Work, Life And Side Projects | Smashing Magazine
There is no doubt about it, I am a hypocrite. Fortunately nobody has noticed… until now. Here’s the thing. On one hand I talk about the importance of having a good work/life balance, and yet on the other I prefer to hire people who do personal projects in their spare time.
Do you see the problem with this scenario? How can one person possibly juggle work, life and the odd side project? It would appear there just aren’t enough hours in the day. Being the arrogant and stubborn individual I am, when this hypocrisy was pointed out to me, my immediate reaction was to endeavour to justify my position. A less opinionated individual would probably have selected one or the other, but I propose these two supposedly contradictory viewpoints can sit harmoniously together.
Can you have your cake and eat it, by working on side projects, holding down a job and still having a life beyond your computer? Image by GuySie 1.To understand how this is possible we must first establish why a work/life balance is important and what role side projects play. Let’s begin by asking ourselves why it is important to have a life beyond our computers, even when we love what we do.
(Smashing’s side note: Have you already bought the brand new Smashing Book #3? The book introduces new practical techniques and a whole new mindset for progressive Web design. Get your book today!)Why We Should Have A Life Beyond The Web
Generally speaking Web designers love their job. In many cases our job is also our hobby. We love nothing more than experimenting with new technology and techniques. When we aren’t working on websites we are tinkering with gadgets and spending a much higher than average time online. Although in our job this single-mindedness is useful, it is ultimately damaging both for our personal wellbeing and career.
In the early days of my career, when I was young, I used to happily work long hours and regularly pull all-nighters. It was fun and I enjoyed my job. However, this set a habit in my working life that continued far longer than was healthy. Eventually I became stressed and fell ill. In the end things became so bad that I was completely unproductive.
This high-intensity working also sets a baseline for the whole industry, where it becomes the norm to work at this accelerated speed. No longer are we working long hours because we want to, but rather because there is an expectation we should. This kind of work/life balance can only end one way, in burnout. This damages us personally, our clients and the industry as a whole. It is in our own interest and those of our clients to look after our health.
This means we cannot spend our lives sitting in front of a screen. It simply isn’t healthy. Instead we need to participate in activities beyond our desks. Preferably activities that involve at least some exercise. A healthy diet wouldn’t hurt either. Getting away from the Web (and Web community) offers other benefits too. It is an opportunity for us to interact with non Web people. Whether you are helping a charity or joining a rock climbing club, the people you meet will provide a much more realistic view of how ‘normal’ people lead their lives.
This will inform our work. I often think that, as Web designers, we live in a bubble in which everybody is on twitter all day, and understands that typing a URL into Google isn’t the best way to reach a website. Not that this is all we will learn from others. We can also learn from other people’s jobs. For example, there is a lot we can learn from architects, psychologists, marketeers and countless other professions. We can learn from their processes, techniques, expertise and outlook. All of this can be applied to our own role.
As somebody who attends a church (with a reasonable cross section of people) and used to run a youth group, I can testify that mixing with non Web people will transform your view of what we do. Furthermore, the activities you undertake will shape how you do work. Reading a non-Web book, visiting an art gallery, or even taking a walk in the countryside, can all inform and inspire your Web work. There is no doubt, that stepping away from the computer at the end of a working day will benefit you personally and professionally. Does this therefore mean you should shelve your side projects? Not at all, these are just as important.
Why We Should All Have Side Projects
I love to hire people who have side projects. Take for example Rob Borley 2 who works at Headscape 3. He runs a takeaway ordering site 4, has his own mobile app business 5 and has just launched an iPad app 6. These projects have been hugely beneficial to Headscape. Rob has become our mobile expert, has a good handle on what it takes to launch a successful Web app and puts his entrepreneurial enthusiasm into everything he does for us.
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Rob’s side projects such as iTakeout 8 has broadened his experience and made him an indispensable employee.But side projects don’t just benefit your employer, they benefit your personal career. They provide you with a chance to experiment and learn new techniques that your day job may not allow. They also provide you with the opportunity to widen your skills into new areas and roles. Maybe in your day job you are a designer, but your side project might provide the perfect opportunity to learn some PHP. Finally, side projects allow you to work without constraints. This is something many of us crave and being able to set our own agenda is freeing. However, it is also a challenge. We have to learn how to deliver when there is nobody sitting over our shoulder pushing us to launch.
All of this knowledge from personal projects has a transformative effect that will change your career. It will increase your chance of getting a job and show your employer how valuable you are. It may also convince your employer to create a job that better utilises your skills, as we did for Rob. Rob used to be a project manager, but when we saw his passion and knowledge for mobile we created a new role focusing on that. Of course, this leads us to the obvious question: how can we have time away from the computer if we should also be working on side projects?
Is Hustling The Answer?
If you listen to Gary Vaynerchuk 9 or read Jason Calacanis, you maybe forgiven for thinking the answer is to ‘hustle’; to work harder. They proclaim we should cut out TV, dump the xbox and focus single-mindedly on achieving our goals. There is certainly a grain of truth in this. We often fritter away huge amounts of time, largely unaware of where it is going. We need to be much more conscious about how we are spending our time and ensure we are making a choice about where it goes.
