Hear Direct from a Financing Source: Where the Money is today for your Business

Karen Rands’ Compassionate Capitalism radio show for entrepreneurs and investors returns to interview a special guest: Tony Erwin of Skyrocket Financial. Tony is an active member of the angel investor community in Atlanta having found fortune from his role in technology IPO and garnered success from sophisticated stock market investments. Now he helps growing companies with additional sources of alternative finance to fuel their growth with debt against assets to augment their efforts in raising business capital. Tune in to learn more about where to find business capital and investor money for your early stage business. www.skyrocketfinancial.com and www.launchfn.com Formerly SPEC Talk Radio.

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Hear Direct from a Financing Source: Where the Money is Today for your Business

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

NEW for 2014:  http://NationalNetworkofAngelInvestors.com and http://AngelInvesting101.com

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Bumper Music by Bryan Hunley of New Whyne Music

Earning an Annuity as an Angel Investor- Yes, Virginia it can be done

Similar to other investment options, an investment in a private company can produce annuity type income.   When starting out as an angel investor an investor should plan on making multiple investments with diversification of industry and structure as a core principal.  Accredited investors with sufficient liquid capital to make multiple strategic investments over a period of time, will likely diversify their portfolio of private equity stock investments to include multiple types of investment structures.   Similarly to an investor looking to get involved in real estate investments with different targeted outcomes; short term return (flip), revenue producing (rental), and long term (raw land). An angel investor should seek to diversify into multiple types of offerings:  debenture with option to convert (flip); royalty or revenue cycle financing (rental); and traditional equity (raw land).

In this episode of the Compassionate Capitalist Radio Broadcast (REPLAY) http://www.blogtalkradio.com/karen-rands/2014/03/25/earning-an-annuity-as-an-angel-investor  Karen Rands shares her insight into the different types of angel investments and specifically how to identify private alternative investment opportunities that can produce a re-occurring revenue stream.

The conventional wisdom for angel investing is similar to venture capital investing— invest in 10 companies, wait 5-10 years to discover which one or two of the lot produced a big enough return on the investment to make up for the 4 that lost all of the investment and the 2 that broke even and the 2 others that gave you just a teeny return.   It doesn’t have to be that way.   When wealth men and women apply the same discipline they have learned when managing their public stock decisions and their real estate investment choices, and seek to have a long term strategy that calls for diversification of industry and investment type, they increase their odds of a higher rate of return because they have balance and load.

Diversifying by industry and into market areas that an investor already has an interest ensures some level of insulation from the natural economic ebb and flow industries experience.   Diversifying by product / investment type allows for shorter term results off set by long term hold.   For example, an investor just starting out could “loan” money as an investment secured against orders with the option to convert or to have it paid back but with warrants, then they get their money back, but have an option for discounted equity.   After a couple of those types of investments, they begin to accumulate additional liquid capital that could be invested in to an offer for royalty or revenue cycle financing.   This is a type of investment that is made but instead of an equity stake, the investor received a re-occurring revenue stream as a % of revenue until an agreed to multiple on the investment is paid back, usually 4X the investment.  Companies with the potential for long term growth and opportunity to go public are ideal for equity investments where the investor will have their investment capital tied up and illiquid for 5-8 years.   This type of equity investment is the most risky, because a lot can happen in 8 years to cause a company to not succeed, but if they do, then the results can be 10X to even 25X return on investment.    Early investors in Microsoft, eBay, Amazon and many others all experienced this type of return.    Keep in mind though… for every one of those, there are at least 10 that never got that far and never gave a return on investment.   There are some, like the companies that went public with a big splash… Web Van, even Facebook,  that did not hold its value after going public, but the initial angel investors made their money back and them some, probably at least 5X if they sold when it first went public.

You have an opportunity to get more information on this type of diversification by listening to the podcast or buying the Inside Secrets of Angel Investing.    This is the topic discussed in detail in Chapter 5.   You can also sign up for free excerpts from the ebook, Inside Secrets to Angel Investing.

Are you an investor that is tired of the volatility and unpredictability of the stock market? Are you frustrated that you have little influence to affect the management or operation of that public company? Have you realized that the public stock market is actually pretty risky and the overall return on investment isn’t that great?  The Join the New National Network of Angel Investors and be a part of the growing community of wealth men and women that want to master their wealth portfolio and learn how to be Compassionate Capitalists  – make money and contribute to the economy at the same time. 

