Small businesses today have access to more funds than ever, not to mention a wider array of financing resources. Venture capital firms invested a record $36 billion in 1999--more than double their 1998 investments--and are on track to exceed that figure this year.
Angel investors, fattened by lucrative undertakings over the past decade, are eager to share their wealth and expertise with fledgling entrepreneurs. More than $16 billion in SBA loan and venture capital programs helped launch or expand 50,000-plus businesses in 1999. And banks, finance companies, credit card issuers, leasing companies, factoring firms and a host of Net enterprises are tripping over one another to participate in the $170 billion small-business financing market.
But don't submit your loan application just yet. Despite the proliferation of financing sources, funding remains problematic for most start-ups. "If you're starting a new venture with only an idea, you'll probably have to start with only your money," says Charles Cocotas, the veteran entrepreneur who helped transform single-unit Boston Market into a national franchise chain. "Securing a loan or investors is easier once you have a successful track record. Otherwise, it's extremely difficult--unless you're a dotcom."
There's the rub. Dotcom: the obsession of virtually every investor. The nemesis of virtually every non-dotcom entrepreneur competing for funds. Indeed, PricewaterhouseCoopers estimates that of the $36 billion invested by VCs last year, nearly 90 percent went to high-tech companies; fully 56 percent went to Internet-related ventures. "Money going into non-high-tech companies declined for the first time in five years," reports Kirk Walden, national director of venture capital research for PricewaterhouseCoopers in Austin, Texas.
Of course, not all VCs are on the same page, adds Walden. "Some specialize in narrow segments, such as retailing or health care. They understand those brick-and-mortar businesses and know they won't realize returns of 100 percent a year, but they also know there's value and less risk in those investments."