I don’t think working harder is the long term solution, however. We can work hard for short periods of time, but as we have already established this can’t continue indefinitely. We need downtime. We need time lounging in front of the TV or mindlessly shooting our friends in Halo. If we don’t have that we never allow our brain the chance to recuperate and we end up undermining our efficiency. I don’t believe the answer is “work hard, play hard”. I believe the answer is “work smarter”.
We Can Do Everything If We Work Smarter
Working smarter is about three things:
- Combining interests,
- Creating structure,
- Knowing yourself.
Let’s look at each in turn.
Combine Interests
A good starting point when it comes to working smarter is to look for commonality between the three aspects of your life (work, life and side projects). You can often achieve a lot by coming up with things that have a positive impact in each of those areas. Take for example the choice of your personal project. If you look at most personal projects out there, they are aimed at a technical audience. We are encouraged to “build for people like us” which has led to an endless plethora of HTML frameworks and WordPress plugins.
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Maybe if we got out more there would be a wider range of personal projects and fewer of near identical jQuery plugins 11!If however we have built up interests outside of the Web, suddenly it opens up a new world of possibilities for side projects.
I wanted to get to know more people at my church. There are so many I have never spoken to. I also wanted to keep my hand in with code (as I don’t get to code a lot anymore), so I decided to build a new church website in my spare time. This involved talking to lots of people from the church, and also gave me the chance to experiment with new ways of coding. What is more, some of the things I learned have been valuable at work too.
Look for ways of combining personal projects with outside activities. Alternatively, identify side projects that could make your working life easier. This kind of crossover lets you get more done. However, by itself that is not enough. We need some structure too.
Create Structure
If we want to get the balance right between personal projects, work and life we need some structure to work in.
For a start take control of your working hours. I know this isn’t easy if you have a slave driver of a boss, but most of us have at least some control over how long we work. You will be surprised, limiting your hours won’t damage your productivity as much as you think. You will probably get as much done in less time. Work tends to expand to take as much time as you are willing to give it. Next, stop fluttering from one thing to another. When you are “having a life” don’t check work email or answer calls. There is a growing expectation we should be available 24/7. Resist it.
One method to keep you focused is the Pomodoro technique 12. This simple approach breaks your day into a series of 30 minute chunks. You work for 25 minutes on a single task free from interruption and then have a 5 minute break. Similar tasks are grouped together so that you spend 25 minutes answering email rather than allowing email to interupt other blocks of work.
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The Pomodoro technique 14 is a simple way of staying focus on the task in hand.Set specific time for working on personal projects and stick to them. Don’t allow that time to expand into your free time. Equally don’t allow work to distract you from your side project. Set boundaries. If you need to, set an alarm for each activity. Nothing will focus your mind on a personal project like having only 30 minutes until your alarm goes off. You will inevitably try and squeeze just one more thing in. These artificial deadlines can be very motivating.
Finally, make sure work, personal projects and recreation all have equal priority in your mind. One way to do this is to use a task manager like Omnifocus 15, Things 16 or Wunderlist 17 to keep all your tasks in one place. Often we have a task list for our work but not for other aspects of our life. This means that work is always prioritised over other activities. It is just as important to have a task to “finish that book” you are reading as “debug IE7”. Providing structure won’t just help with your side projects. It will also help with your sanity.
Know Yourself
Remember, the goal here is to have fun on side projects, broaden your horizon with outside activities and recharge with downtime. You therefore must be vigilant in keeping the balance and ensure that all these competing priorities don’t drain you.
Part of the problem is that we spend too much time on activities that we are just not suited to. Its important to recognize your weaknesses and avoid them. If you don’t, you waste time doing things you hate and doing them badly. For example, I just am no good at DIY. I used to waste hours trying to put up shelves and fix plumbing. Because I was trying to do something I was weak at, it would take forever and leave me too tired to do other things.
My solution to this problem was to delegate. I employed people to do my DIY. People that could do it much quicker and to a higher quality than me. How did I pay for this? I did what I was good at, building websites. I would work on the odd freelance site, which I could turn around quickly and enjoy doing. This applies to the side projects we take on too. Learning new skills is one thing, but if it stops being fun because you are just not suited to it, move on. Working on stuff you are not suited to will just leave you demoralized and tired.
Talking of being tired, I would recommend not working on personal projects immediately after getting home from work. Give yourself time to unwind and allow your brain to recover. Equally don’t work on side projects right up until you go to bed. This will play havoc with your sleep patterns and undermine your productivity.
Finally, remember that side projects are meant to be fun. Don’t undertake anything too large because not seeing regular results will undermine your enthusiasm. If you want to work on something large, I suggest working with others. There is certainly no shortage of opportunities 18. Alternatively try breaking up the project into smaller sub-projects each with a functioning deliverable.
Am I Asking For The Impossible?
So there you have it. My attempt to have my cake and eat it. I believe you can have side projects, a life beyond computers and get the day job done. It’s not always easy and if I had to pick I would choose having a life over side projects. However, I believe that personal projects can be fun, good for our careers and also facilitate a life beyond the Web.
