Finding money to finance your small business can be a real challenge. You might look to the traditional avenues, such as using personal funds, tapping the resources of family and friends, or even relying on partners for financial backing. In the mid-1990s, however, a new approach to finding financing has emerged-one that utilizes the networking capability of the Internet. That's what Pam Marrone of AgraQuest, Inc., tapped into when she needed additional financing.
Marrone's Davis, California, company develops and manufactures all-natural pesticides. She needed $2.5 million to pay the research, development, and production costs of two pest-control products. Marrone knew how to find money the old-fashioned way. After all, she had raised $300,000 in startup financing to launch her company. But when she began looking to expand her business's product line, she decided to experiment with a more direct link to potential investors via the Internet.
Marrone chose to list her business idea (at a minimal charge) with Venture Connect, a website designed to match investors and entrepreneurs. She also developed her own company home page, which included an extensive business summary and job postings, and promoted it through Yahoo!'s business directory. "This is a potential way to get directly to investors," Marrone said. "The responses have been fast." Marrone was confident that her unique search for financing would pay off, yet she was being just as cautious in her search for financing in this high-tech approach as if she had taken a more traditional approach. After all, we're still talking about money."
1. What are the advantages of financing via the Internet as Marrone did?
2. Are there any disadvantages to financing via the Internet?