All Dried Up?

Sweeping changes in stock market bode ill for small-business financing-both public and private.

Spunky Productions is about as much on the leading edge as a business can get. As a digital media company, the San Francisco firm is producing and syndicating what co-founder Karl Kronenberger, 32, calls one of the largest collections of original Web-based interactive cartoons and live-action programs for children in the world.

Plus, Spunky Productions is at the crossroads of one of the hottest trends in Hollywood: the distribution of entertainment content over the Internet. According to Kronenberger, "Many international media companies who can't own cable or television assets in the United States see the Internet as a viable distribution channel for entering the U.S. market." Moreover, he says, the entertainment industry will be in for another radical redefinition when the next generation of wireless Internet products come to market during the latter half of 2001.

The incredible opportunities that companies like Spunky Productions are pursuing require more than just creative genius and an audience, however. They require capital, and lots of it. And growth capital is getting harder to find, because investors are getting much more cautious. A sell-off of Internet stocks notwithstanding, the reasons for this change are more systemic and, in fact, threaten the longest-running economic expansion in U.S. history.

David R. Evanson's newest book about raising capital is called Where to Go When the Bank Says No: Alternatives for Financing Your Business (Bloomberg Press). Call (800) 233-4830 for ordering information. Art Beroff, a principal of Beroff Associates in Howard Beach, New York, helps companies raise capital and go public, and is a member of the National Advisory Committee for the SBA.

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This article was originally published in the November 2000 print edition of Entrepreneur with the headline: All Dried Up?.

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