So do you agree? Am I being unrealistic? What challenges do you find in striking the balance or what advice do you have for others? These are just my thoughts and I am sure you can add a lot to the discussion in the comments.
Excellent article.
From YC Rejection to 10,000 Users in 1 Month | Codiqa
My co-founder Ben Sperry and I applied for the W2012 Y Combinator funding round last fall with Codiqa, our jQuery Mobile developer tools and services company based in Madison and Milwaukee, Wisconsin.
I interviewed with YC for the W2010 round with my last startup, which ultimately failed. It was a really great experience and I had a blast, even though we didn’t get funded. Being able to talk with really brilliant people in the orange room, meeting and pitching the partners, and exploring the tech capital of the world was an experience I will always cherish.
This time around, I was really confident we’d at least get an interview for Codiqa, so we submitted early and iterated on the application after that. A week before the application deadline we got a message on Hacker News from Robbert Morris with a question for us to clarify something on our application. I took this as a sign this would be the last time they checked the application. Too bad, since we made a ton of changes after that which might not have been reviewed (if that is true, it’s an argument against submitting early).
My good friend Ryan Oldenburg, now lead Android developer at Hipmunk, put me in touch with Steve Huffman, co-founder of Hipmunk and Reddit, for some much needed feedback on our application. He basically said that we needed to do a better job explaining why jQuery Mobile matters. In the end, we didn’t do a good enough job of that, and I think our other answers lacked substance and confidence (and were too MBA sounding). On Halloween night we received an email saying we were rejected, had a moment of sorrow, and moved on.
Not long after, the jQuery Mobile project started following our updates and expressed interest in what we were building. The fact that Codiqa is 100% dedicated to jQuery Mobile, we believe, set it apart from any other mobile app building tool. We began talking with Todd Parker, leader of the jQuery Mobile project, who was instrumental in giving us early feedback as we developed Codiqa, from its evolution as a desktop application to a web-based service.
We launched our private beta of Codiqa in January of 2012 to about 500 users. For two months we worked feverishly to build our MVP, fixing bugs and adding necessary features. We opened publicly in late February with an announcement to our mailing list and Twitter followers.
In February we approached Todd with a proposal to put a free, embedded version of Codiqa directly on the jQuery Mobile homepage. He loved the idea, and on the night of February 27th we went live directly on jquerymobile.com (scroll down to play with a basic version of Codiqa).
Since then, Codiqa has been growing beyond our wildest imaginations. By the end of this week we will have over 10,000 users, up from about 1,000 just a month ago. The excitement surrounding jQuery Mobile is huge, and we have people from all over the world using it. Here is a graph of total registered users over the last three months:
Here is a graph of new accounts per day over the last three months:
Codiqa launched with a freemium model: we have a basic builder that only allows HTML exporting, no saving on codiqa.com or using our sharing and theming tools. We try to upsell through saving your app instead of just downloading the HTML. Right now we are not satisfied with our conversion rate from free to paid. We are going to run some experiments, but we’d love to hear your ideas (NOTE: We just made a change which seems to be really improving this!). Here is a graph of free users and users with a plan (we just launched, so almost all users are still in their trial period):
And the conversion rate from free to paid:
We hit a major milestone yesterday: our first successful charge after a 30-day trial ended. We have about 1400 users in a free trial right now so we expect to successfully convert and charge a number of them to bring in some revenue.
For the next few months, our plan is to focus on our “hot dog” (see Rework) – the builder we’ve developed. We are going to be adding more components, fixing bugs, and updating our pricing to better reflect the use-cases we’ve heard from our customers. We are going to be launching an alpha version of our desktop builder in a month or so and are going to spend more time blogging and sharing our expertise with our users.
Codiqa has given both Ben and I some really amazing opportunities. When I think back on my two years since graduating college, nothing has grown my career nearly as much as building Codiqa. I left my 9-5 job two months ago. Since quitting and then launching Codiqa, I’ve been approached to lead a chapter in the jQuery Mobile Cookbook, a project lead by appendTo and published by O’Reilly Media. I also started doing part-time consulting to pay the bills with appendTo and some of the best Javascript and jQuery developers in the world. I’ve learned a ton from them already. Both Ben and I have been approached numerous times with employment offers since we launched. It seems like starting a business is a great way to quickly boost your career. My only regret was not starting on it sooner!
We are really excited for the next few months. We want to be very transparent about our growth as we bootstrap Codiqa. We would love to hear your feedback or any ideas you have on how we can grow Codiqa! Please leave a comment below if you have something to add. Stay tuned for more posts as we build Codiqa!
BBC News - Singapore pushes ‘entrepreneurial nation’
Singapore pushes ‘entrepreneurial nation’
By Saira Syed Business reporter, BBC News, SingaporeCan Singapore overcome cultural barriers and spur entrepreneurship?
The team at Jobs Bolega, a start-up from India, is hoping to transform the way workers find jobs in developing countries.