6 Reasons Why Private Equity Investment is the Next “HOT” Asset Class for Sophisticated Investors

During the last few years, we have survived one of the worse economic downturns. The new “normal” by many standards is a 10 year set back. Money is like water, it finds a way to flow and come together to multiply. Leading up to the economic crash of 2000, we saw an increase in angel investing triggered by the increase in venture capital investment. As more companies were going public, we saw an increase in day trading as a means to quick wealth. These were enabled because big money from retirement funds, private equity funds and family funds invested in the venture capital funds and took large positions on companies in their initial public offerings.

When it all imploded and the bubble burst, it took a couple of years but angel investing and venture capital investing came back. The intrinsic value of investing in private companies in their early stage was not in doubt, it was the process – how companies were identified and vetted that was in question. Investor groups became more formalized, with better pre-screening, due diligence committees, and terms negotiation. Similar economic conditions exist now. The difference in then and now is that most of the people participating in the growth of angel groups in the mid 2000s were successful high-tech entrepreneurs investing in similar companies to influence a repeat of their prior success without the full cost of time and capital in starting and growing a company.

As an economist, who has worked with angel investors for over a decade, I have identified 6 reasons why private equity investment will be the next “hot” asset class for high net worth men and women that want to create generational wealth.

  1. Increase in Risk Tolerance: In the last decade, fortunes have been lost in real estate and the stock market. As investors become more sophisticated and become aware of the ability to invest in private companies because of the buzz surrounding “crowd funding”, they are willing to take the risk because the potential for return is greater than with other asset classes.
  2. Quasi Public Offering: Market Makers are going to be looking for new places to put money and the new rules on general solicitation open up opportunities, awareness, and access to private companies. Private companies raising capital under a 506c will be the next favored market place because it’s easier to directly reach investors to create the market for that stock.
  3. Return on Investment: Early stage companies that have received private equity investment from angels have found a ripe market to sell their companies to larger corporations even before they need their B & C round of capital. Early investors are not as diluted and the timing for exit is shorter than for companies trying to grow to the point of being able to go public.
  4. Increased Value: Angel Investors already know the early stage company’s value is at the bottom and will either go up or go out of business, but the investors can impact the company’s value success through their involvement than they can with a public company.
  5. Safety in Numbers: With the advent of strong collaborative investor groups and investor portals designed specifically for investors to be able to identify, investigate and invest in early stage companies the way eTrade provides that access to public companies, individual investors have an opportunity to collaborate with on early stage companies.
  6. Efficient Use of Capital: The cost to launch a company is lowest so the investment dollar goes further. Young entrepreneurs can join incubators that are associated with either universities or as part of an economic development initiative in their area.

Watch this space — angel investment will become one of the best asset classes for sophisticated investors to increase their wealth as the economy continues to rebound and early stage companies continue to have ample access capital to grow profitably and create jobs.

You can get a free report on the 5 Billionaire Secrets and excerpts from the popular “How To” book for investors seeking to learn the ins and outs of investing in the equity of private companies: Inside Secrets to Angel Investing–  Simply visit http://.angelinvesting101.com and optin on that page.
Visit http://NationalNetworkofAngelInvestors.com  to join a community of Compassionate Capitalists and help build a network of sophisticated investor that are like minded in their desire to help entrepreneurs succeed, and increase their wealth by doing so.

Why is Angel Investing such a Mystery to Wealthy People?

Interestingly enough, if you were to ask the average millionaire that you encountered on the street (not that any millionaires are actually average) their thoughts on entrepreneurship, capitalism, and creating wealth; you would likely get comments such as the following:

“Entrepreneurs are the backbone of our society. They create jobs and bring innovation to the market.”

“It is only in creating wealth that anything gets done or paid for.”

“I’d rather give my money to an entrepreneur with half a brain and the gumption to go out and do something with it, than some government empty suit that is just going to give it away. ”

“The people who solve problems make the biggest bucks.”

“Buy low and sell high!”

“The free market – capitalism – gives you personal freedom – to choose your future destiny.”

“I seek to invest my money where I can get a return on investment…the greatest reward relative to the risk.”

So with thoughts and feelings like this, what keeps millionaires with the capital on hand to make alternative investments and invest in early stage private equity opportunities?  It is estimated that 10% of the American population has the means to qualify as an accredited investor, that translates to millions of potential investors, yet only a few hundred thousand participate in angel investor type deals.

Our investigative team has determined that the very regulations intended to keep fraud out of the process and protect high net worth individuals is actually creating a situation where misinformation abounds.   Further, greed and fear actually limit the free market access to information about investment opportunities into private companies these potential investors should have to be able to become “angel investors”.

The Securities and Exchange Commission (SEC) regulates the sale of securities.   What this means is that for entrepreneurs to be compliant in their sales of equity in their company, they must adhere to rules regarding selling those securities as a non-public company.

