>> THIS PROGRAM WAS MADE POSSIBLE BY A GRANT FROM THE UNITED STATES DEPARTMENT OF AGRICULTURE RURAL DEVELOPMENT.

>> THERE'S PRESSURE ON DOING THE SEG AND PRESSURE ON JOHN IN THE PREFERRING TO ACCELERATE THAT PROCESS AND PRESSURE ON ME TO MAKE SURE THE CHECKS DON'T BOUNCE AND THE ACCOUNTS STAY LIQUID.

>> RAISING CAPITAL HAS BEEN AN EXTRAORDINARY EXPERIENCE.

VERY, VERY FRUSTRATING MOST OF THE TIME.

MOSTLY BECAUSE IT TOOK MUCH LONGER THAN WE HAD ANTICIPATED.

>> WE DIDN'T WAVE A WAND AND SAY WE'RE GOING TO HAVE A PUBLIC COMPANY.

THE AMOUNT OF HOURS PROBABLY DOING WHAT WE HAVE JUST DONE AND WHAT WE'VE JUST GONE THROUGH COULD HAVE BEEN VERY EQUAL TO THE START-UP OF OUR COMPANY.

>> WHEN WE FIRST STARTED THINKING ABOUT BUSINESS I NEVER IMAGINED I WOULD BE RUNNING A FACTORY AND LEARNING HOW TO MAKE IT WORK.

>> IT WAS A CHOICE OF FAILING AND HAVING THE WHOLE THING FALL DOWN OR TO SURRENDER OUR OWN INTEREST IN THE COMPANY.

>> WELCOME TO VENTURING.

I'M CAROL DILLON.

IN AN EARLIER SHOW WE TALKED ABOUT RAISING MONEY TO START A BUSINESS.

MOST OF THE TIME THAT COMES FROM YOUR OWN POCKET, FAMILY, FRIENDS, BANKS, OCCASIONALLY GOVERNMENT FUNDS.

BUT WHAT DO YOU DO WHEN YOU NEED MORE MONEY TO FINANCE THE GROWTH OF YOUR BUSINESS?

CAN YOU STILL TAP INTO THOSE SAME FUNDING SOURCES?

IF NOT, WHAT DO YOU DO.

WE'LL MEET ENTREPRENEURS WHO HAVE ANSWERED THAT IN A VARIETY OF WAYS.

THIS IS LEWIS, JOHN AND BOB OF CHICK TECH.

DESIGNERS AND BUILDERS OF WOOD ENERGY PRODUCTS.

WE TALKED TO THEM AT AN OPEN HOUSE.

CHIP STARTED OUT LEAN AND MEAN AND STAYED THAT WAY THROUGH SEVERAL PERIODS OF GROWTH.

>> FOR CHIP TECH WE DESIGN, BUILD AND INSTALL ENERGY SYSTEMS.

ONE IS AUTOMATING AND THE OTHER IS THE WAY WE BURN THE FUEL, WHICH IS CALLED GASIFICATION.

WE CHOA A STRATEGY OF FINANCING CALLED BOOTSTRAP FINANCING.

I MEAN THAT WE HAVE BEEN ABLE TO AVOID SELLING OFF OWNERSHIP OR CONTROL OF THE COMPANY TO OUTSIDE INVESTORS.

I THINK THAT IS A MISTAKE A LOT OF SMALL GROWING COMPANIES MAKE.

WE HAVE ALSO BEEN ABLE TO AVOID HIGH LONG TERM DEBT WHETHER IT WAS FOR WORKING CAPITAL OR FOR PREMISES AND EQUIPMENT.

AT THE PRESENT TIME WE HAVE THREE PEOPLE WHO ARE FRIENDS WHO BELIEVE IN WHAT WE DO, WHO UNDERSTAND WHAT WE DO.

WHO HAVE ASKED IF THERE'S ANY WAY THEY CAN BASICALLY PARTICIPATE IN OUR GAME.

WE HAVE BEEN ABLE TO BASED ON OUR NEEDS ARRANGE SHORT TERM NOTES AGAINST FUTURE CONTRACTS OR CUSTOMER CONTRACTS WITH THESE INVESTORS.

WE HAVE SMALL BANK LOAN FINANCING AND WE ALSO USE LEASE FINANCING FOR SOME OF OUR EQUIPMENT AND SOME OF OUR VEHICLES.

>> I THINK JOHN HAS SUMMARIZED AN ATTITUDE THAT WE HAVE ASSUMED.

THAT IS DO MORE WITH LESS.

IT'S THE WAY WE ARE PUTTING OUR COMPANY TOGETHER.