Jobs Bolega, which means “Jobs will now talk”, is aimed at people in the lower-income brackets who may not have access to the internet, but have a mobile phone.
“Using mobile voice technology, essentially we are getting employers and employees in a network like LinkedIn to get them a job,” says Krishanu Dutta, a founding member of the team.
“We are creating a voice resume (CV) for them.”
Krishanu and his team have come to Singapore as part of an accelerator program for start-ups from around Asia to develop their business ideas.
Jobs Bolega, and the other start-up teams from around the region, have 100 days in which they receive mentorship from experienced entrepreneurs and specialists, after which they will pitch to investors.
The team at Jobs Bolega hopes to create mobile “voice resumes” for low-income workers looking for jobsThe programme is run by Singapore-based Joyful Frog Digital Incubator (JFDI) in a partnership with a subsidiary of one of the region’s biggest telecommunications companies, SingTel.
“I see Singapore as the technology and start-up capital of South East Asia, not unlike the US where you recruit from around the world and get them to come into Silicon Valley,” says Wong Meng Weng, who helped to start JFDI, taking inspiration from the likes of TechStars and Y Combinator in the US.
‘Entrepreneurial nation’There is a growing ecosystem to support entrepreneurship in Singapore, which gives it its hub position in the region. A lot of it has to do with the infrastructure available here, the business-friendly environment and an active push by the government to remove regulatory barriers.
In 2003, one of the recommendations a government economic review committee made was to make Singapore an “entrepreneurial nation willing to take risks to create fresh businesses”.
Ease of doing business ranking
1 Singapore
2 Hong Kong SAR
3 New Zealand
4 United States
5 Denmark
6 Norway
7 United Kingdom
8 Korea, Republic
9 Iceland
10 Ireland
Source: World Bank 2012
Less than 10 years later, Singapore ranks number one in the world for ease of doing business and number four for starting a business, according to the World Bank.
Universities and polytechnics now have entrepreneurship programs, as well their own incubators, and private players such as Founders Institute are seeing the opportunity to mentor young people starting out in new businesses.
Angel investors and venture capital funds alike are noticing start-ups coming out of the region.
It is considered a gateway to South East Asia, being a smaller market of five million people which investors use as a place to park their money but then invest in much bigger markets in the region such as Indonesia, Malaysia and the Philippines.
‘No right answer’But Ron Mahabir, founder of Asia Cleantech Capital, says the entrepreneurial landscape still needs time to develop, and resources alone are not enough.
His company invests in and develops clean technology projects in the region. It’s a sector the government is eager to support.
Asia Cleantech worked with government agencies to bring the first electric vehicles to Singapore.
“While the government has done a great job of loans and grant programmes, culturally it’s very difficult to push entrepreneurship very quickly,” he says.
Hugh Mason Chief Executive of JFDIThe emphasis traditionally here is on conceptual learning, and being smart sometimes weighs against entrepreneurship”
One of the reasons for that, he says, is that in Asia failure is just not acceptable yet.
“In California, if you fail that’s not necessarily a bad thing,” says Ron, who moved to Asia from the US to explore clean energy opportunities.
“But in Asia if you fail, it’s tough to turn around from that.”
Hugh Mason, chief executive of JFDI, agrees that fear discourages young people from the inherent risks involved in going it alone in business to the point where most won’t even try.
“The emphasis traditionally here is on conceptual learning, and being smart sometimes weighs against entrepreneurship,” he says.
“You’re taught in school, it’s all about getting the right answer - well, in early stage business there is no right answer.”
Local heroesThere is a move towards changing that, and a growing number of people in South East Asia are willing to take on that uncertainty and high-risk environment.
“There are people right next door who have said to their parents: ‘I’m going to disappoint you. I’m not going to be a doctor, I’m going to go start my own company,’” says Meng, pointing to the JFDI workspace, or the “jungle” as they appropriately call it.
One of the founders of a Singapore-based incubator says the region needs its own success stories
Ask the aspiring entrepreneurs who they look to for inspiration and they name the usual suspects: Mark Zuckerberg, Steve Jobs and other Silicon Valley stalwarts.
But some say what they really need are success stories from this region to emulate.
While there have been successful “exits” by local companies who have sold their businesses to bigger international players, there are few with the kind of star power that would get people to take the leap.
“Once the heroes do appear, and it’s only a matter of time before they do, the stories will change, the greed will kick in and everybody will know that you can do a Facebook in Singapore,” says Meng.
Perhaps one of those heroes will come from this room.
Starting Over | Get Real | Jason Fried
In 2004, 37signals, the software company I co-founded, released a Web-based project-management and collaboration tool called Basecamp. At the time, we mostly did Web design; Basecamp was a side project that we developed in our spare time to make it easier for us to work together.
Back then, project-management software was mostly about charts, graphs, statistics, and one-way broadcasts. Basecamp was different. It provides team members with a consistent place to work on projects and tools to swap ideas, share feedback, make revisions, and deliver the final project online. Millions of people across nearly every industry have used Basecamp to manage more than eight million projects; 96 percent of users say they would recommend the software to others.
