Raising Capital Without Giving up Equity
Raising Capital Without Giving up Equity
A startup is offering "small business bonds" as an alternative way to finance growth.
Good morning!
Here are today’s highlights:
In Facebook’s David and Goliath trademark fight over the name Meta, the facts are coming out.
As the labor shortage continues, more companies are offering high school apprenticeships.
An array of new acquisition marketplaces can help sell businesses for less than $1 million.
WeWork is selling software that it says businesses can use to lure employees back to the office.
INTELLECTUAL PROPERTY
If you guys were the inventors of Meta, you would have invented Meta: “In August of 2017, an executive at the social networking giant [Facebook] emailed Justin Bolognino, the founder of [a] small VR company that curated The Lab, to tell him how ‘AMAZING’ and ‘spectacular’ it all was. Before long, Facebook was teaming up with Bolognino’s company to pitch a project that would meld AR with AI. The name of this little VR company Facebook hoped to partner with? Meta. These details come from a lawsuit Bolognino’s company filed in July for, well, the obvious reasons. The lawsuit alleges that, despite their friendly history, Facebook (as we’ll call it in this story) willfully infringed on Meta’s trademark when it noisily renamed itself Meta in late 2021.”
“Not only did Facebook change its name, the suit argues, but it began swallowing up Meta’s business in the live VR event space, setting up installations at some of the very same venues where Bolognino’s Meta had previously mounted shows ...”
“Meta’s side of the story certainly fits neatly into the prevailing narrative about Facebook, which has a history of borrowing — or outright buying — its best ideas from smaller, lesser-known competitors.”
“But Meta will need to show Facebook to be more than just a bully. The legal case may end up saying as much about Facebook as it does about the state of trademark protections today.” READ MORE
FINANCE
A San Francisco startup is helping local merchants finance their growth with small business bonds: “After around two years of pandemic-related delays and disappointments, San Francisco ‘ice cream for adults’ company Humphry Slocombe finally opened up its first location—and fifth overall—on the Peninsula this week. ... What went surprisingly smoothly was getting financing for the new store, typically a stumbling block for small businesses reeling from the pandemic. Instead of relying on a typical bank loan, Humphry Slocombe was able to raise $250,000 from 180 individual investors by offering ‘small business bonds,’ a novel financial product created by SMBX, a 35-person San Francisco startup.”
“In 2020, when Humphry Slocombe was looking to raise money for the new Redwood City location, banks were largely turning them away. The lenders that were calling them back were offering money, but at exorbitant interest rates.”
“In 2012, the passage of the JOBS Act opened up the ability for private companies to issue public securities. SMBX was formed to provide access to capital without forcing entrepreneurs to give up equity.”
“Since launching in February 2020, roughly 70 businesses listed on SMBX’s platform have raised more than $6 million to help support and expand their ventures.”
“‘Our vision was really building a new public marketplace for small and medium-sized businesses,’ SMBX CEO and-founder Ben Lozano said.” READ MORE
HUMAN RESOURCES
Desperate to hire, more companies are turning to high school apprenticeship programs: “With almost two openings for every person looking for work, U.S. companies are increasingly tapping high school students for skilled jobs. As a result, apprenticeships are seeing a renaissance after failing to gain a foothold over the past few decades. About 214,000 people age 16 to 24 were in apprenticeships in 2022, more than double the amount a decade ago, according to July data from the US Department of Labor. Companies in sectors such as health care and insurance have launched apprenticeship programs—even tech and finance companies, including Amazon.com and Mastercard, have joined in.”
“Apprenticeships allow companies such as Canon—which prefers the term ‘outreach program’—to hire and train employees at an earlier stage in life.”
“Until about a year ago, fixing printers and copiers required a college degree, but no longer, says Brian Gallipeau, who leads Canon Solutions America’s field service unit.” READ MORE
America faces a catastrophic shortage of teachers: “Rural school districts in Texas are switching to four-day weeks this fall due to lack of staff. Florida is asking veterans with no teaching background to enter classrooms. Arizona is allowing college students to step in and instruct children. The teacher shortage in America has hit crisis levels — and school officials everywhere are scrambling to ensure that, as students return to classrooms, someone will be there to educate them.”
“[Arizona’s Tucson Independent School District] may hire virtual math teachers from a Chicago-based online education company, the Tucson Sentinel reported.” READ MORE
MARKETING
Amazon continues to gain on Facebook and Google in digital advertising: “Amazon has built a robust online ad division by getting brands to pay big bucks to promote their products on the company’s website and app. As of late last year, Amazon commanded 14.6 percent of the U.S. digital ad market, third to Google at 26.4 percent and Facebook at 24.1 percent, according to Insider Intelligence. In the second quarter, Amazon grew faster than either of its larger peers in the market and also beat out the rest of the major players. Amazon’s ad revenue rose 18 percent from a year earlier to $8.76 billion, topping analysts’ expectations and underscoring the unit’s rapid ascent and increasing importance to brands.”