>> BOOTSTRAP FINANCING FOR ME IS DOING WHATEVER IT TAKES NOT BEING TIED IN OR ONLY LOOKING AT ANY ONE SPECIFIC FINANCIAL OPTION.

WE HAVE GOTTEN VERY GOOD THE A LOOKING AT ALL DIFFERENT OPTIONS AND PURSUING THE ONES THAT WE FELT WERE MOST ADVANTAGEOUS FOR US TO TAKE.

>> WE DON'T NEED A LOT OF MONEY TO PRODUCE A LOT OF LITTLE PIECES THAT GET DISTRIBUTED AND SOLD.

WE SELL HIGH PRICED EQUIPMENT, CUSTOM MANUFACTURED.

WE CAN ASK FOR DEPOSITS AND HAVE BEEN SUCCESSFUL DOING.

THAT IT'S BEEN TRYING AT TIMES BUT IT'S GOING TO PAY OFF FOR US AND WHEN WE DO HAVE TO CAPITALIZE OUR COMPANY WE'LL BE A MORE POWERFUL POSITION AND BE ABLE TO CAPITALIZE IT ON OUR TERMS RATHER THAN SOMEBODY ELSE'S TERMS.

IT'S GIVEN A SENSE OF REALITY ABOUT HOW TO GROW A BUSINESS THAT ULTIMATELY WHETHER IT'S A SMALL BUSINESS OR A LARGE BUSINESS WE HAVE TO PAY OUR WAY.

WE HAVE TO BUILD AND SELL SOMETHING OR MAKE SOMETHING AND SELL SOMETHING FOR ENOUGH PROFIT SO THAT WE CAN STAY IN BUSINESS.

>> THERE IS PRESSURE ON LOU, WHO DOES THE SELLING, ON JOHN IN THE MANUFACTURING TO ACCELERATE THAT PROCESS AND PRESSURE ON ME TO MAKE SURE THAT THE CHECKS DON'T BOUNCE AND THE ACCOUNTS STAY LIQUID.

WE FREQUENTLY GO TO OUR VENDORS FOR SHORT TERM FINANCING.

IT'S NOT PAYING ACCOUNTS PAYABLE ON TIME.

THEY DON'T LIKE IT, WE DON'T LIKE IT.

WE WORK AGREEMENTS WITH MOST OF THEM AND IT WORKS OUT FINE.

THEY ALL KNOW AND TRUST US AND THEY GET THEIR MONEY BUT IT'S A PART OF HOW WE'RE OPERATING THAT'S UNCOMFORTABLE AND STRESSFUL FOR ME.

>> AS WE GROW I KNOW WE'LL NEED CAPITAL AND BOOTSTRAP FINANCING WON'T ALWAYS SUPPLY US, BUT IT WILL HAVE DEMONSTRATED TO POTENTIAL INVESTORS THAT WE WERE CAPABLE OF MAKING THIS WORK ON ITS OWN MERITS.

THAT IS TO BE ABLE TO BUILD, MANUFACTURE, SELL A PRODUCT AND RUN A BUSINESS PROFITABLY, AND IF I PUT MYSELF IN THAT INVESTOR'S SHOES THAT'S THE TYPE OF COMPANY I WOULD WANT TO INVEST IN.

>> HE'S RIGHT.

THAT'S JUST THE KIND OF COMPANY I WOULD WANT TO INVEST IN.

BUT WHEN CONSIDERING BOOTSTRAPPING YOU HAVE TO MAKE SURE SALES CAN AGAIN CONFEDERATE JUST CAPITAL IN A TIMELY MANNER.

OTHERWISE YOU MAY FIND YOURSELF UNDERCAPITALIZED.

THIS CAN HAVE DISASTROUS RESULTS AS WE'LL SEE LATER IN THE SHOW.

THIS IS AN INDUSTRY THAT REQUIRES MASSIVE CAPITAL INFUSION FROM DAY ONE.

THEY DIDN'T HAVE THE PERSONAL RESOURCES TO FUND THEIR CAPITAL INTENSIVE VENTURE AND KNEW THE PITFALLS OF TOO MUCH DEBT SO THEY RAISED MONEY IN RETURN FOR PIECES OF THE COMPANY.

LET'S SEE HOW THEY DID IT.

>> THE IDEA THAT SUE AND I CAME UP WITH FOR A GENERAL INTEREST COMMUNITY UP IN IS A VERY AMBITIOUS IDEA FOR THIS COMMUNITY.

