Another Social Media Start-up in the news.

Posted on March 12, 2012 by Dave Dambro

CNN in Talks to Acquire Mashable, By BRIAN STELTER

Pete Cashmore of Mashable wrote to his staff on Monday about reports that CNN was in talks to acquire Mashable.
Michael Nagle for The New York Times – Pete Cashmore of Mashable wrote to his staff about reports that CNN was in talks to acquire Mashable.

12:19 a.m. | Updated AUSTIN, Tex. — CNN, a unit of Time Warner, and Mashable are in advanced talks that may lead to an acquisition of the social news Web site, three people with knowledge of the talks said.

Mashable, which specializes in stories about technology and social media, could bolster CNN.com, which is one of the most popular news Web sites in the United States. An acquisition of Mashable would make a statement about CNN’s interest in start-ups and social media.

A blogger for Reuters, Felix Salmon, reported on Sunday night that a CNN acquisition of Mashable could be announced on Tuesday. Early Monday morning, officials at CNN denied that an announcement would be made on Tuesday and declined to comment on the potential acquisition.

On Monday morning, Pete Cashmore, the chief executive of Mashable, e-mailed his staff to say that the “rumor going around on Twitter that Mashable will be acquired this week” is not true. The e-mail didn’t address the ongoing talks between his company and CNN, and left the door open for an acquisition announcement the week after.

“Mashable’s one of the hottest brands here at SXSW and there’s bound to be rumors coming out of the festival,” Mr. Cashmore wrote to the staff. “We’ve had a great presence here and I look forward to updating you guys when we get back.”

The people with knowledge of the talks insisted on anonymity because they were not authorized to speak by their employers. It is possible that the acquisition will not be completed, some of the people cautioned.

Nonetheless, news of the potential acquisition spread rapidly among attendees at South by Southwest, a technology conference here that celebrates the kind of old-and-new-media combination that CNN and Mashable would represent. Both companies have big groups of staffers at the conference and both have been hosting parties, sometimes with other media partners.

Mashable, which is seven years old and is privately held, would be CNN.com’s largest acquisition to date. Last fall, CNN.com acquired Zite, a company that made an iPad app that determines what its users want to read and view, for a price that was estimated to be between $20 million and $25 million. Mashable would cost CNN far more to acquire.

Mashable is best-known in Internet circles for covering social media and technology, though it has expanded recently to include business and entertainment coverage. It has hired aggressively and has partnered with a number of mainstream news sites, including CNN and ABC News. CNN already syndicates some of its stories.

There was a social media hint about the potential acquisition early Monday morning when Adam Ostrow, the executive editor of Mashable, “liked” on Facebook Mr. Salmon’s story for Reuters. Mr. Ostrow did not respond to a request for comment.

Offered through our business desk at Capital Matchpoint – Edward E. Cambas.

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Fixed and Variable Costs for Entrepreneurs.

Posted on April 27, 2012 by Dave Dambro


When discussing financials with capital seekers and preparing the financials for the whole capital raising process, we generally get to the subject of distinguishing between fixed cost and variable cost. It is important to know this, because it conveys some very important information to investors.

First of all, let’s talk about what fixed cost and variable costs are. Fixed costs are just as the name implies: expenses that are fixed. These are expenses that you have no matter what your sales are whether they are good one month and bad the next month, the rent is going to be the same, the management salaries are going to be the same. There are a lot of costs of this nature. Variable costs are, as its name also implies, costs that are variable with the level of sales. Examples might be sales persons’ commissions. This is a cost you do not incur until a sale is made. If a company makes sales on credit cards, the merchant fees that a credit card company charges are not incurred until that sale is made.

The distinction between fixed cost and variable cost are important, because it helps investors to determine two very important financial ratios when evaluating a company; the burn rate and the break even analysis. The recommendation I always make to capital seekers is, if you do not feel comfortable categorizing your costs between fixed and variable, give us a call at the Capital Match Point. We deal with this a lot, across a lot of different industries, and we will be happy to help. Because at the end of the day, we are in the business of maximizing the opportunities of capital seekers to get that funding.

