Is Your Company Fundable?

IS YOUR COMPANY FUNDABLE? by Rich Karlgaard

America’s unemployment rate–the worst in 26 years–has stopped the stock market cold. It has moved the recovery goalposts down the field, maybe into next year.Hope resides with America’s growth companies. But they sit at the epicenter of the credit meltdown and face funding hardships. Forbes.com has a plan to help promising growth companies get the funding they need. More on that in a minute.

The awful, jobless summer was forecast in April, when two conflicting sets of data emerged. One was positive–consumer confidence was soaring–and hinted at growth by summer. But other data was deeply discouraging: America’s large-company CEOs were paralyzed. I wrote about the disturbing anomaly a while back:

The Fed has done its job. (Maybe too well, but that’s another story for another day.) Consumer sentiment and spending have bounced back. The headwinds that remain have less to do with bank stress tests and more to do with CEO mood. The Business Roundtable, which represents big business, reported “record low” CEO confidence in April:

–71% of CEOs plan more layoffs in the next six months.
–Most see declines in capital spending.
–The CEO Economic Outlook Index was negative for the first time.

Let me say this again: The yield curve predicts growth. Check. Consumer sentiment and spending are up. Check. But CEO confidence is lousy, and CEOs are not investing for growth. Whoops. This raises the question: Why are CEOs in such a low mood?

Answer: If you are a CEO in financial services, manufacturing, energy production or health care, you will see more regulation. Period. End of story. Your response to forthcoming regulation of yet-to-be-determined complexity will be to hunker down. Keep your name out of the news. Improve the balance sheet. Hold tight.
That’s what has happened. Understand that America’s soaring rate of joblessness is not due to mass layoffs. It is due to the fact that CEOs are simply not hiring. They are paralyzed by the fog of uncertainty coming out of Washington.

In past recessions, recovery and new jobs have emerged from start-ups and small growth companies. But during this recession, funding has been very difficult for the small fry.

Forbes.com has a plan. We have teamed with The Venture Alliance (TVA), a boutique investment adviser to early-stage companies, to identify America’s most promising companies. Click here to learn more.

How do venture capitalists evaluate the potential of any growing company? The Venture Alliance has developed a scoring algorithm based on a vast range of variables that determine a company’s potential–and, ultimately, its worth to investors–including: financial projections, current capitalization, market position, market opportunity, intellectual property, management team and others. TVA crunches that data (which it collects by surveying young companies) and reduces it to one “fundability score.”

Companies that score well, theoretically, have a better shot at raising money than those that don’t.

If you are a growth company seeking funding, click here to get your fundability score.