Alternative Financing

The CEO of a young company has responsibility to secure adequate financing for the operation of the business. Most people are familiar with these two methods:

1. Equity investment - giving ownership for cash.
2. Debt - borrowing funds with obligation to repay loan, this is often difficult
for young companies.

There are several alternative financing methods that can be pursued:

1. Secure OEM partner or distributor to license your technology or buy your
proprietary products with advanced pre-payment; up to 1 year advance.
2. Secure a turnkey manufacturer to build your products, finance inventory and
provide extended receivable financing of 90 to 120 days you ship the products
get payment from you clients before you pay your supplier/partner.

It must be noted that these alternative financing methods are very difficult to implement. It requires highly motivated partners to provide these kind of financial support. Partners must be convinced of the outstanding technology and the great market opportunity that you bring them.

Thomas Hong
Board of CEOs

Startup Co-Founder Ownership

I recently was introduced to a new startup company where the four Co-Founders all had equal ownership. This company did not retain my consulting service, so I will not give them strong advice but I hinted that that may want to re-think the equity allocation. In the past I had provided consulting advice to two startups where the Co-Founders had equal equity ownership. There were significant problems and bad feelings after about one year of operation. After one year of operation, it became evident that the Co-Founders' talent, knowledge, experience, energy/time devoted to the business, and positive contributions to the business were not all equal. In both cases it took considerable negotiation and effort to adjust the equity division of the C0-Founders that were acceptable to all involved.

It is highly recommended that a startup business of C0-Founders should allocate equity ownership as a function of talent, knowledge, experience, and anticipated future contribution. The CEO should have greater ownership than the VPs of the company.

Thomas Hong

Board of CEOs