For more information on this and other business subjects go to The Capital Matchpoint Website – http://www.capitalmatchpoint.com

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Why is the JOBS Act So Important a Problem for the SEC?

Posted on April 26, 2012 by Dave Dambro

The ultimate question is whether or not the JOBS Act will inspire the next Steve Jobs or Bernie Madoff. The debate is landing squarely on how much help it is for start-ups versus the possibility of abuse and fraud. It is supposed to help small business get funding by easing restrictions and regulations on the process of raising capital. Small business start-ups need the SEC to get this one right and it will be a boost for start-ups around the country.

It will actually depend on how the SEC structures the process so that it is functional while still protecting investors. The SEC has announced that they are “seeking public opinion” which the regulatory body will take under consideration along with all the nightmare scenarios that they are speculating could occur. As it stands the restrictions are very “entrepreneur friendly,” and the problem is that the way it is set up now can open the door to a ton of fraud. The SEC is already overwhelmed with trying to regulate what laws are already on the books and simply will not be able to regulate the entire process of crowdfunding as it goes forward.

The most important part of the JOBS Act to entrepreneurs is crowdfunding which allows for companies to raise capital online. Most importantly, the ACT eases restrictions on the number of shareholders allowed to participate in the offering, amount they may invest, and removes the accreditation requirement. Another troublesome part of the crowdfuning provision is how to protect the investors from unscrupulous dealings. Ken Honeyman, President of The Capital Matchpoint recently stated that “The SEC already has its hands full, and they simply do not have the resources to scrutinize and regulate this new breed of securities.” The Capital Matchpoint has web resources in place to handle crowdfunding deals once all the dust settles and has been a proponent of the bill since its inception.

During the great depression legislation was passed to protect the public. It was called the Securities Act of 1933. That was passed in part to among other things protect investors post market crash of 1929. The Securities Act requires that in order for stock to be sold publicly in the United States it must be properly registered with the SEC. The filings and statements then become public record and they contain key disclosures which protect the public.

The JOBS Act creates a key exemption by not forcing registration of the shares to the SEC if they meet certain requirements. The Act allows up to 1 million dollars to be raised within a 12 month window and allows that the investors solicited have a much lower financial threshold to be able to invest. The amounts vary and depend on their income or net worth.

1. An investor’s annual income or net worth is less than $100,000. This person can invest $2,000 or 5% of his or her annual income or net worth within any 12-month period.
2. An investor’s annual income or net worth is equal to or more than $100,000. This person can invest 10% of his or her annual income or net worth, up to a maximum amount of $100,000.
3. The transaction much be done through an intermediary, such as a broker or funding portal, which must register with the SEC.
These three things have already been solidified as being a done deal. The next aspect of the process is for the SEC to make a variety of additional rules which will apply in an effort to protect the investor community.

The SEC will be weighing in on:
•What disclosures intermediaries must provide to investors, including disclosures about risks and other investor education materials;
•Standards to make sure investors have reviewed these materials and understand them;
•Measures to reduce the risk of fraud;
•Making sure that no investor in a 12-month period has bought more shares than the law allows;
•Protecting the privacy of information collected from investors.

For more information on this subject and others please visit The Capital Matchpoint – www.capitalmatchpoint.com

Written By Edward Cambas – The Capital Matchpoint April, 25th, 2012.

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Business Plan- What is EBITDA?

Posted on April 25, 2012 by Dave Dambro

You know, another financial term that an entrepreneur may hear when they start the capital raising process and start to communicate with our investors that they may not typically hear is a term called EBITDA.And what is EBITDA?Well, EBITDA is really an acronym.It stands for “earnings before interest, taxes, depreciation, and amortization.”The second question is usually why is it important?Well, what EBITDA does is it strips away a lot of the structural and non-cash expenses associated with the company.It really allows and investor to make and apples-to-apples comparison of two different companies.