WE'RE GOING UP AGAINST ONE OF THE BIGGEST MEDIA CORPORATIONS IN THE WORLD, AND NEITHER OF US HAD SIGNIFICANT PERSONAL RESOURCES TO DRAW ON, SO REALLY OUR ONLY CHOICE WAS TO PUT TOGETHER AN OFFERING THAT DREW ON PRIVATE INVESTORS AND PREFERABLY FROM THE LOCAL MARKET SO THAT BUSINESS LEADERS, OTHERS WOULD HAVE A VESTED INTEREST IN THE SUCCESS OF THIS PUBLICATION.

WE DIDN'T WANT TO LOAD IT ON WITH TOO MUCH DEBT UP FRONT HENCE WE DIDN'T GO AFTER BANK FINANCING, AND THE PUBLIC OFFERING ROUTE WAS TOO EXPENSIVE AND TIME-CONSUMING.

SO THE PRIVATE ROUTE SEEMED THE WAY TO GO FOR US.

>> ONCE WE DECIDED TO GO WITH THE PRIVATE STOCK OFFERING, THEN WE HAD MANY OPTIONS AVAILABLE TO US AS TO WHAT KIND OF STOCK OFFERING IT WAS GOING TO BE, WHETHER WE WOULD OFFER COMMON STOCK OR OFFER PREFERRED AND COMMON STOCK OR IF WE WERE GOING TO BE INVOLVED WITH A LIMITED PARTNERSHIP.

>> WE DECIDED TO GO WITH A FAIRLY STANDARD TWO CLASSES OF STOCK, COMMON AND PREFERRED.

THE MANAGERS OWNING THE COMMON STOCK AND THE PREFERRED STOCKHOLDERS OWNING ONLY PREFERRED STOCK.

PREFERRED STOCK GENERALLY CARRIES WITH IT PREFERENTIAL PAYMENT ON DIVIDENDS AND PREFERENTIAL PAYMENT IN THE EVENT OF A SALE OR LIQUIDATION OF THE COMPANY.

>> WE LIMITED OUR PRIVATE OFFERING TO SO-CALLED CREDITED INVESTORS.

THAT MEANS INVESTORS WHO HAVE A NET WORTH OF $1 MILLION OR MORE OR MEET CERTAIN RATHER HIGH INCOME CRITERIA.

THESE CREDIT INVESTORS ARE ASSUMED TO HAVE SIGNIFICANTLY HIGHER DEGREE OF SOPHISTICATION ABOUT BUSINESS VENTURES AND SO FORTH, SO THE REQUIREMENTS FOR DISCLOSURE AND REPORTING TO THOSE INVESTORS ARE LOWER THRESHOLD THAN WHAT A PUBLIC OFFERING IS.

>> WITH PRIVATE OFFERING AS OPPOSED TO PUBLIC YOU MUST DO YOUR PITCHES TO THE INVESTORS ONE ON ONE.

IT CAN BE A FAIRLY DAUNTING AND INTIMIDATING PROCESS TO GO OUT AND PUT YOURSELF ON THE LINE AND ASK PEOPLE TO GIVE UP THOUSANDS OF THEIR WELL EARNED DOLLARS FOR YOU AND SOMETHING YOU BELIEVE IN.

AT FIRST, IT WAS A LITTLE DIFFICULT FOR SUE AND MYSELF TO GET OVER THAT HURDLE.

>> YOU GOT TO UNDERSTAND THE WE HAVE INK IN OUR BLOOD.

WE LOVE LOVE LOVE THE UP IN BUSINESS.

WE LOVE THE IDEA OF MAKING A DIFFERENCE IN THIS COMMUNITY THAT WE HAVE BEEN AROUND AND LIVED IN FOR SO LONG.

I THINK PEOPLE CAUGHT ON TO THAN KIND OF ENTHUSIASM AND THAT KIND OF BELIEF AND TO TELL YOU THE TRUTH, THE PEOPLE THAT INVESTED IN VERMONT TIMES NOT ONLY BELIEVES IT'S IMPORTANT AND HEALTHY FOR OUR COMMUNITY TO HAVE A SECOND UP IN BUT THEY BELIEVED IN OUR ABILITY TO PULL IT OFF.

>> DO YOU KNOW WHAT THE STORY IS THAT'S GOING TO GO HERE?

>> RAISING CAPITAL HAS BEEN AN EXTRAORDINARY EXPERIENCE, VERY, VERY FRUSTRATING, MOST OF THE TIME.

MOSTLY BECAUSE IT TOOK MUCH LONGER THAN WE HAD ANTICIPATED TO RAISE CAPITAL.

MOST FOLKS ARE EXTREMELY BUSY.

THIS IS THE NUMBER ONE THING ON YOUR MINE.

THIS IS NOT NUMBER ONE ON THEIR MINDS.

