Advising Entrepreneurs
if They should Quit
or Continue
Those invited to join The Up or Down Group (Group) will be those who have been successful in starting companies or have not been successful. They will understand the critical decisions which have to be made by entrepreneurs who have an immediate need for capital.
The members of the group may or may not know one another prior to becoming involved. Similarly, they may or may not have an interest in becoming involved with those seeking experienced and impartial advice. Their common interest and participation will reflect their memories of the decisions which had to be made and the resulting changes the decisions made in their lives. They want to help.
The Group will develop a short questionnaire for entrepreneurs to submit in confidence. The form will focus on the company’s: vison, status, needs and alternatives. Some members will relate and respond, disclosing their identity or not as they wish. The members will offer advice as to immediate actions which should, in their opinion, and based only on the information provided, be undertaken. Some members of the Group may wish more information, and some may have an interest in some form of participation.
If there is a sufficient positive response to the general idea, either a non-profit or Limited Liability Corporation (LLC) entity will be formed. The Group will organize research regarding those individuals who might be both qualified and interested in becoming involved. It is also possible that an existing philanthropic or academic institution may wish to become involved. It is hoped that distribution of this writing and possibly that of the Decision piece to be posted on the arthurlipper.com blog will stimulate such responses. The Group is envisioned to be not-for-profit, like the Tech Coast Angels and other similar groups, in that members will benefit from helping entrepreneurs during their most difficult of times. The Group’s mission is not to earn profit, as an entity, but for its members to help those in need.
Status and Question
The company needs capital to continue. The founder is the controlling shareholder and CEO. He has been responsible for the company’s vision and progress. The objective of the company is to profit from making a critical improvement in the activities of a range of prospective customers. Producing the product is estimated to require a year and $2.0 million. If the founder continues to support the company, without compensation or obtaining financing. his personal bankruptcy is likely. He is convinced the company can become very successful.
Questions:
Should he continue or quit?
Should he accept a financing requiring that his role and ownership be significantly reduced?
Should he seek a full partner, rather than passive investors?
Should he disclose the vision and seek financing and/or affiliation from one or more prospective customers or from companies likely to be competitors?
Should he seek to recruit an industry recognized CEO, taking a lesser role for himself?
Should he attempt to obtain funding based on transferring ownership based on failing to meet scheduled objectives?
Should he personally guarantee investors against loss?
Should he name investors as beneficiaries of a life insurance policy until the company achieved agreed events?
Should he agree to having his first son personally guarantee the investor against loss, as used to be done in China?
Should he accept a proposal to sell the entire stock of the company to an investor offering to provide all the funds the entrepreneur states as being necessary to achieve an agreed profit or revenue level, for stock options to recapture an agreed percent for the amount invested by the investor?
or
Should the company offer to sell an investor a revenue royalty for the amount projected to be necessary for the company to achieve an agreed level, for terms to be structured by Arthur Lipper?
Arthur Lipper, Chairman
British Far East Holdings Ltd.
14911 Caminito Ladera,
Del Mar, CA 92014
+1 858 793 7100
arthurlipper@gmail.com
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