For many years, I’ve been frustrated by the banking community’s reaction to financing SaaS (Software as a Service) opportunities.  In my view, long term contractual commitments from credit worthy customers should be an asset that can be evaluated and funded. HOWEVER, from an GAAP perspective, the contracts aren’t considered a “receivable” as the service hasn’t yet been delivered. So, banks don’t tend to be very creative! I’ve run into SaaS Capital a few times and I think their model has a lot of merit. The linked white paper below, provided by Saas Capital, walks through SaaS financing issues and options.

Understanding the Financial Implications of the SaaS Business Model

I recently got a note from Jack Bicer, a friend who heads up TechBizConnection (Orange County networking group) as well as Septium (a custom software development firm). He passed along the following tips on managing a software development process. I think the list is right on target and has the advantage of being both powerful and concise. Continue Reading »

One of the first questions that investors will ask you about your company is “what is stopping others from copying your ideas or technology and beating you at your own game?” I’ve found that the “barriers to entry” question is one of the most difficult to answer when raising institutional money. If you answer too boldly the investor might feel that you are naive about the nature of competition. Conversely, if you answer that you simply have a head start, you may not be making a strong enough claim. Neither answer will build a sufficient level of confidence. Following are a few thoughts that may help: Continue Reading »

When you start your company you need to decide what form of corporate structure you want to use.  Depending on what you are trying to achieve, you might operate as a sole proprietor, form an LLC or C corporation. In the interest of brevity, I’ll divide corporate structure alternatives into those that, for tax purposes, are “pass through” or not. “Pass through” entitities include sole proprietorships, partnerships and LLCs.  Essentially, if an entity is “pass through” it means that any losses or profits will be passed directly to the owners of the entity on a pro-rata basis or as defined in the organizing documents.   In a C corporation, all of the gains and losses are dealt with within the corporation and the corporation either pays taxes or accumulates losses with no effect on the ownership until there is some distribution.   This is how we can categorize these organizations, but this is not what is important for you to know as an entrepreneur.

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