WHILE YOU WOULD LIKE ANSWERS WITHIN A WEEK THEY OFTEN PUT IT ASIDE FOR TWO OR THREE WEEKS.

SOMETIMES IT WOULD REQUIRE SEVERAL MEETINGS.

THERE WOULD BE QUESTIONS AND LAWYERS WOULD HAVE TO GET INVOLVED AND ACCOUNT YANTS SO YOU COULD IDENTIFY TWO OR THREE POTENTIAL INVESTORS BUT THEN OTHER FOLKS GOT INVOLVED WITH THEIR DECISION.

SO IT DID TAKE LONGER BUT WE MADE IT.

WE GOT THERE.

>> REMEMBER, DON'T COUNT YOUR MONEY BEFORE IT'S IN THE BANK.

THAT CAN SOMETIMES TAKE A LONG TIME.

KEEP THE DEAL SIMPLE AND GET EXPERT LEGAL AND ACCOUNTING ADVICE EVERY STEP OF THE WAY.

STEVE AND BRIAN OF VERMONT DISTILLERS HAVE DONE A PRIVATE PLACEMENT BUT IT WASN'T ENOUGH.

THEY NEEDED MORE MONEY AND DECIDED THAT DEBT CAPITAL WAS NOT THE RIGHT VEHICLE TO GET THEM WHERE THEY WANTED TO GO.

THEY ARE GOING TO GET EQUITY CAPITAL THROUGH AN INITIAL PUBLIC OFFERING OR IPO.

LET'S SEE WHAT'S INVOLVED.

>> YOU DON'T JUST WALK INTO A BANK AND SAY I WOULD LIKE ANOTHER COUPLE HUNDRED THOUSAND DOLLARS.

>> WELL, YOU DO BUT THEY DON'T RESPOND REAL WELL WHEN YOU DO IT.

>> UNLESS YOU HAVE A GUN IN YOUR HAND IT JUST DOESN'T WORK.

>> BASICALLY WE DIDN'T HAVE THE OPTION OF ACQUIRING MUCH MORE DEBT EQUITY.

THE COMPANY WAS REASONABLY HIGHLY LEVERAGED, WE HAD A FAIR AMOUNT OF BANK LOAN ALREADY IN PLACE, SO THE STRUCTURE OF THE COMPANY WOULD NOT REALLY SUPPORT A TREMENDOUS AMOUNT OF DEBT.

REALLY THE OTHER OPTION LEFT IS EQUITY FINANCING.

>> PRETTY EARLY ON WE REALLY SAW THAT THE BUSINESS WAS GOING TO NEED A REAL GIANT MARKETING EFFORT, THAT IT WASN'T JUST GOING TO BE THIS INCREDIBLY EASY ROAD OF EVERYBODY LOVING OUR PRODUCT AND LOVING OUR BOTTLES AND PICKING IT OFF THE SHELVES AND HAVING ALL THESE ORDERS IN.

WE REALLY NEEDED MARKETING DOLLARS.

SO WE WENT THROUGH A SERIES OF DIFFERENT FINANCINGS OVER THE LAST COUPLE OF YEARS.

WE BROUGHT ON A FEW MORE PARTNERS AND WE DID A PRIVATE PLACEMENT WITH ANOTHER 30 INVOTE OFFERS THEN WE WERE HOPING FROM THERE TO SPRINGBOARD INTO A PUBLIC OFFERING.

APPEARED THAT'S WHERE WE ARE RIGHT NOW.

>> WE SPENT A LOT OF TIME ANALYZING WHAT BEN & JERRY'S HAD DONE WITH THEIR INITIAL PUBLIC OFFERING.

THEY RAISED $1 MILLION FROM THE PUBLIC, THE REAL GENIUS AND BENEFIT TO WHAT THEY DID WAS THAT THEY NOT ONLY RAISED CASH FROM WITHIN THE STATE OF VERMONT SO KEEPING THE ECONOMY LOCAL, BUT THEY ALSO WERE ABLE TO IN A SENSE ACQUIRE THIS LARGE MASS OF NOW DEDICATED CONSUMERS, AND ALMOST IN A GREATER SENSE DEDICATED SALES FORCE.

STEVE AND I LOOKED AT IT THE SAME WAY.

WE WANTED TO CREATE THIS VERMONT FAMILY, THIS COMPANY THAT REALLY HAD VERMONT OWNERSHIP.

A GRASS ROOTS VERMONT COMPANY.

THE PUBLIC OFFERING GAVE US A VEHICLE TO DO THAT.

IN A SENSE IT WAS FRIENDLY MONEY AS OPPOSED TO UNFRIENDLY MONEY.

