DNA

I once knew a guy who I will call “Wall Street Tycoon.” He had dreams of starting a hedge fund on Wall Street. So what did he do? First, he got really good stationary. And then he went out and he recruited about ten of his friends, acquaintances and associates from his private club and then he asked them to come aboard his newly formed corporation. Now, the only vetting criteria he used is where they went to school and what their resumes sounded like. PHD in French Literature from Standford? Check. BA in political science from Yale? Check. Former Harvard Law School Dean of Students? Check. You name it, he got every elite school grad he could find and he asked them to join his company.

And he got really good stationary and really good paper. Then he proceeded to set up a hedge fund that traded heavily in real estate. Sounds good so far? It was. The only problem is, for all their PHDs and impressive educational pedigree, not one of these people understood the fundamentals about starting or running a hedge fund. Many of them did not know for sure what a hedge fund did. Actually, the only person who knew anything about hedge funds was Wall Street Tycoon.

I was getting pretty fed up hearing him bad mouth everybody when deal after deal fell through. “But why did you bring this guy aboard in the first place?” I asked one day in exasperation. “He knows nothing about what you are doing and you knew that from the start.” Wall Street Tycoon got really angry and impatient with my ignorance. “This guy is a PHD!” he rasped.
“Yes," I concurred. "But PHD in what?!”

He was a real genius this guy, Wall Street Tycoon. He personally guaranteed about $5 million dollars using his house as collateral for the debt, and proceeded to spend money, a lot of money on things like sponsoring scholarship funds for major universities in the city in an effort to get on “the Board” so that he could be in the right circles, and get investors for his fund.

But when you really got down to asking him what exactly his company does and what his vision was for the firm and what his strategy was for accomplishing his vision and how any of these people fit into the mold other than to add impressive resumes, he got defensive and told you things like “this is very creative. You are not going to get it. I know what I am doing. This is what I do. I am a financial engineer.”

Well, I was not an engineer but I got a bad feeling about this company from the start. I told him he needed to sit down and do some root canal and figure out what it was his company was about, and give everyone clear goals, and surround himself with some people who knew how to run and maintain a hedge fund. In short, I was asking him to figure out the company’s DNA before going one step further.

Do I need to recount in numbing detail how this story ended?

The moral is, before you take a step further, figure out the DNA of your company. Believe me it is a lot more complex than fancy resumes and stock paper.

Currency

Where are you supposed to get money to run your small business? You're broke. Your 401K just got swept away in the Wall Street tsunami. But you have a vision. It's this great start-up you want to try. It's a dot com. You really believe in the premise, in the idea. You know you are cut out to be a tech entrepreneur. Everybody knows it. Silicon Valley here you come. But you need money. Where's the money?

Well, you always have your parents. But if that fails, you can try to find a private equity attorney to help you approach some venture capitalists who might be interested in your idea. Venture capitalists and angel investors are still doing deals and they are still one of the best sources of generating currency for your business - especially if you are a "start up" with a techy mission. But make sure you have a good business plan. Nobody is going to take you seriously if you don't have a business plan. They will think you are an amateur.

If you are not a start-up (maybe you want to start your own accounting firm or your own law firm, or a health food store) then venture capitalists may not be the way to go. You may need to seriously consider asking the bank for a loan. Now, the banks are not exactly feeling all that generous right now. But that is bound to change in the months to come. How long can there be a credit freeze before the whole world colapses? It's a matter of time before the banks are giving money away again, and small businesses are going to be at the top of their agenda - especially if they are backed by the Federal Government if the loans are guaranteed. Everybody seems to understand that small businesses are the backbone of the economy and without small businesses, this recession will turn to a Depression. They can't afford that. So small bussinesses are going to be in a very good place very soon.

But what if you do not qualify for a loan for some reason? Or maybe you don't want to go into debt. Well, don't you have lines of credit from your credit cards? You must have a few dollars on the bank? A CD? Retirement accounts? What about real estate? Any equity there?

Another way to generate currency for your business is to take side jobs, like waitressing, bar-tending or babysitting. These types of jobs allow you the flexibility and time you going to need to develop your business and your idea. The only problem is that most don't offer health insurance. So don't get sick.