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Chapter10GettingFinancingorFunding

Chapter10GettingFinancingorFunding - CHAPTERTEN Getting...

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CHAPTER TEN Getting Financing or Funding OPENING PROFILE BIZOOKI Raising Money Through a Variety of Sources www.bizooki.com In 2008 Andy Tabar, a student at Belmont University, was tweaking his start-up, Bizooki, a Web-based company that helps businesses become more efficient by utilizing global talent. The idea behind Bizooki is that many businesses need technical projects completed more efficiently, like the preparation of Web sites, interactive CO-ROMs, or marketing research, but don't have in-house expertise. By outsourcing the task to the most efficient global provider, the task can be completed inexpensively and on time. Bizooki acts as a matchmaker-bringing together businesses that need these types of tasks completed with a network of global providers. Although Bizooki didn't take a large sum of money to launch, the way Tabar has funded Bizooki is instructive for aspiring entrepreneurs. Rather than trying to raise money from investors or bankers, he has relied on a combination of bootstrapping, loans from friends and family, and creative sources of financing. Tabar's experience raising and managing money started at an early age. As a high school student, he built Web sites, strictly on a cash basis. He didn't need much money because he was essentially selling his time. When he graduated from high school, he brushed up on his knowledge of how to obtain credit, knowing that at some point he'd need external funding. The first step he took was to obtain an ExxonMobil credit card-not because he needed the credit but to start establishing a credit history. Tabar, who grew up in Ohio, chose Belmont University in Nashville primarily because of its entrepreneurship program. He experimented with a number of business ideas before settling on Bizooki. Along the way, he utilized several techniques to either raise money or gain access to resources in creative ways. One example is that as a freshman, he applied for membership to the university's Practicing Student Entrepreneur Program (also called the "hatchery"). Through the hatchery, Tabar and about 70 of his classmates gained access to desks, computers, phones, fax machines, and copy machines, along with the opportunity to brainstorm business ideas with one another. Another example, which is becoming increasingly popular among student entrepreneurs, is that he entered several business plan competitions. He won Belmont's top award in 2006 and 2008, netting $5,000 in cash both times. He also won $5,000 in the University of Evansville's competition in 2008. The cost savings and money generated by these techniques helped Tabar flesh out his idea for Bizooki and get the company off the ground. He borrowed several small amounts of money from an interesting source: Rather than going through a bank, he registered with Prosper.com, a peer-to-peer lending network. Prosper is an online auction Web site that matches people who want to borrow money with people who are willing to make loans. Tabar obtained several loans of around $5,000 apiece through
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