COVID-Created Startups, SMB Investment Opportunities Hindered

Many small to medium sized businesses (SMBs) are failing, because they struggle to find the right investors who can help even the playing field of opportunity for SMBs.

Q3 2021 hedge fund letters, conferences and more

SMBs Are The Backbone Of The U.S. Economy

• SMBs account for nearly 30 million businesses in the U.S.
• In the midst of COVID-19 during 2020, Americans filed paperwork to start 4.3 million businesses.
• This number – 4.3 million – is a 24% increase from the number of businesses that were started in the U.S. in the year prior. ⁽¹⁾

Yet half of them⁽²⁾ go belly up, even when private equity (PE) and venture capital (VC) groups are pouring more than $100 billion in capital to SMBs every year?? ⁽³⁾

Without the right kind of investment, SMBs cannot endure challenges such as what the supply chain is experiencing right now. Here’s why the recent crisis that is creating shipping bottlenecks has many small business owners worried:

• Concerns that larger companies with more spending power will take priority over their own, causing them to lose valuable business.
• A decrease in the flow of goods from the U.S. to China has led to a shortage of shipping containers to bring items over.
• Getting more containers for an SMB could mean sacrificing months of payroll.

To deny these startups the support they need, financial, legal, strategic and otherwise, is to stifle society’s innovation, job creation and economic opportunities on a larger scale, while withholding solutions that potential end users could benefit from remarkably. 

“Founders are tired of investors who KPI the founders’ vision out of the company.  SMBs deserve a level playing field and financing from groups that can see their potential,” says Paul Ford, founder and president of DS9 Capital.

Disregarding SMBs As Small Potatoes

DS9 Capital is a founder-friendly venture capital studio serving as a privately held business portfolio management company, Founder Paul Ford has built DS9 on the fact that there is a huge disconnect in the investment world, as SMBs are being denied the opportunity to reach their potential.

So many large investors make the mistake of disregarding SMBs as “small potatoes” or not worth their time and money, according to Ford.  Minority-owned SMBs have an even harder time finding investors. 

But it’s the investors that are missing out on unique opportunities to help these SMBs grow.

This crisis presents a great opportunity for investors to put their money where their mouth is.  Companies like portfolio management company DS9 specialize in placing underrepresented SMBs on the road to success by connecting them with the right investors and tools they may not otherwise have access to.

“It’s important to look for a finance provider offering guidance on insurance, legal and regulatory matters.  Being on the same page when it comes to what you want growth to look like means you’re likely to see it through.” – Paul Ford

Startup financing should be a partnership, not a “wire sent, waiting for my return” experience, says Paul Ford, Founder and President of DS9 Capital.  Instead of jumping at any investor with deep pockets that comes their way, there are a few other important qualities businesses must have to achieve long-term success:

• The investor must offer assistance other than funding.
• The investor should share the same vision that the founders have for the company.  This includes growth and profit goals
• The investor should want to be involved, but not take over the business.

Just like it’s done in the hiring process, SMBs should vet and interview potential investors to find the right fit. ⁽⁵⁾

“When evaluating investors remember it is an interview on both sides.  Finding someone who can spot opportunities for the investors to get a step ahead of competitors means success for everyone.” – Paul Ford

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About DS9 Capital:

DS9 Capital is a founder-friendly portfolio management holding company focused on building enduring and stable cash-flowing businesses in the insurance and healthcare technology space. DS9 is generally focused on frontier technology and service offerings in the insurance and healthcare space largely leveraging cloud-based infrastructure, and more specifically on applying our domain expertise to nano-cap sized businesses to expand the value chain for all stakeholders. This value creation typically includes investment, leveraging our vast resources and networks to create a strategic pipeline for organic growth, and realigning the businesses to optimize commercial and IP assets. Our tactical goal with each of our companies is to leverage our expertise into higher margin and missed revenue opportunities.

Footnotes

1. Casselman, Ben; “Start-Up Boom in Pandemic Is Growing Stronger”; 19 Aug 2021; The New York Times; www.nytimes.com/2021/08/19/business/startup-business-creation-pandemic.html
2. Deloitte; “Connected Small Businesses US”; 2017; www.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-connected-small-businesses.pdf
3. Brown, Greg; Kenyon, Sarah; Robinson, David; “Filling the U.S. Small Business Funding Gap”; 2020 February; www.sbia.org/wp-content/uploads/2021/04/Kenan-FundingGap_02042020.pdf
4. Popken, Ben; “In struggle to fix supply chain, small businesses fear losing out to larger  companies with more spending power”; 13 Oct 2021; NBC News; www.nbcnews.com/business/consumer/struggle-fix-supply-chain-small-businesses-fear-losing-out-larger-n1281467
5. Cremades, Alejandro; “How To Find The Right Investor For Your Startup”; 30 September 2018; Forbes; www.forbes.com/sites/alejandrocremades/2018/09/30/how-to-find-the-right-investor-for-your-startup/?sh=6ecf0f717b82