March 29, 2024

You’re the Boss Blog: Would You Take a Private Equity Investment?

Puneet Mehta has ruled out taking private equity for his latest company.Josh Weiss for The New York Times Puneet Mehta has ruled out taking private equity for his latest company.

Today’s Question

What small-business owners think.

In a small-business guide we’ve just published, Puneet Mehta talks about feeling “razzle-dazzled” when private equity investors approached him about buying into the online marketing business he had founded in 2006 in Atlanta.

“Our goal was to expand rapidly with private equity, put in a bunch of sales teams, get some distribution networks going,” Mr. Mehta explained. He ended up with $1.5 million in private equity growth investments and venture capital. “But I realized after we had raised the money that there were so many clauses that came with it that I had lost complete control of the company.”

You can read the guide, which was written by Jessica Bruder, to see how that turned out and to hear what business owners suggest you should consider before accepting private equity. As for Mr. Mehta, he has sworn off outside financing altogether in his current endeavor, a start-up called Local Marketing Inc., which he said was profitable and generating several million dollars a year in revenue. “Now we basically get approached by a bank or a company every month to give us money,” he told Ms. Bruder, “but we don’t need it.”

Of course, there can also be compelling reasons to take the investment capital. Right now, there happen to be a lot of investors looking for deals and a lot of businesses looking to sell.

What do you think? Would you take private equity?

Article source: http://boss.blogs.nytimes.com/2012/08/15/would-you-take-a-private-equity-investment/?partner=rss&emc=rss

You’re the Boss: A Safer Way to Start a Business

Courtesy of Meetpoint.

Start

The adventure of new ventures.

Most new entrepreneurs don’t have much spare time. But beginning next fall, those with a couple of hours to kill can immerse themselves in Startup Fever, a board game that challenges players to start and build rival companies.

Competitors develop their own products and vie to win the most users. They hire engineers (“nerds”), salespeople (“suits”) and chief executives (“big suits”). If employees aren’t kept happy, they can get poached by other players. There’s no one direct path to victory; many different strategies can prevail.

Forget “life imitates art.” This is “play imitates work.” And for the game’s designer — Louis Perrochon, 43, a software engineering executive in Mountain View, Calif. –  it involved trying something he’d witnessed many times but never done himself: starting a small business.

Mr. Perrochon is the founder and sole employee of Meetpoint, a tiny company he created to produce his game. Reached by phone for an interview at a Club Med in Mexico, he deadpanned, “I own a business now. I can’t go on vacation anymore.” His family, he added, was already starting to complain.

To raise funds for the game’s artwork and manufacturing, Mr. Perrochon started a fund-raising drive on Kickstarter in April. Following a mention on TechCrunch, he quickly reached his original goal of $10,111, raising more than $30,000 from 380 donors by June 14, when the drive ended. Those who donated $60 or more have been promised a copy of the finished game and a venture capital extension pack with extra features, including a posse of lawyers.

Mr. Perrochon began designing Startup Fever in the fall and has been refining it ever since. “In the first rounds we played, the salespeople didn’t have a lot of value,” he said. His initial attempt to fix that problem backfired; he pushed too hard in the other direction. “Then for a while everybody just bought salespeople because they were so powerful,” he adds. “If you hired only salespeople you’d win. It was kind of like Groupon!”

Startup Fever is part of an entertainment genre with a name that sounds, well, less than entertaining, so-called resource-management games. Board games in this style force players to compete for finite resources, engage in commerce and think through webs of strategy. They’ve been popular in Germany for decades; in recent years, small American publishing companies, including Rio Grande Games and Mayfair Games, have been bringing English-language versions to market in the United States. The most popular, Settlers of Catan, has sold more than 15 million copies worldwide.

Mr. Perrochon says playing Settlers of Catan and similar games inspired him to create Startup Fever. (He’s still testing it; if you want to take the beta version for a spin and give feedback, you can learn more here.)

He recently started taking preorders for the game. But buyers, be warned: playing Startup Fever will not guarantee that your own start-up will succeed. “You can’t use this to teach high school kids how to start a company,” Mr. Perrochon said, laughing. “The start-up world is really, really complex, and you have to simplify things or the rules would take four years of study.” And playing the game, he added, does not mirror his own experiences creating Meetpoint, because “what I learned around creating the game was about small business and manufacturing, and what’s in the game is more about Web companies.”

“Maybe that’s the next game,” he added, laughing. “Maybe I can create an extension where you actually have to manufacture stuff in China.”

Starting his own company to bring Startup Fever to life also made it exhaustingly clear to Mr. Perrochon why most game designers team up with existing publishers, who provide upfront financing and handle administrative overhead. “It takes a lot more work than you think it will take,” he said of going it alone. “Everything is a lot more effort.”

But selling out to another company would have meant relinquishing what he has enjoyed so much about making the game: creative control. Working with a publisher, Mr. Perrochon noted, would mean that “you give away the game. If they say, ‘Hey, we don’t like Startup Fever, the Silicon Valley thing, then you end up with a zombie theme.’”

So will the experience of actually starting his own company affect the content of the game? Perhaps. It’s been “an interesting learning experience,” he said. For example, Mr. Perrochon didn’t anticipate that his home state would charge him extra just for operating a limited liability corporation. Therein, he says, lay fresh inspiration: “I’m going to make an event card that says, ‘California taxes your company: Pay $800.’”

Article source: http://feeds.nytimes.com/click.phdo?i=4b1c812f2d69cf945453712f6554b4dd