That can mean only one thing: It’s time to start over.
Why mess with something that has proved so successful? There are a couple of reasons. For one, eight years is a long time. Consider the ways in which the world has changed over the past eight years. We’ve learned a lot about collaborating in that time. We’ve received tons of feedback from users, many of whom have shown us the ways in which they work. Plus, there are technologies available that didn’t exist back then.
But that’s only part of it. About a year ago, we began discussing how we might improve our best-selling product. The more we talked, the more it became clear that the only way to significantly improve Basecamp was to start over.
Think about a product’s life span. When something new is released to the public—and this is especially true of software—it’s hardly set in stone. You get feedback from customers and make modifications. You add features, refine existing ones, and make things better over time. If you really listen and do it right, the product earns its success.
But paradoxically, that success makes it harder to change. As time goes by, people get used to things the way they are. And the more someone is accustomed to doing something a certain way, the harder it is to ask him or her to change. When it comes to introducing ideas, the years have a way of boxing you in.
And that’s where we found ourselves with Basecamp—a successful product that was tough to change in major ways. Of course, it has evolved; over the years, we’ve made thousands of incremental improvements to the software. But now we have ideas that are more revolutionary than incremental. We think these ideas will dramatically enhance Basecamp’s speed, power, and flexibility.
The problem is that we cannot make these kinds of changes in the existing product. Over time, software builds up legacy. The old technology is baked in, and the roots of the product are so knotted that simply unwinding them becomes a massive undertaking. Think about trying to uproot a 250-year-old oak tree versus a two-year-old one.
The easy thing to do is nothing. But continuing on the current path is a time-tested formula for complacency.
Of course, customers have a way of building up legacy, too, and there’s bound to be some grumbling. We’ll deal with any such issues as they arise. But one thing is certain: Starting over doesn’t have to mean forcing change on existing customers. We’ll have two versions of Basecamp—the Classic version and the new version. Users will be able to switch to the new Basecamp or stick with the Basecamp they are already comfortable with.
After a year of hard work, this is all set to happen soon. How will our customers receive it? In an upcoming column, I’ll let you know.
10 Biggest Entrepreneurs of 2011
Interesting list…
How Has Cloud Computing Impacted Businesses Around the World? [INFOGRAPHIC]
We have long been advocates of moving business operations into the cloud. The remote access, cost-savings and organizational benefits alone make it a no-brainer.
Now that we’ve been floating around in the digital ether for a few years, what have we learned? How has cloud computing affected company bottom lines? Has it really made operations “greener?” Why do most companies move into the cloud in the first place?
Business technology company CSC commissioned a survey of IT decision makers in eight countries to find out the motivations behind their move to cloud computing systems and its effects on their businesses. The data they distilled might surprise you, and it’s all packed neatly into the infographic below.
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7 Ways to Finance a Small Business | Small Business Financing for Your Business Idea | Finance Your Business Idea | Business News Daily
Dreamstime.com
The road to starting a successful business can be a long one, filled with many hurdles and obstacles along the way. Even if you have a great business idea, no business can succeed without a financing plan. While the process may sound daunting, there are many small business financing options, each with their own advantages and disadvantages. Here’s a brief summary of startup business financing options for anyone thinking of starting their own business in 2012.
- Small Business Administration Loan
The Small Business Administration (SBA) was started in 1953 to encourage small businesses and entrepreneurs to start their own businesses. Under the SBA, there are two types of loans that can help borrowers to get the capital they need to start their business: a 7(a) guarantee small business loan and the 504 fixed asset small business finance program. The
7(a) guarantee loans for small business are more common for small businesses and can be applied for at banks participating in the SBA loan process.
“Both programs look for businesses not in the startup phase,” said Chuck Evans, managing director at the South Eastern Economic Development Company of Pennsylvania. “They look for businesses two years into business cycle that are generating cash flow.”
Advantages
“The advantage to the borrower is they have more access to capital,” said Evans of the 7(a) guarantee loan. “When borrowing with a loan, collateral or purpose often dictates the terms. If you look at real estate, you are looking at a 20- to 25-year term. If you are financing equipment, you look at the useful life and may finance it for five years. If you look at permanent working capital, you may only want to loan them for three years. With a guarantee from the SBA, banks can go up to 10 years for working capital, 10 years for equipment and 25 years for real estate. It gives the borrower longer terms and improved cash flow.”
Additionally, banks may also be more willing to give these loans out as the SBA guarantees 75 percent of the loan.
“At a point, if that business goes under in the future and you have liquidated all of your collateral, acted like a prudent lender and done everything you are supposed to do, the loss is split,” said Evans. “Let’s say on a million-dollar loan, if you sell a building from the business for $600,000, that leaves a loss of $400,000. With a 75 percent guarantee from the SBA, they will give $300,000 and the bank will take a hit of $100,000.”
Disadvantages
“Because the loans are sold in the secondary market, they tend to structure a lot of those loans on a variable basis,” said Evans. “If you are getting a 25-year fully amortizing loan at prime plus 2.75 percent today, interest is going to be at 6 percent because prime is currently 3.25 percent. Three years from now it might be nine percent. The interest rate risk is greater on the 7(a) program.”
