Successful businesses seek out equity

PHOTO/Rob Stapleton/AJOC
marshall.jpg I am continually amazed at the level of resistance to equity ownership that I run into at the start-up business level. "I don’t want to give anyone a piece of my pie, my hard work and creativity," I hear all the time. Then there’s the frontier spirit of independence: "I can do it all alone. I don’t want money that comes attached to someone who will tell me how to run my business!"

wealthbuilders.jpg This attitude is a recipe for failure. Successful businesses are always team efforts. Founding entrepreneurs who can’t listen to others are found starting one unsuccessful business after another.

Study successful companies and to a one, the founder-entrepreneur understands his or her own strengths and weaknesses and finds others with complementary skills with whom to run the business.

The recipe for success is what Ernesto Sirolli calls the "Management Trinity" -- the technical skills to produce the goods or services one wishes to sell, the ability to market one’s goods or services, and the ability to financially manage one’s affairs. No one is equally passionate and proficient in all three areas.

Enter equity. No one will care as much about your product as someone who has an invested interest, who wants a return on his or her investment, and so is willing to be your regular customer, serve on your advisory board and give you the feedback you need to be successful.

Owner’s equity is on the bottom of the balance sheet; in accounting terms, it’s what is left after liabilities are subtracted from the assets. How are you going to put this equation in the black?

People, not money, run businesses, as the recent dot-bombs and their burn rates demonstrate. Angel investors have run successful businesses and earned enough real owner’s equity to be willing to risk some of it on start-ups. They come with the connections to the talent that entrepreneurs need to complete the management trinity as well as the ability to provide meaningful mentoring and advice along the way.

The other day, I had the pleasure of eating lunch with a vibrant group of young Alaskans, most in their 20s. They were concerned that most of their high school classmates are putting their college educations to work outside of the state where they have higher earning power -- often with stock options, the incentive of equity .

Many of us started businesses in Alaska when we were in our 20s. Today, the economy has changed -- the markets are global, everything has been speeded up by the Internet -- but the basic tenets of building a successful company remain the same. And there are still plenty of untapped market niches for those who want to establish themselves in business and to be successful.

Take entrepreneur Bob Gillam, president of McKinley Capital. He has taken advantage of Alaska’s strategic time zone and grown the McKinley fund into the 12th best performing fund in the world in the last 10 years, according to Nelson’s Investment Research.

Key to his success is that he has put Alaska’s youths to work and given them a piece of his business. Twenty percent of McKinley Capital is owned by his employees, most of whom are Alaska’s college graduates, happily competing with their peers Outside.

There is as yet no real active venture capital in Alaska, but we do have angel investors who are looking for good Alaska businesses in which to invest. To introduce start-up entrepreneurs to Alaska’s angels, and continue spreading the gospel of equity, Alaska InvestNet will be hosting its third annual Capital Investment Conference on March 22-23 in Anchorage.

The top 10 business plans from some of the state’s most innovative entrepreneurs who are looking for equity investors will be selected for showcasing at the Venture Forum.

Highlights include a keynote address by Cairn Cross of Fresh Tracks Capital, who will speak to venture capital in nontraditional markets like Alaska’s; there will also be panel discussions and educational breakout sessions. The complete conference schedule is on the Web site (www.alaskainvestnet.org).

Deborah Marshall is director of Alaska InvestNet. She can be reached via e-mail at ([email protected]) or by telephone at 888-393-3662.

Updated: 
02/03/2001 - 8:00pm

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