“By contrast, Facebook’s ad business shrank for the first time ever, missing analyst estimates, and the company forecast a second consecutive decline in revenue in the current period.”
“‘Long term I think Amazon is building an absolute advertising juggernaut,’ said [Andrew Lipsman, an analyst at Insider Intelligence]. ‘That engine is going to become transformative to advertising.’” READ MORE
SUCCESSION
Legendary restaurateur Danny Meyer is stepping down as CEO of Union Square Hospitality:
SELLING THE BUSINESS
An array of new acquisition marketplaces can help you sell a business for less than $1 million: “Acquisitions are especially difficult for companies who might want to sell for smaller amounts. M&A brokers are not always the right decision — brokers take cuts of sales and don’t always make financial sense. Not everyone has the right network or the right timing or the right location to be approached by a buyer independently. And it's not always clear how much smaller companies should be sold for. Enter the acquisition marketplaces. Those like TinyAcquisitions and Side Projectors cater to the smallest businesses. ‘Some businesses list between $10,000 and $100,000, and they’re usually making between $1,000 and $5,000 a month,’ says [Stephen Campbell, founder of Tiny Acquisitions].”
“BitsForDigits, co-founded by Laurits Just, caters to companies making over $100,000 in revenue. ‘In a lot of these other marketplaces, it’s failed side projects and startups that go for sale,’ Just says. ‘But we’re trying to keep the quality high.’”
“BitsForDigits, which cites inspiration from the no-control minority stake that Basecamp sold to Jeff Bezos in 2006, also allows entrepreneurs to sell as much of their business as they’d like.”
“Others, like MicroAcquire, market themselves as open to all revenue-making startups. MicroAcquire competes directly with the older acquisition marketplaces, like 11-year-old Empire Flippers, and 13-year-old Flippa, the oldest and biggest player in the place.” READ MORE
SMALLBIZ TECH
WeWork is selling software to help businesses lure employees back into the office: “WeWork is hoping to boost its drooping share price by joining the growing number of technology companies selling apps, data tools and other software to landlords and office tenants trying to adjust to the new world of hybrid workplaces. Nine months after going public, the shared-workplace operator in July officially launched a service named WeWork Workplace, which includes the software tools that WeWork has been using to power its scores of locations. For the first time, WeWork is now offering these tools to all tenants regardless of WeWork membership.”
“WeWork executives say Workplace will help businesses lure workers back to offices by giving their employees an app with which they can do such things as book a conference room, post a company announcement or register for a yoga class.” READ MORE
RETAIL
In Boston, they’re rethinking the grocery store: “Business owners and residents have opened — or are in the process of opening — at least four boutique food shops and co-op grocery stores that cater to their neighborhoods this summer. They’re banking on the idea that customers will come from around the block to shop, or arrive looking for high-quality (and often locally sourced) products you can’t find at, say, Stop & Shop. Among those entrepreneurs is Alexis Cervasio, the founder of East Boston’s EBO & Co. Grocery.”
“The shelves are stocked with goodies for a charcuterie board, including cheeses, meats, jams, and honeys. There’s a wall of tin fish, which, if eaten on the picnic tables outside, comes on a paper plate with butter, sea salt, parsley, and lemon.”
“Four kinds of caviar will be available at all times. And a lobster roll kit with a pound of meat, two buns, and a dime bag of spices runs for $75 — ‘a steal,’ Cervasio said, while lobster prices skyrocket.”
“‘The type of place I think every neighborhood should have — not as big as a grocery store, not as boring as a bodega.’” READ MORE
THE 21 HATS PODCAST
This week, Jay Goltz tells Shawn Busse and Karen Clark Cole about a dream he had recently. It was a dream, of all things, about this very podcast, and on it, someone—it was a guy—was talking about how his business was faring: “I think I’m screwed,” he says in Jay’s dream. But who was it? And why was he screwed? Jay woke up before those answers were revealed. So we did some interpreting on this week’s real podcast. Spoiler alert: It wasn’t that hard to interpret! Plus: Shawn explains why he thinks his website is no longer performing. Karen explains why she thinks it’s actually easier to onboard an employee who will work remotely. And Jay and Karen discuss whether it’s time to give up on things going back to the way they were.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren