Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the
September 12, 2001 edition of U.S. 1 Newspaper. All rights
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,"
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
of the NJTC Venture Fund and
Cost: $50. Call 856-787-9700.
Scott, who says he was "educated entirely by the state,"
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
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
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
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
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
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
market share proved disastrous.
With the dot-coms on their backs, and those who invested in them
the venture capital outlook for tech start-ups in general has
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
Here are some ways entrepreneurs can pull in the cash to get their
start-ups to the next level.
someone who hasn’t put in his own time and his own money," says
Scott. Investors have the same criteria, so the owner of a new
has to be prepared to dig into his own savings, and perhaps even
his house or sell some assets to get the business going before he
asks outsiders to provide funding.
to Bluejeanmedia.com, an Internet publisher that put up stories
sent in. The company is now in bankruptcy, he says, but its owner
retains the rights to the content readers sent in, and has put it
together into a book. She is using the book, says Scott, to
a comeback." The lesson here is that companies, and especially
tech companies, often have assets they never consider valuable, and
that these assets can be used as capital.
Some of these assets can be used as collateral, too. That is the case
with ExpertPlan, one of Scott’s clients. "They have about 100
plans," he says of the 401 (k) plans the company administers.
"They’re adding about 10 or 20 a month." These plans have
value to anyone who might consider purchasing ExpertPlan, Scott
in the same way that each cable subscriber adds value to a cable
and each water customer adds value to a water company. In the case
of ExpertPlan, Scott figures each 401 (k) plan adds $10,000 to the
company’s value. That is money ExpertPlan can use as collateral, says
Scott, who is in the process of helping the company raise $2.5
"There are landlords in New Jersey no one should work with,"
says Scott. These are the landlords that require personal guarantees
on office leases, and show no inclination to bend with the winds of
economic change. Others will work with tenants, perhaps helping them
through a cash crunch. "You want to do business with good
says Scott. Establish a network of vendors, customers, business
and landlords, and do your part by helping them out — perhaps
by sending business their way.
looking for capital is the same advice so often given to job seekers
— network, network, network. Let absolutely everyone know you
are working at funding your company. "Tell vendors, customers,
your accountant, everyone in the family. No source should be
days going to meetings and funding fairs to meet angel investors.
This isn’t the best approach, says Scott. A better tactic is to
your company’s industry so well that you are aware of all of the
Among them are recently retired executives, some of whom may want
to stay in the game. These are valuable contacts, and, with luck,
one might decide to fund your company.
"A lot of people think money is going to solve all their
says Scott, "but that is not the case. Almost any business can
be built slowly." A big infusion of cash is nice, but a solid
business plan is better.
With her frequent court appearances and complicated
love life, Ally McBeal doesn’t appear to spend a lot of time
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, according
with Pepper Hamilton, networking, an activity not known for inspiring
exciting 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,
13, at 6 p.m. at the Wyndam Mt. Laurel. Other panelists include
Kelleher of Kelleher Associates, a company specializing in career
transition counseling, and
Cost: $35. Call 908-281-9234.
Battista, a graduate of West Virginia University (Class of 1990) who
holds a J.D. from Temple, says "people don’t think of lawyers
when they think of networking." Lawyers themselves give little
thought to the process of building contacts to build business, she
says, at least they don’t early on in their careers. "It’s not
taught in law school," she says.
Law firms don’t spend a lot of time talking with their new associates
about networking, either. Yet a solid roster of clients is one of
the main things a law firm looks at when it decides which of its
will make partner. Becoming a partner in a firm is the goal of most
lawyers in group practice. The partners, each receiving a share of
the firm’s profits, make far more than associates do. And, what’s
more, in most cases, an attorney is not allowed to remain on as an
associate past the time — perhaps his sixth or 10th year out of
law school — that the firm grants partnerships.
Even after partnership is attained, income varies among a firm’s
and an important determinant in any one partner’s share is the amount
of business he brings in. Networking is an important tool in bringing
in business, and Battista says that is the case not only in law.
true in accounting, insurance, consulting, and in other service
she points out.
These are some of Battista’s networking suggestions:
years in practice are an intense time for attorneys, who are expected
to quickly come up to speed on legal procedures and, typically, to
bill lots of hours. Still, Battista says, if attorneys get involved
in networking early on, they will have time to develop and deepen
relationships with young professionals in other fields. As these
move up in their organizations, they will be in a position to hand
work to friends. Those who jump into networking years later, perhaps
when they are being considered for partner, will not have the same
opportunity to develop real friendships.
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’s
easy," says Battista. Just write a quick note, or forward an
article. Anything to keep the friendships going. And remember, she
says, to keep the relationship reciprocal, offering help, leads, and
work referrals, and not just expecting to be on the receiving end.
clients at a presentation/networking event," Battista says. She
knows many attorneys are not comfortable at networking gatherings,
but says the effort can pay off. Anyone who just can’t stand the
of wading into a room of strangers, though, can still make valuable
contacts. Battista suggests volunteer work or joining a sports group,
"something where you’re comfortable."
enjoys networking, and is even happy to speak in front of a crowd.
Making presentations, she says, is an excellent way to meet
clients. So valuable is this tool that she suggests those who are
timid about speaking might try joining a group like Toastmasters,
which offers coaching and support to those who want to get up in front
of an audience.
event had a lawyer on staff when she met him, and was happy with his
work. 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 his
place, bringing "substantial" business into her firm.
of Commerce events or speaking at Rotary meetings, she often is
as doing one of the things Battista says is most important in
In winning cases, and often going to great lengths to make clients
happy — even going so far as attending a prom with a client in
one episode — she sets herself up to reap referrals from existing
clients. Battista calls this"internal networking," and says it is
one of the best ways to win new business.
Corrections or additions?
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