Additionally, borrowers must make a smart choice when choosing the bank to borrow from, Evans said.
“If you take 100 banks in the state of Pennsylvania, maybe only 20 banks made more than 10 SBA loans last year,” said Evans. “If you deal with that few loans a year, you are not going to be able to understand the nuances of a program that is constantly changing, so it can turn into a slow and cumbersome process. If you go to a bank that does it well and does it on a regular basis, you stand a much better chance of a more simplified process because they understand it.”
- Friends and Family
Know of a rich aunt or a wealthy friend who has some extra money to throw around? Then you have another way to finance your business. Friends and family present an interesting alternative to traditional forms of financing, but those who take them risk muddying personal relationships with a business decision.
Advantages:
“You can take advantage of those sources when your business lifecycle is early,” said Evans. “If you are in an early stage of business, you are going to be forced to go to friends and family because the banks may not entertain your requests. Also, friends and family are not going to be charge you a high price for that investment. This funding is available when you need it and with less contractual hassles.”
Disadvantages:
“The downside is that you risk lots of other things within the family dynamic,” said Evans.
- Home Equity Loan
Home equity loans are based on the equity a potential borrower has in their home. For borrowers who have equity, the difference between what a home is worth and what you owe, in their home this form of financing makes for a great option to finance a small business due mainly to interest rates that are not only flexible, but also lower than traditional commercial rates. Interest rates for home equity loans can range from a half point under to one point over Wall Street prime, which is currently 3.25 percent. However, there can also be one potentially very large problem caused by this financing option.
Advantages:
“Home equity loans first of all are very cheap, rate-wise,” said Al Engel, executive vice president of consumer lending at Valley National Bank. “It is a very low-cost form of borrowing that is very controllable by the entrepreneur as far as when he pays funds and redraws funds. The flexibility is tremendous.”
Disadvantages:
“The risk is you are putting your home on the line,” said Engel. “If the business fails or you fail to maintain the terms and conditions of the home equity loan or line, you risk foreclosure. This puts the home over your families head at risk, meaning there is personal liability for home equity loans.”
- Credit cards
Other people looking for additional financing for their small business can look no further than their wallets. While business credit cards are among the most readily available ways to finance a business, experts warn that there are some significant things to consider before swiping that piece of plastic.
Advantages
“There are minimal advantages to using credit cards to finance your small business,” said Ken Nickel, senior vice president of community lending at Valley National Bank. “One of the few advantages is that the minimum payment on a credit card is very low. If you are a new business who is just starting out and you don’t have a lot of money coming in or you don’t have a ton of expenses, you can put it on a credit card and pay the minimum payment.”
Disadvantages
“The downside to credit card financing is that it doesn’t go away quickly and it also costs you a lot of money,” said Nickel. “Particularly if a new business gets started and then has trouble making the payments, the interest rates and costs on the cards can build very quickly. The commercial loan market right now is in a range of probably 5.5 to 6 percent for commercial loans. When you get into the credit card market, you can be looking at interest rates of 24 percent and over. It can be really devastating to a business over a period of time to have to carry that kind of debt.”
- Angel investors
Additionally, those looking to finance their business can always look to an angel … investor that is. Angel investors have been responsible for helping in the early stages several prominent companies, including Google, Yahoo and Costco. This alternative form of investing generally occurs in the early stages of growth for a company, with investors expecting a 20 to 25 percent return on their investment.
Advantages
“The principal advantage of an angel investor is generally that you have a friendlier atmosphere and a quicker decision making circumstance for a smaller amount of dollars,” said Mark DiSalvo, chief executive officer at Sema4 Inc, a leading global professional services provider of private equity funds. “You are not going to invest the levels of time, experience and diligence that an institutional investor would require.”
Beyond this, angel investors can also help nascent businesses by acting as an advisor for them in their journey.
“More importantly, angel investors are an aggregate of smaller high net worth individuals that are going to afford fitting in a more appropriate amount of money,” said DiSalvo. “Very few institutional investors today will invest less than $2 million, whereas angels will invest from $100,000 to $2 million easily. You are more likely to get an investor who has strategic experience so they can provide tactical benefit to the company they are investing in. That could mean that they have customers lined up for them. It can also mean they might have partnership opportunities for these businesses.”
Disadvantages
“In every stage, the investor and entrepreneur need to make sure they are the right partners for each other,” said DiSalvo. “You have to fit the kind of investment with the need the entity has. That, however, is a difficult thing to discern.”
- Venture capitalists
While venture capitalists are synonymous with the dot-com bubble of the late 1990s and early 2000s, the truth is that they may be a great source of capital if your business falls into a few categories. For small businesses who are beyond the startup phase with revenues already coming in, a venture capital investment may be for you.
