Are there other businesses vying for the same sale and/or aggressively protecting their turf? Competition can limit a new venture’s success — and your investment return. So be aware of other businesses — or the status quo — before investing. There’s good news about the competition! More businesses are educating customers on the buying opportunity. Unfortunately, the company must convince...
Any new venture can project growth. Before investing, check the practical realities that support the 10x, 100x, 1000x growth. All too often, the relatively mundane is ignored during the analysis process - the unexpected “snakes in the grass” often seriously derail business growth. In general, businesses which are manufacturing a physical product are much more challenging to scale. This is,...
Let’s start with some facts: In year one, 20% of small U.S. businesses fail. By the end of the 5th year, 50% do so. Throw in a newbie entrepreneur, and those statistics may be generous. Studies have pointed to a myriad of reasons; no market need, ran out of cash, and a wrong team rated high on the list.. Here’s a fundamental truth that we embrace at Carofin: You must believe in the...
You may not remember what was happening in information technology around the turn of the century (It’s known as the “The dot-com bubble”). For many people, the lesson we’re talking about in this article was learned the hard way. According to FactSet, in the early part of 2000, IT constituted close to 35% of the Market Capitalization of the S&P. And, in about a year and one-half, when the...
If what you are investing in “rocks the world,” be prepared for the company to face unexpected challenges convincing customers. Double any timeframe presented as well as the cost of success. Significant sales will take longer (see Crossing the Chasm by Geoffrey Moore) and cost more per early customer. In our series of nine questions to ask before investing in a new venture, ask...
Sure, there may be 7 billion people in the world with close to 14B legs, but how many of those individuals will stop what they’re doing and switch to this company’s brilliant new brand of pants? Customers, or a lack thereof. It’s why businesses thrive or eventually fold. Every business plan projects ever-increasing sales (often exhibiting a hockey stick growth line), but can the company truly...
We were approached by a small company in the consumer goods business looking to raise capital to build inventory. It’s true, experience is everything, and we’re game to share. In our normal course of conducting due diligence, we discovered that the owner of the company previously had exited and sold another business and, rather than pay federal taxes, he had used the proceeds to improve his...
If you’re thinking of Willie Nelson crooning “Blue Skies,” you’d be in the right state of mind. That’s because each state has its own state Securities laws, or “Blue Sky” laws, that further protect Investors from Securities fraud. Here’s a brief overview of what those laws do for you. In other articles, we’ve discussed federal Securities laws - the Securities Act of 1933 and the Securities...
In the interest of accessibility, here are some terms that any investor should be familiary with.
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