The question usually comes up, well aren’t interest, amortization, and depreciation all legitimate expenses? Yes, they are, and interest and taxes, those are cash expenses. But at the end of the day, those expenses are more structural than they are operational.So, what our investors try to do when they are trying to get a real sense of the company and the earnings potential is strip away all of those structural expenses and look at the real income generated by the operations.That will allow that to make some really apples-to-apples comparisons against another company they may be considering for investment.

A couple of watch-outs regarding EBITDA.It should not be used as an inference of cash flow.That is always a temptation, but it should not be used as an inference of cash flow, because EBITDA comes from the income statement.An income statement is very susceptible to interpretation of accounting principles and gap guidelines.I would caution anyone against using it as an inference of cash flow.Second thing about EBITDA is that it is also a good internal metric for management in that it shows management the performance of the company within their boundaries of influence.

If an entrepreneur has any questions about EBITDA, would like to really dig into EBITDA, understand it, and maybe do some EBITDA calculations for their own company, I would encourage them to give us a call. Because at the end of the day, we see this a lot, and we are here to help maximize our entrepreneurs opportunity to get funded.

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Crowdfunding – A Challenge for Regulators – April 23rd

Posted on April 23, 2012 by Dave Dambro

A lot of entrepreneurs and investors are waiting to see what the SEC is going to do about the future regulations for crowdfunding. The Congress passed the law in an effort to make it a lot easier to raise capital from smaller investors including being able to crowdfund online. The Congress also made sure they stipulated that the final touches to the bill would be left up to the SEC. They will be in charge of making the tweaks which will supposedly protect the investors from undue harm. The SEC is going to have to put together an entire strategy for how the actual funding will work.

The Jumpstart Our Business Start-ups Act has left 22 places for adding rules and restrictions by the SEC, according to Karen Kerrigan, president of the Small Business and Entrepreneurship Council at their first conference in New York recently. The agency, which has always advocated that there are major concerns, has 270 days from April 5th, 2012 to make the rules. This should place the final and official target date for enactment on Jan 1st, 2013. The SEC is now in the process of taking public comments and working on the final adjustments to the Act.

Crowdfunding websites are going to be further scrutinized and regulated as “intermediaries” and rules will be set into place with regards to the investor disclosures, the amount the investor will be allowed to invest, and how to vet the companies behind the actually selling of the shares. It is simply not going to be a “free for all” for websites to do whatever they want. This could open the Pandora box of all time investment schemes and that is the very reason the SEC is going to take the assignment so seriously.

Kerrigan, one of the most vocal backers in favor of the law, does not want the SEC to get so involved that they tangle up the industry in red tape. She goes on to suggest that the “SEC might do more regulatory damage”, and we are all hoping that the crowdfunding laws will be such that small business and entrepreneurial start-ups will actually have a new way of obtaining successful funding.

The law is putting a lot of new work on the books for regulators which are already behind on implementing the Dodd-Frank reforms, says Joan MacLeod Heminway, a law professor at the University of Tenn. She spoke up along- side Kerrigan at the New York conference and it was her opinion that the SEC does not have the full resources needed to regulate the crowdfunding industry. They simply cannot police the new class of securities which will be unregistered shares and the websites which connect the investors to the issuers. “I think they have a big problem on their hands”, says Heminway. Many people have suggested that the entire platform for crowdfunding will be like the “Wild West” of raising capital.

Written by Edward E. Cambas – For more info on this subject or other important business topics visit our website at: The Capital Matchpoint – http://www.capitalmatchpoint.com

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Ratio Analysis of Financial Information

Posted on April 22, 2012 by Dave Dambro

Entrepreneurs seeking capital from investors frequently find that the financial projections they provide are broken down and analyzed using ratios. Every investor has their own idea of what is important and what ratios best reflect that aspect of performance. Many times the task of keeping up with these and understanding them proves tedious and time consuming for an entrepreneur that has a business to run. I advise entrepreneurs faced with sorting out this type of information to think of ratios in five broad categories.