Beware, though — venture capitalists have a short leash when it comes to staying with a company and they often look to recover their investment within a three- to five-year time window. However, for a fast-growth company with an exit strategy already in place, venture capitalists present a great way to quickly gain anywhere up to tens of millions of dollars that can be used to invest , network and grow their company quickly.Advantages
“The benefit of venture capital investors to a startup is that they can help them get the money and provide them with professional management expertise,” said Brian Haughey, assistant professor of finance and director of the investment center at Marist College. “You may have a venture capitalist who concentrates on physics or nanotechnology. Because they focus on specific industries, they can generally offer advice to the entrepreneur on whether the product is going to fly or what they need to do to bring it to market.”
Disadvantages
“Sometimes the money comes in to easily,” said Haughey. “During the dot-com bubble, the venture capitalists were throwing money at the startups and as a result, many startups forgot about what they should be focused on. A lot of businesses started thinking about fancy offices and they forget the commercial imperative that they needed to be making money. If money is too available, it lets some people get lazy.”
Beyond that, Haughey warned of the imperative that venture capitalists always have in business decisions.
“They also have to make a return and usually have a five-year time horizon,” said Haughey. “So they invest and you have to be able to show a profit in five years to return the capital. If you have a product that is taking longer than that to get to marke,t then venture capital investors may not be very interested in you.”
- Strategic investors
In 2007, software developers began working on a then-unknown personal assistant application. That application Siri was bought by Apple three years later in 2010. One year later with the release of the IPhone 4s, Siri has become one of the most well-known and intriguing features of the new iPhone. Apple’s investment goes to serve as an example of what a strategic investment can provide an upstart company.
Advantages
“Strategic investing is more for a large company that identifies promising technologies,” said Haughey. “For whatever reason, that company may not want to build up the research and development department in-house to produce that product, so they buy a percentage of the company. It is a cheap investment, but the company could turn out to be the next Google or Facebook for them.”
Disadvantages
“The first disadvantage would be loss of control,” said Haughey. “You have this great idea and now you have to answer to someone else and you have to give up a percentage of your company. The question then becomes, ‘would you rather have 100 percent of a tiny pizza or 50 percent of a huge pizza?’”
Beyond that, those using strategic investing must also think about the restrictions the investing company may place on them, as they can prevent dealing with any competitors and possibly even canceling the business relationship at any time.
2011 Trends: This Way Up | Slideshow | Entrepreneur.com
In his inauguration speech, President Obama paid homage to entrepreneurs. The path to greatness, he rhapsodized, has been paved by “the risk-takers, the doers, the makers of things—some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.”
Almost three years later, it’s clear he was spot on. Entrepreneurship has been one of the precious few bright spots in a terribly gloomy economy, and this new generation of entrepreneurs, both intentional and accidental, has taken it upon themselves to keep things chugging along. At the same time, starting a business gained serious cool cred.
Consider American Express’ slick ad campaign featuring Patagonia founder Yvon Chouinard; foursquare’s founders as models in glossy Gap mag ads; and the cults of celebrity surrounding “the Zuck” and the late Steve Jobs. Even A-list stars like Justin Timberlake and Lady Gaga added headlines to their clip files from startup-centric blogs like TechCrunch and Mashable.
“Entrepreneurship has become sexy in a lot of ways,” says Clay Newbill, executive producer of ABC’s Shark Tank, which features people pitching their dreams to a panel of deep-pocketed investors, including Mark Cuban.
Entrepreneurship has never been more practical, either. According to the Kauffman Foundation, 565,000 new businesses were created in 2010—the most in 15 years—as many new ‘treps were forced into it by the downturn. “Young people know that there’s a high likelihood they’ll have to make it on their own,” says Thomas Knapp, associate director at the University of Southern California’s Lloyd Greif Center for Entrepreneurial Studies. USC has seen a 13.2 percent year-over-year increase in students taking entrepreneurship courses at the school.
Here, 10 sectors to get in on while they’re trending up. Plus, one trend to watch. —Jennifer Wang
View As Slideshow
Facebook Will File IPO as Early as April 2012 [REPORT]
Facebook will file its long-anticipated IPO between April and June 2012, according to a report from The Wall Street Journal on Monday.
The report, which cites “people familiar with the matter,” says that Facebook is considering raising $10 billion in an IPO that could value it at more than $100 billion. This is consistent with a report in June that used the same eye-popping number of zeros to describe Facebook’s expected valuation. If realized, the valuation would make Facebook’s IPO one of the largest in history — more than four times as big as Google’s $23 billion IPO in 2004.
While the first rumors of Facebook’s impending IPO predicted that the company would go public during the first quarter of 2012, recent reports had suggested that the offering had been pushed back to “September or later.”
The Wall Street Journal‘s sources cautioned that Facebook has not made any final decisions in its internal discussions about the timing of its filing and that market conditions will ultimately determine how much money the company seeks and the value of the company.
Mashable has contacted Facebook for comment and will update this article with any additional information.
Sean Parker thinks Silicon Valley is in trouble | Digital Media - CNET News
Sean Parker this week at Techonomy
(Credit: Techonony)Tucson, Ariz.—Sean Parker, a big reason for Facebook’s success (remember Justin Timberlake) and a now a partner with Founders Fund, thinks Silicon Valley is in big trouble. His beef: Too many angel investors are throwing way too much money—albeit in little drips—at aspiring entrepreneurs who aren’t up to the task of building a company.