IT JUST ALL SEEMED TO MAKE SENSE AND GO WITH OUR PHILOSOPHY OF WHAT WE WANTED FOR OUR COMPANY.

>> I THINK THERE'S SEVERAL OPPORTUNITIES HERE.

ONE IS THAT WE HAVE CREATED -- >> THE MAJOR DIFFERENCE IN EMBARKING ON AN IPO, YOU BECOME A PROMOTER AS OPPOSED TO HAVING A SPECIFIC JOB WITHIN THE COMPANY.

IN OTHER WORDS, I USED TO SPENDS MY TIME DEALING WITH PRODUCTION.

NOW I HAVE VERY LITTLE TIME FOR PRODUCTION AND IT'S BASICALLY TO BE OUT THERE SELLING THE IPO.

>> THIS IS NOT AN EASY THING.

WE DIDN'T WAVE A WAND AND SAY WE'RE GOING TO HAVE A PUBLIC COMPANY.

THE AMOUNT OF HOURS PROBABLY DOING WHAT WE HAVE JUST DONE AND GONE THROUGH COULD HAVE BEEN VERY EQUAL TO MANY OF THE HOURS SPENT IN THE START-UP OF OUR COMPANY SO IT'S A WHOLE NEW PHASE OF THE BUSINESS GOING THIS ROUTE.

>> THERE'S A REAL IMPACT IN TERMS OF CASH FLOW AND EVERYTHING ELSE BECAUSE TO GO THROUGH THE PROCESS VERMONT DILL TILLERS IT TOOK OVER A YEAR FOR US TO GET THE PUBLIC OFFERING OUT.

WE HAD TO GO THROUGH THREE AUDITS IN THAT TIME.

AS YOU KNOW IT'S AN SCRUSH YAILTING AND VERY COSTLY EXPERIENCE.

YOU CAN WELL IMAGINE A YEAR'S WORTH OF LEGAL FEES AS WELL AS TAKING STEVE AND I AWAY FROM THE VITAL DAY-TO-DAY ASPECTS OF THE BUSINESS.

SO IT'S NOT SOMETHING TO BE DONE LIGHTLY.

IT'S NOT A QUICK, EASY SOURCE OF CASH FOR ANYONE WHO THINKS THAT IT'S A CHEAPER WAY TO GET MONEY THAN JUST GOING TO A BANK.

THERE'S TRULY A SIGNIFICANT IMPACT ON THE BUSINESS BY DOING AN IPO.

AS YOU APPROACH AN IPO, THE LAWYER THAT TAKES YOU THROUGH THAT PROCESS REALLY HAS TO BE AN EXCEPTIONAL INDIVIDUAL BECAUSE HE IMPACTS THE BUSINESS IN SO MANY WAYS.

HE IS PART OF WRITING THE PROSPECTUS, WHICH GOES OUT TO THE PUBLIC WHICH IS NOT ONLY IN GENERAL AN EDUCATION FOR THE PUBLIC OF WHAT YOUR BUSINESS IS AND WHERE IT'S BEEN, IT'S ALSO AN EXTREMELY IMPORTANT LEGAL DOCUMENT.

THAT'S VERY EXCITING THAT YOU HAVE GROWN THIS IDEA TO THE POINT OTHER PEOPLE ARE WILLING TO GIVE YOU MONEY TO BE PART OF IT.

ON THE OTHER HAND IT'S MORE REGULATION, MORE REPORTING, MORE PAPERWORK.

AND MORE INDIVIDUALS TO DEAL WITH.

ANY TIME YOU GET A GROUP OF PEOPLE PROBLEMS GROA EXPONENTIALLY THROUGH THE NUMBERS THAT ARE INCLUDED.

>> I WISH THEM SUCCESS.

THE IPO ROUTE IS NOT FOR EVERYONE.

IT'S EXPENSIVE, TIME-CONSUMING AND TAKES YOU AWAY FROM YOUR BUSINESS.

OF COURSE, EVERYTHING YOU DO BECOMES PUBLIC.

HOW WOULD YOU FEEL IF YOU HAD HUNDREDS OF BUSINESS PARTNERS?

IT'S TIME FOR OUR WEEKLY CHECK-IN WITH SMITH AND POST, THE SNACK FOOD COMPANY WE HAVE BEEN FOLLOWING.

LORI AND PETER ARE BACK FROM A SUCCESSFUL LAUNCH AT A NATIONAL FOOD SHOW AND THE REALITY OF WHAT SUCCESS MEANS HAS HIT HOME.

LET'S JOIN THEM.

>> I WAS IT WAS REALLY EXCITING.

WE WITH HAD ORDERS COMING OUT OF THE WOOD BJORK.