First of all there is profitability ratios. This category includes ratios such as return on equity, return on assets, earnings per share, return on sales and, In short these ratios express net income in terms of a percentage when divided by a chosen return criteria.

Next there are solvency ratios. These help an investor determine the ability of your company to meet near term financial obligations. The most popular solvency ratio is called the quick ratio which is the sum total of your cash, marketable securities and accounts receivable (from your balance sheet) divided by current liabilities (also from your balance sheet and typically defined as obligations due within 30 days).

Activity ratios give investors a sense as to how fast assets turnover within your company. This also gives important insight into cash flow. For example, receivables turnover (credit sales divided by average accounts receivable) calculates the rate at which receivables are collected. A higher number indicates that you are collecting receivables more quickly and are hence bringing cash into the company more frequently. Likewise inventory turnover (COGS divided by average inventory) give an investor a sense of how efficiently inventory is being managed. A high inventory turnover means that product is being sold much sooner after hitting the warehouse and hence turning into cash more quickly than a product that lags in inventory before being sold.

Capitalization ratios such as financial leverage (Return on Investment – Return on Assets) and debt to equity gives investor a sense of importance of debt and equity in your company’s capital structure.

Market ratios are very important to investors as they will ultimately play a part in the value an investor places on your company and the amount of stock they will require in exchange for investment. Two very important market ratios that companies seeking capital should understand are price to earnings and return on investment.

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Business Plan-Financial Statements That Will Stand Up to Investor Scrutiny

Posted on April 17, 2012 by Dave Dambro

I work with a lot of entrepreneurs seeking capital and putting together their financials.The question that always comes up is, what do the financials really need to contain to stand up to the scrutiny of sophisticated investors? Aside from the obvious, which is they need to be believable and the assumptions need to be able to be backed up and defended, there are basically five points that I give an entrepreneur to use like a check list.
#1, have a complete set of financials.This includes historical, en pro-forma, balance sheet, income statement, and statement of cash flows. Always be advised to look forward at least three years, five year if you can, but at least three. For the first year, summarize your information on a monthly basis. For years following that, do it on a quarterly basis because looking that far out is not that good.
#3, include historical financials as far back as you have accurate information. I say this because we work with a lot of companies in the early stages of development, and there may not be historical financial information back very far. So, go back as far as you can but do not go back any further than you have accurate information. Because at the end of the day, accuracy trumps history.
#4, make sure that your business plan and what you say in your business plan in your market analysis and your competitive analysis, make sure those hang together. Because if an investor picks up a business plan that says one thing and then looks at a set of financial that says something else, it is not going to make sense to them, and they will start to ask a lot of questions, and, in turn, the credibility of the whole plan in general is going to be called into question.
#5, dot your I’s and cross your T’s. Make sure your balance sheet balances. Make sure your costs are properly categorized. Make sure that the investor can take your three financial statements and do a flow-through analysis, and it makes sense to them. Because, at the end of the day, our investors see a lot of business plans, and what you do not want to do is give them an excuse to pass on yours.
When putting together financial statements, I always recommend that is an entrepreneur has questions, to give us a call.

For more info about this subject go to The Capital Matchpoint website:

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Business Plan-Cash is King: Cash Flow & Case Management

