Restaurant, Easton Avenue, Somerset, 908-789-3424. $45.
This forum (NJEF), held the week after NJEN, often continues the
topic for the month with in-depth practical information on how to
establish and capitalize a business.
at 11:30 a.m. at the Westin, Morristown, 973-631-5680. $55.
Entrepreneurs don’t have to be making money now to gain
the confidence of investors, says Stephen Shaffer
Partners LP of 1 Palmer Square. "What we look for are companies
that have a strong management team in place and a compelling story
— a proprietary feature that we feel certain can capture a
share of a very large market" (U.S. 1, March 24).
By definition a Small Business Investment Company (SBIC), Penny Lane
is limited to investments of up to $2 million in any given deal. In
addition to stock, investors typically claim a seat on the board of
directors. This means entrepreneurs have to be ready to give up a
portion of their company.
"Venture capitalists are expensive people," Shaffer concedes.
An alumnus of Dartmouth (Class of 1967) with an MBA from Cornell,
Shaffer did leveraged buyouts for Prudential and was an intermediary
for private placements for a New York-based broker-dealer before
his venture capital firm. "But investors not only bring money
to a company, they bring experience, useful connections, and strategic
focus because they’ve been in the business." He offers the
suggestions to entrepreneurs thinking about ways to help their
different sources of funding depending on its size, history and stage
of development. "You can save yourself time by knowing which
will take the risk, and for how much," says Shaffer. At the
stage, an idea or concept may be enough to attract initial investments
of up to $500,000 from "angel" investors. An SBIC like Penny
Lane usually enters the picture once a company has established both
history and a viable product. Large investment firms, banks and
capitalists typically enter at a much later stage.
are accustomed to looking a few years down the road, but they want
reassurance nonetheless. "At this stage of investment, venture
capital firms aren’t necessarily looking at the immediate profit
so much as what amount of the market the company can seize once the
company is fully developed."
the integrity of the people in a business, not just the product.
I see a management team in place that I don’t like, I won’t do the
deal," says Shaffer. "We like to know the management team
has worked together and can function well together," says Shaffer.
For him, that usually means at least three years of company history.
sabotage efforts to gain financial backing by clinging to unrealistic
expectations. "We turn down a lot of deals because the
think it’s worth a whole lot more than we think it’s worth," says
Shaffer. On the other hand, if investors are scrambling to get stock,
that could mean a company has been undervalued. The best way to avoid
either situation: work closely with someone who knows the financial
business plan, Shaffer urges, should be drafted under the guidance
of a professional before it reaches investors. "We’d almost prefer
that the plan come to us through somebody else," says Shaffer.
"It tells us that at least somebody has looked at it and has
judgment on it that it belongs in the venture capital community."
Attorneys, investment bankers, and intermediaries can all help get
your plan in the right hands.
Although the competition for funding is rigorous, promising businesses
benefit from what Shaffer describes as a "cooperative" rather
than competitive attitude within the SBIC community. "I’m just
as happy to do a deal with other venture capitalists as not,"
says Shaffer. Attractive businesses will often pull in multiple
which means both more money and a better chance for success. "We
all get together and share ideas about how to do things: how to raise
your own money, what to look for in companies, how to hire staff,
how to bring partners in. The more minds, the better."
Corrections or additions?
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