THEN WE GOT HERE AND TRIED TO MAKE ENOUGH MATERIAL TO FILL THE ORDERS.

FIRST THING BOTTLENECK THAT WE KNEW WAS GOING TO BE A BIG PROBLEM WAS THE SLICER.

WE WERE SLICING BY HAND WITH A DELI SLICER.

TRYING TO GET ENOUGH PRODUCT TO SULLY SELL.

WE HAD A HARD TIME GETTING A SLICER.

IT'S HARD TO FIND A USED SLICERS.

EVERYONE WANTS THEM.

THE ONE WE WANTED IS THE STANDARD IN THE INDUSTRY.

WE GOT ONE HERE AND A BIG SENSE OF RELIEF.

GOT IT ALL HOOKED UP AND THE APPLES ARE JUST POURING THROUGH IT.

IT'S GREAT.

ACTUALLY HAVE BROUGHT ON OTHER PEOPLE A LITTLE EARLIER THAN WE EXPECTED TO DO WITH THE INCREASED DEMAND.

>> THESE ARE READY TO COME OUT OF HERE NOW.

THE SLICES ARE SOFTENED UP AND YOU CAN HANDLE THEM EASILY WITHOUT BREAKING THEM.

AS OPPOSED TO WHEN THEY FIRST GAME OUT OF THE SLICER IF YOU TRIED TO STIR THEM OR PICK THEM UP YOU BREAK THE SLICES.

>> BRINGING SOMEBODY ELSE IN TO WORK IN THE PROCESS IS A BIG RELIEF BUT IT'S ALSO SOMETIMES FEELS LIKE IT'S HARD BECAUSE YOU HAVE TO SLOW DOWN TO TEACH SOMEBODY.

>> THE SPINNER IS A LOW COST SOLUTION TO A VERY EXPENSIVE FOOD PROCESSING PROBLEM.

IT WOULD COST US AT LEAST $6,000 TO GET A CENTRIFUGE TO DO THE SAME JOB THAT A SPEED QUEEN DOES.

>> BACK WHEN WE WERE FIRST THINKING ABOUT BUSINESS, I NEVER IMAGINED THAT I WOULD BE RUNNING A FACTORY AND LEARNING HOW TO MAKE IT WORK.

BUT THAT'S REALLY A BIG PART OF BEING IN A BUSINESS LIKE THIS.

>> I LIKE YOUR IDEA -- [AUDIO NOT UNDERSTANDABLE] TAKE THE WHOLE BAG.

>> I THINK SUPERMARKETS ARE -- >> MUCH OF THE DECISION MAKING HAPPENS ON THE FLY AT THIS STAGE.

IT'S REALLY ESSENTIAL TO MEET PERIODICALLY AND THE IDEAL IS TO HAVE A ROUTINE OF STAFF MEETINGS WHERE YOU CAN BRAIN STORM, BUT OFTEN WE DON'T HAVE THE TIME TO DO THAT.

WE'LL FINDS OURSELVES DEALING WITH SOMETHING THAT'S COME UP JUST HAVING A HUDDLE IN THE MIDST OF THE PRODUCTION SESSION.

WHEN WE WENT TO THE TRADE SHOW WE ACTUALLY DIDN'T INTEND TO TAKE ORDERS BECAUSE WE DIDN'T KNOW HOW SOON WE WOULD BE ABLE TO FILL THEM.

>> IT'S DEFINITELY A DANGER NOT BEING ABLE TO FULFILL A PROMISE THAT WE MADE AND WE HAVE TO BE VERY DILIGENT ABOUT CONTACTING THE CUSTOMERS THAT WE MADE AT THE TRADE SHOWS, LETTING THEM KNOW WHAT' HAPPENING, WHEN THEYN HAVE THEIR PRODUCT.

AM TIMES IT SEEMS WE'LL NEVER GET OUT FROM UNDER THIS 8-BALL THAT WE HAVE BEEN BEHIND.

WE WORK LONG HOURS WORKING FROM 6:00 OR 7:00 A.M.

UNTIL 7:00, 7:30, 8:00 P.M.

THAT GETS A LOT OF THINGS DONE BUT YOU CAN'T GO ONLINE THAT FOREVER.

ON SOME DANES IT SEEMS AS THOUGH NOTHING IS GOING RIGHT AND WE'LL NEVER GET THE SYSTEMS WORKING, NEVER GET THE PRODUCTION WHERE WE WANT IT.

WE DON'T UNDERSTAND WHAT'S HAPPENING.

THE NEXT DAY EVERYTHING GOES PERFECTLY.

THE RESPONSE HAS BEEN GOOD.