Posted on April 16, 2012 by Dave Dambro

One piece of advice that I would give an entrepreneur, no matter what stage their company is in, is that cash is king.I know that it is cliché, but it is nevertheless true.Cash flow is, in a lot of ways, the company’s key to survival.Experience has taught me a lot of things about cash management, but there are a few specific pieces of advice and insight that maybe I can offer.
The first thing I would do would be to set a cash plan.Just like a budget.Set a plan.The second thing I would do would be to set goals.For instance, a cash goal might be t say by “X” date, we are going to have three months operating cash on hand at all times as an emergency fund.The third thing I would do would be to set some rules about the use of cash.For instance, you might say that any cash or purchase disbursement not in the plan has to get prior approval.
Periodically, take projected economic conditions into account.Have they changed since the last time you updated your cash plan?Are they different?What does that mean for my customers and my ability to collect payment?
The next thing that I would recommend is obviously to watch your receivables.If you sell on credit, you have to have continual flow of receivables.That does not mean you have to go out and offend your customers, but you could tactfully but firmly collect the money that is due.
The third thing would be to take control of what cash items in your plan and move them around such that you could smooth the flow of cash in your company.Other items you can move up when you have a lot of money or move back to times where you have more money.Take that into account and construct your cash plan accordingly.
Last thing, revisit the plan often.Make sure it is updated and make sure it is evergreen, so that it is always a meaningful document to everyone within your company.If an entrepreneur is putting together a cash plan or is having cash flow issues and would like some insight into doing this, I always encourage them to give me a call.We get a chance to see a lot of companies, and, at the end of the day, it is our business to maximize our entrepreneur’s opportunity to get funded.

For more info on this subject and to get funding for your business :

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What is burn rate and why it is so important?

Posted on April 16, 2012 by Dave Dambro

Once an entrepreneur gets in the throes of the whole capital raising process, one of the terms they hear is burn rate. A lot of times, we get the question, what is burn rate? Well, classically defined, burn rate is the rate at which a company will exhaust its capital base. Let’s take an example. Let’s say a company has a burn rate of a million dollars per month. That means that they will exhaust a $12-million capital base in a year. Burn rate is synonymous with negative cash flow, and this is important to investors for a couple reasons.
#1, an investor wants to know if the money that they are putting into the company, or potentially putting into the company, I should say, is enough to sustain the company until it can reach positive cash flow.
#2, that is going to give them some indications as to whether or not another round of fundraising is going to be necessary before the company is up and on its own.
Also, investors typically look at companies in light of their ability to reduce their burn rate when revenues do not meet projections. This is important for two reasons as well.
#1, a lack of cash just diverts management attention from the crucial business of running the business, the day to day operations.
#2, a lack of cash severely hamstrings growth necessary to reach positive cash flow and eventually exit. It also prevents the company from taking on new customers.
If an entrepreneur has any questions about burn rate, how to calculate it, and what it really means, I always recommend that they contact us or give us a call at the Capital Match Point. We have seen this a lot. It is a topic we deal with daily, and we would be glad to walk them through it. Because at the end of the day, we are in the business of maximizing our entrepreneur’s opportunity to get funded.

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Find Investors-Angel Investor, Venture, Private Equity, Capital Funds, or Hedge Funds. Which One is for You?

Posted on April 13, 2012 by Dave Dambro

I get a lot of questions from capital seekers about the type of money that is available on the Capital Match Point. I have several categories, and we classify them and categorize them for a reason. There are angel investors and angel investor groups. There are venture capital funds, commonly referred to as “VC’s”. We also have private equity funding sources. Then there are hedge funds; additionally private investors. Then we have a category called “other”, which pretty much encompasses all other accredited investors, that would be investors of significant net worth and sophistication to make investments on their own. Now, what is important here, as a capital seeker you need to understand the differences between capital providers. They’re very specific. And secondly, you need to be able to identify the source that you need to target for your particular capital needs. Now, getting in front of the right capital provider is paramount to getting your company funded. So, what we’re looking for here is, the key is efficiencies. Don’t waste time chasing the wrong kind of money, and don’t waste money doing that either. The thing you need to be doing is running your business. So, take the most efficient route to capital. If there are any questions on this subject I always invite the capital seekers to call. That is what we do on a daily basis here at Capital Match Point, and we can easily help you identify the type of capital sources that would be most efficient for you to use.

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The JOBS Act: What does it mean for start-ups and entrepreneurs?

