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Sunday, September 26, 2010

BUSINESS CAPITAL TRENDS: Direct Capital Investment In Small Business - The Time Is Now.

Direct Capital Investment In Small Business - The Time Is Now.


Dear Members, Colleagues and Friends:

No matter how much currency is printed, how much money is allocated, or how much funding is either 'gifted' or 'invested' in any "economic stimulus" which goes to government-run agencies, monopolistic companies (which are either deemed "too big to fail") or large publicly-traded entities which are subject to the vagaries of stock market volatility, no true economic recovery will be made or sustained. These approaches have always failed, and will continue to fail.

A genuine economic recovery requires: increased productivity, employment, efficiency, innovation, initiative, business facilities expansion, greater capacity utilization, stimulated consumer demand and greater amounts of money in the hands of smaller businesses and individuals.

Simplistic monetary and fiscal policies, especially at these highest levels, where the money is used to either subsidize inefficiency, to engage in capital market speculation, or to engorge already-privileged industrial and dynastic goliaths cannot work, because they do not put any money into the economy-at-large.

In fact, any benefits associated with these governmental and institutional activities are completely inaccessible to the entrepreneurs and to the ordinary consumers upon whom a healthy economy is dependent. Instead, these programs ultimately engender and proliferate both gluttony and poverty. In sum: the rich get richer (and become a smaller percentage of the total population), while the middle-class becomes extinct and the poor become poorer, and increase as a total percentage of the population.

With rising unemployment (and under-employment) evaporating pensions, disintegrating savings and wealth, tighter reins on consumer credit and rising costs for the barest necessities of living, consumer demand is faltering.

Small businesses have scant sources of financing in a prolonged period where banks are mostly interested in playing the float on deposits and charging increasing fees for access to their depositors' own money (remember when banks made loans?), venture capitalists are only interested in rapid turnover through short-term exit strategies, and investment bankers are either busy trading or doing secondary underwritings for only the largest companies.

Small businesses, the torch-bearers of all great industries, technological breakthroughs, fortunes and futures are starving. This is not for lack of merit or viability -- this is due to the growing chasm between Wall Street/ Washington and Main Street, wherein these companies have somehow become invisible because they are not lobbying loudly enough. This is also due to the lack of a well-known structure or program for investing directly in these seedlings of future prosperity and being assured high returns.

The conventional financial institutions, capital market approaches and vehicles for investment simply do not have a means of panning for these nuggets of gold. Perhaps they have lost sight of the fact, as supported by history, that prosperity does not start from the top down; no, it starts at the grassroots level and works its way up. The money poured into the top of the funnel seems to reach an early never quite flows down to these small- to medium-sized powerhouses of productive potential.

Entrepreneurs, emerging enterprises, small businesses and growing companies have always been the wellspring of innovation, technology, productivity, employment and general economic prosperity. They are the most frugal investors of funds (out of sheer necessity), the most bottom-line-oriented organizations, and they have always had the greatest true growth potential. Their captains and CEOs are motivated, enterprising and tirelessly determined.

Place capital in the hands of the best of these smaller companies, and watch them grow. Wait a bit longer, and watch the economy truly begin on a stable, sustainable path to recovery.

By investing directly (i.e., a direct participation) in these enterprises, several crucial objectives can be achieved at once:

1. The businesses get the capital which they need for growth;

2. Investor-Participants receive rapid recovery of their capital (regardless of prevailing capital market conditions, the DOW, NASDAQ, and rest of the indexes) through direct cashflow payments in the form of revenue-based royalties from the investee companies, and they continue to receive significant benefits (in either continued cashflow, stock options, buybacks or exit events) thereafter. Visualize a genuine cash-on-cash return, full capital recovery, and an average annualized rate of return in excess of anything available in the conventional investment marketplace -- and, at a far lower and much more controllable level of risk;

3. The economy is nourished, and begins to thrive again.

TNNWC's Emerging Enterprise Venture Capital Growth Program is being launched to provide financing for grassroots business growth, and to encourage and reward investors for participating in the Emerging Enterprise Sector.

I am delighted to play a part in this shift of capital from its current immobility to its most efficient, productive and profitable use; to the benefit of all parties. You'll be hearing a great deal more about this. It is truly revolutionary.


Douglas Castle

For more information, please visit Douglas's TNNWC Bio.

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The Emergence of The Relationship Economy

The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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