PEOPLE LOVE THE PRODUCT.

THEY WOULD LIKE TO HAVE IT RIGHT NOW.

BUT THEY ARE WILLING TO GET IT WHEN THEY GET IT.

>> I LIKE THE FACT THAT THEY CONTINUE TO KEEP THE SPIRIT OF RUBEOR GOLD BETTER ALIVE AND WELL WITH THAT WASHING MACHINE.

WE'LL CHECK IN NEXT WEEK AS THEIR BUSINESS BEGINS TO TAKE OFF.

WHAT HAPPENS TO A BUSINESS THAT NEVER QUITE HAS ENOUGH MONEY FROM DAY ONE?

THEY HAVE A GREAT PRODUCT, GREAT MARKETING, AND GREAT PEOPLE, BUT NEVER ENOUGH MONEY.

MEET TWIN BROTHERS WHO FOUNDED EARTH'S BEST BABY FOOD.

>> WE MADE THE DECISION AT THE KITCHEN TABLE.

PANCAKE BREAKFAST, IT WAS SEPTEMBER, 84, I WAS FEELING LIKE, IT'S TIME IN MY LIFE, I WAS 33 YEARS OLD, TIME TO DO SOMETHING THAT WOULD PUT MY VALUES IN ACTION.

I COULD NOT BELIEVE THAT THERE WAS NOT A LINE OF ORGANIC BABY FOODS IN THE MARKETPLACE.

I JUST DECIDED THAT I WAS GOING TO BE THE PERSON THAT WAS GOING TO DO IT.

SO I GAVE RON A CALL THE NEXT DAY AND I SAID, BROTHER, GUESS WHAT.

IT'S TIME TO DO BABY FOOD.

HE DID JOIN ME AND TOOK A COUPLE OF WEEKS FOR HIM TO SETTLE ON IT HIMSELF AND MAKE THE COMMITMENT BUT HE MADE THE COMMITMENT AND WE WERE OFF.

WE RAISED $250,000 IN SEED CAPITAL TO DO THE RESEARCH AND DEVELOPMENT.

THREE YEARS WHERE THE RESEARCH AND DEVELOPMENT OCCURRED WE KEPT EATING UP MONEY.

THE FIVE-YEAR PLAN, DEVELOPMENT OF THE PRODUCT, THE LAYOUT FOR THE FOOD PROCESSING PLANT, THE BUILDINGS, ALL THE REQUIREMENTS IDENTIFIED REGARDING PERMITTING, SALES AND MARKETING, MATERIALS WERE DEVELOPED.

WE REALLY STRETCHED $250,000.

IT'S AMAZING WHAT YOU CAN MAKE DO WITH WHEN THAT'S ALL YOU CAN FIND AND WE WERE JUST MAKING DO, MAKING DO, AND THEN IT SUDDENLY HAPPENED.

WE GOT TO A PLACE WHERE WE WERE READY FOR THE NEXT STAGE OF FINANCING.

WE IDENTIFIED THAT $900,000 WOULD BE THE FIRST ROUND OF FINANCING.

$500,000 IN EQUITY, $400,000 IN DEBT.

WE RAISED THAT MONEY IN A PRIVATE PLACEMENT THROUGH OVER 20 INDIVIDUAL INVESTORS.

ONCE WE HAD THIS $900,000 WE JUST WENT TO WORK.

THE FOOD PLANT STARTED TO BE BUILT.

WE STARTED ACTUALLY IDENTIFYING EQUIPMENT IN THE REAL WORLD, BUYING EQUIPMENT.

WE STARTED LOOKING FOR KEY EMPLOYEES, AND WE HAD A TIGHT TIMETABLE.

WE WERE VERY CONCERNED THAT WE DIDN'T HAVE ENOUGH WORKING CAPITAL, BUT WE CONVINCED OURSELVES THAT IF WE DID EVERYTHING JUST RIGHT AND THE STARS AND EVERYTHING WERE ALIGNED THAT WE COULD GET THROUGH THIS START-UP AND FUND THE COMPANY'S GROWTH THROUGH OUR CASH FLOW.

WE FINALLY GOT INTO PRODUCTION IN DECEMBER, AND ALREADY THINGS WERE NOT GOING EXACTLY THE WAY WE PLANNED.

WE WERE SPENDING MORE MONEY, IT TOOK LONGER TO GET INTO PRODUCTION THAN WE PLANNED.

WE HAD PROBLEMS.

WE HAD PROBLEMS WITH EQUIPMENT.

SO WE STARTED TO THINK ABOUT NEEDING MORE MONEY AND WE WENT BACK TO OUR ORIGINAL 20-PLUS PRIVATE INVESTORS AND SAID WE NEED MORE MONEY.