Posted on April 11, 2012 by Dave Dambro

The JOBS Act was signed into law by President Obama on April 5th, 2012. The House originally passed the Act, and then it was amended by the Senate on March 22, 2012. This Act makes changes to a lot of different laws to attempt to make it much easier to raise private capital. This applies to a lot of emerging companies that want private capital and they wish to stay private longer. In addition, it reduces the regulatory burdens on certain public companies that are new and allows them to raise the money on the internet.

If securities are held by 500 people or more issuers are required to register that class of securities with the SEC. This makes these securities extremely burdensome with regard to reporting obligations. They have to file very detailed quarterly and annual reports with the SEC.

With the passing of the Act, the threshold has now risen to 2,000 holders of record. One of the provisions is that no more than 499 of those investors qualify as an “accredited investor” under SEC rules. One of the positive aspects is that persons who purchase securities pursuant to crowdfunding are exempt. This will open the door for entrepreneurs to receive a new method of funding and this is something that is extremely positive for start-ups.

The enactment of the JOBS Act is effective immediately. The regulatory agency (SEC) is going to have to adopt rules and revise what they call “held of record”. The rulemaking for the SEC revisions should take place within the next 270 days. It passed Congress last week through a 73-26 Senate vote and a 380-41 House vote, including an amendment designed to protect crowdfund investors in order to make it easier for start-ups to access capital.
What this means for entrepreneurs:

1. More Control over the Timing of Going Public.
2. Less Impacted by Potential Reporting Requirements.
3. Potential Impact on Secondary Markets.
4. Eliminates the Prohibition Against General Solicitation and Advertising
5. Reach a Wider Pool of Investors
6. Lowers the Investors Wealth Requirements
7. Gives the Start-up a 5 Year Plan to Develop

“Simply, the JOBS Act will make funding more accessible for startups by allowing non-accredited investors to participate in the funding rounds, and this alone, I believe will be the main factor driving the increase in new companies being founded. And with new companies comes the need to hire staff. Without a doubt, this will help the current unemployment rate,” said Tanya Prive, founder of Rock The Post, a social networking platform for entrepreneurs to fund and swap resources.

Rory Eakin, founder of CircleUp, an equity-based crowdfunding platform focused on established high-growth consumer and retail companies, added: “Currently, less than one percent of U.S. small businesses receive Angel investments. By opening up restrictions around general solicitation and introducing crowdfunding…these investments create up to six jobs per investment.”

Companies like Indiegogo or Kickstarter were offering a way the companies could raise money from average person that did not meet the “accredited investor” criteria as defined by the SEC. The problem was that the persons contributing could not take a piece of the equity and benefit directly from profits and losses. The new law makes it much more enticing to the investors because they are allowed to participate and benefit in the upside of the company.

The new law that is enacted now allows for companies to use crowdfunding to seek out and find the actual investors. It can now raise up to $1,000,000 this way. Investors with a net worth less than $100,000 may now invest up to 5% of their yearly income or $2,000 whichever is higher. Wealthier individuals can invest up to 10% of their annual income.

The measure as it passed the House limits individual contributions to $10,000 or 10 percent of the investor’s annual income. The democrats in the House and Senate argued against the de-regulation and suggest that it is going to open the door to a wide variety of abuses and scandals. The republicans are in favor of relaxed regulations and they argue that we have to make it easier for start-ups to get their companies up and running. After all, small business is the engine that fuels growth and jobs in our economy.

The Capital Matchpoint founder and President, Ken Honeyman and Vice President, Dave Dambro have been watching the bill as it progressed through the House and the Senate. The Capital Matchpoint is a premier online destination “where business meets capital.” They have carefully crafted an online community where entrepreneurs can develop a profile which then has a sophisticated method of using the information to match them up with the investors in the network. The website has all types of resources including an entire library of helpful videos, free e-book download and more.

For more info on this subject or to access capital funding for your business: visit our website at www.capitalmatchpoint.com
Written by Edward Cambas – Capital Matchpoint Business Desk. April 10th, 2012

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