The subject came up during a panel Parker was on at Techonomy 2011, a conference that took place this week in Tucson, Ariz. It’s a hot-button issue -every young coder in the Valley, it seems, is either doing a startup or toying with the idea.
I talked with Parker to drill down on the issue.
Q: What’s the problem with the assembly line model of rapid-fire investing that’s going on now?
Parker: This is a model that works well in a bubble—the model of making a large number of investments very rapidly and outsourcing your due diligence to members of your network. Obviously in a market where everything goes up, this works extremely well. And that’s a bubble environment.Q: How’d we get here?
Parker: There was a huge inefficiency in the market six or eight years ago, where there wasn’t enough early stage capital. It was that opportunity that allowed Founders Fund, my venture fund, to enter the market to fill that void because angels had become very skittish and started to believe they could never get their money out.Now we’ve seen this explosion in angel investing. There are lots of angels coming out of Google and Facebook investing very rapidly and wanting to be players. I think that’s some of the motivation—wanting to be players, to stay close to the game and wanting to have a seat at the table.
And they’re making tons of investments often in companies that aren’t fully baked—either the team isn’t fully baked or the product isn’t fully baked or there’s no conceivable revenue model.
Q: You talk a lot about the importance of the right team.
Parker: A lot of the best talent in a particular domain is not necessarily the correct talent to be starting a company. So there’s a lot of fantastic engineers who really shouldn’t be product people, really shouldn’t be founders, and there’s a lot of founder product people who really shouldn’t be engineers. Understanding your place in the ecosystem and the value you’re able to bring gets lost and distorted when there’s so much money sloshing around, and everyone you know is pushing you to go and start a company.There’s a sense of entitlement that I’ve never seen before in Silicon Valley among people who work for a big company for a while and make a lot of money. They think the next step for them is to start a company. That’s often exactly the wrong thing for them to do. They will likely squander their own fortune or waste someone else’s money.
Q: Sounds like funding can end up being a disservice.
Parker: Any great engineer these days, who has a good pedigree, can go and get a $250,000 or $500,000 check and start a business and they’re probably not qualified to do so.They think they’re going to build a prototype and that’s enough. They need to be focused on building a team, and it doesn’t have to be a team of seasoned execs. It needs to be team of people who can perform all the functions necessary to run a business. I learned that the hard way—by starting companies that didn’t necessarily have a complete team.
Q: But sometimes good businesses come out of these small ventures. Few become Facebook or Google.
Parker: I think that the lesson in all this is that while this can sometimes work, it much more closely resembles gambling than it does investing. The result is going to be a lot of lost capital, but the most deleterious affects is the dispersion of human talent, human capital. The dispersion of human talent to a huge number of startups—none of which is executing with the right product or have the right team members to really succeed.And the good businesses find themselves competing not just against Facebook and Google and Dropbox and Groupon for talent. They’re competing against literally thousands of startups, most of which will never succeed.
Q: How does this all play out?
Parker: I think that when the large established players are done going public, you’ll see a few companies that are not ready to go public try. And if the market gets frothy enough, a few of those companies, which are too dependent on bubble economics, will go public and you’ll start to see those companies going terribly wrong and then you’ll see a lot of losses. And when those losses start to accumulate, you’re going to see the public markets for technology shut down again.Q: But the public markets aren’t the only option. Google bought 27 companies just in the last quarter.
Parker: Google bought 27 companies last quarter and a lot of them are talent acquisitions, in some cases paying $1 million an engineer. That can’t last forever. There’s way more startups getting founded now than there are companies than Google and Facebook want to buy.Q: The bubble bursting would obviously help the talent crunch.
Parker: The only countervailing force in that analysis is that Google and Facebook and Dropbox and Groupon, which are willing to pay exorbitant prices for talent, will stop having to do so.Q: Yup. That has to have a ceiling.
Parker: And then you’ll probably see a lot of these companies shutting down, and I guess this is where it really ends—when way more of these companies are shutting down then are getting bought. Then that causes this million-dollar price per head thing to drop, and the scarcity in the market goes away.Then there aren’t VCs willing to keep funding these companies; therefore they’re forced to sell in a fire sale. So they essentially stop being mergers and acquisitions plays and they start being recruiting opportunities.
I see these deals now where Facebook or Google makes an offer not to buy the assets but to acquire the right to hire. They’ll pay the company a certain amount of money and the investors a certain amount of money. It’s a talent acquisition where you don’t even buy the company. You’ll probably see more of that, where companies just get rolled in or talent gets picked over and there’s limited to no return back to the investors. At that point the whole system grinds to a halt.
Q: What’s the time frame for all this doom and gloom?
Parker: I don’t know how many more years of this we have—maybe it’s a year a year or two, max. But eventually this graveyard of dead young companies is going to dramatically exceed the number of companies that Google and Faceook want to buy, at which point that gravy train is over.

