THEY WEREN'T HAPPY, BUT THEY WENT FOR IT.

THAT WAS THE BEGINNING OF WHAT I WOULD CALL ONE OF THE MOST DEVASTATING FINANCING TACTICS THAT AN ENTREPRENEUR CAN UNDERGO, WHICH IS BAND-AID FINANCING, WHICH IS NEVER GETTING ENOUGH, ALWAYS GETTING JUST ENOUGH TO GET OUT OF THE CRISIS AND MINCING ALONG FROM BAND-AID TO BAND-AID TO BAND-AID AND THAT'S WHAT ARNIE AND I HAD TO DO.

WE KNEW THAT WE NEEDED TO GET OUT FROM UNDERNEATH THAT APPROACH.

WE WENT THE VENTURE CAPITAL ROUTE.

EARTH'S BEST WAS IN A PLACE WHERE WE HAD TO FIND MORE MONEY AND THE ONLY THING WE HAD TO GIVE UP WAS MORE EQUITY.

THE SEVERAL MILLIONS OF DOLLARS THAT WE WERE LOOKING FOR WAS NOT TO BE FOUND IN A REALISTIC TIME FRAME FROM PRIVATE INVESTORS.

THE ONLY WAY WE WERE GOING TO FIND THAT MONEY WAS TO FIND VENTURE CAPITAL.

UNFORTUNATELY, THE COMPANY WAS NOT MAKING ENDS MEET CASH FLOW-WISE.

WHILE WE APPROACHED THE VENTURE CAPITAL REALITY WE WERE IN A VERY TOUGH SPOT.

WHEN YOU'RE IN A TOUGH SPOT YOU'RE GOING TO GIVE UP A LOT MORE OF THE FINANCIAL INTEREST, THE EQUITY INTEREST OF YOUR BUSINESS THAN YOU WANT.

WE DID.

WE NEEDED TO AND IT WAS A CHOICE OF EITHER FAILING AND HAVING THE WHOLE THING FALL DOWN OR TO SURRENDER OUR OWN INTERESTS IN THE COMPANY TO ENABLE THE COMPANY TO GO FORWARD.

VENTURE CAPITAL MONEY HAS ITS PLACE.

OKAY?

THE TRICK IS TO NOT BE IN A WEAK POSITION WHEN YOU GO OUT TO FIND IT.

THOSE MILLIONS OF DOLLARS CAN MAKE YOUR COMPANY GROW, CAN MAKE YOUR DREAM COME TRUE.

IF YOU'RE IN A STRONG POSITION, IF YOU HAVE A POSITIVE CASH FLOW, IF YOU'RE MEETING YOUR PROJECTIONS THEN YOU CAN GO INTO THE VENTURE CAPITAL ARENA AND CHOOSE, PERHAPS, THE COMPANY YOU WANT TO DO BUSINESS RATHER THAN BEING ON YOUR HANDS AND KNEES HOPING AND PRAYING THAT THEY ARE GOING TO SAVE YOU FROM DISASTER.

>> THIS CAN HAPPEN TO ANYBODY.

AN DOES ALL THE TIME.

INTRODUCING A NEW PRODUCT INTO A NATIONAL MARKET CAN BE VERY EXPENSIVE.

AND BELIEVE ME, THINGS WILL NEVER HAPPEN THE WAY THEY ARE LAID OUT ON YOUR PLAN.

THEY SO THE VENTURE CAPITAL.

THAT CAN BE AN IMPORTANT SOURCE OF FUNDS FOR A GROWING COMPANY OR START-UP FOR THAT MATTER, BUT IT HAS DIFFERENT AND OFTEN HIGHER EXPECTATIONS THAN OTHER EQUITY INVESTORS.

MAKE SURE YOU KNOW WHAT THEY ARE.

TONIGHT WE HAVE SEEN HOW RAISING MONEY FROM OUTSIDE SOURCES IS A COMPLICATED PROCESS AND EACH SOURCE COMES WITH STRINGS ATTACHED.

MAKE CERTAIN YOU SEEK SUPPORT AND ADVICE FROM PROFESSIONALS WHO KNOW YOU AND YOUR BUSINESS.

NEXT WEEK WE'LL LOOK AT MANAGING GROWTH.

ALL OF THE OTHER THINGS BESIDE PROPER FUNDING THAT GO INTO GROWING A BUSINESS.

IT INVOLVES KEEPING A LOT OF BALLS IN THE AIR WITHOUT LETTING ANY DROP.

AND THAT'S VENTURING.

I'M CAROL DILLON.

SEE YOU NEXT WEEK.