1. General rule of thumb is that they sell to only accredited investors, with a few exceptions.

2. They must provide documents that clearly state the risk, typically in a Private Placement Memorandum

3. They cannot do a public solicitation through an online posting, email blast, advertisement or anything that will offer the security to the public and therefore they must have pre-knowledge of the investor, or if they work through a licensed broker the broker can sell their security on their behalf.

4.  If they are to pay a commission for the sale of that security, they can only do that with a licensed broker, with few exceptions.

This leads into the Broker side of the equation which is regulated by FINRA.  FINRA, the Financial Industry Regulatory Authority, is the largest independent securities regulator in the US whose chief role is to protect investors by maintaining the fairness of the US capital market.  They regulate the brokers that are authorized to sell and take a commission on private placement opportunities.  Typically brokers/dealers charge large upfront fees and large back-end fees for the sale, and assuming the liability, of selling that security.  They have a due diligence fee, retainer, commission and stock options. To justify those fees, they typically want to work with companies that are raising $5M or more and have revenues to manage to the upfront fee, or have cash on hand from their friends and family round of financing.

Broker/Dealers (BD) often have affiliate brokers, financial planners etc, that hang their license with them.   The brokers, according to the FINRA guidelines, create fear with these affiliate brokers if they are caught “Selling Away”.   So if an affiliate broker sells anything to their clients, the people whose money they are managing, that is not offered and approved by the managing BD, then it is considered selling away from the brokerage.

What Does Selling Away Mean?
When a broker solicits you to purchase securities not held or offered by the brokerage firm. As a general rule, such activities are a violation of securities regulations.
Investopedia Says
Investopedia explains Selling Away
Typically, when a broker is “selling away,” the investments are in the form of private placements or other non-public investments.

On the surface this is all good because the investor only gets products, securities, investment vehicles that have been fully vetted by the brokerage house.   They sleep well at night believing that they have placed their money in solid investment vehicles, whether private or public offerings, they really don’t focus on the difference.

As with any private equity transaction, this does not guarantee that they will not lose money in that investment.  We’ve seen that all over the place even in reputable firms like Stanford or in public stocks like Enron.

But in reality, how this plays out is that the Broker will only promote private offerings that they are being paid to promote.   And investors that want to participate in angel investing, want to “own a piece of a company” don’t get the benefit of having their financial counsel to help them  in evaluating the deal, they don’t get quality deal flow from other sources, and they don’t gain insight into how to make wise investment decisions in that area and manage to the tax implications on the return on investment.

Not all high net worth individuals think of investing in private companies as “angel investing”.  If they are readers of Robert Kiyosaki’s books (Rich Dad, Poor Dad or Cashflow Quadrant) then they likely are working on their financial IQ and working toward being Business Owners and Investors so that their money works for them rather than working for their money.   Angel investing in effect is the entire scope of the right side quadrant….business ownership through investing in private businesses.  Yes you have the greatest likelihood to lose all the money invested in an early stage private company, but you also have the potential for greatest return on investment.   Private equity investing at the early stage produces greater returns than real estate or stocks or any other asset class.

Angel Investing has the potential to create more wealth than any other asset class…at multiple levels.  It can create wealth for the investor that directly invests.   It creates wealth for the entrepreneur that is bringing the product to market and building a successful company.  It creates wealth for the newly hired employees in their earned income.   It creates wealth for all the businesses along the supply chain that service the company, build the products, and so on.

On the other hand, most real estate investment only creates wealth for the seller and those that assisted in the sale and the investor who gets a return from rental income or the upside when it is sold the next time.  Public stock investment doesn’t create wealth for anyone except for the person who is able to sell the stock for more than they paid for it.  There is a commission paid to the broker for handling the transaction.  The money used to buy public stocks doesn’t go into the company’s coffers to invest in R&D or hire new people, it goes to the seller of the stock.

So for those millionaires that “get it”….there isn’t a lot of guidance on how to determine if an early stage private equity opportunity is a good investment nor how to decipher the terms of the investment and if the return on investment will come in the best format for the tax implications and so on for that investor’s overall investment strategy.   The tax implications from a convertible note that has accumulated interest may be different from an investment that shared in the revenue (and losses) of a company; the investment made as a straight purchase of equity that is held for 18 months vs one that is held for 5 years.  And what would the impact be if you purchased the equity through your self directed 401K or as an investment made through a ROTH IRA.

Entrepreneurs that think they are doing the right thing, creating a PPM that even allows for a broker commission and only selling securities to accredited investment has NO idea that a whole source of potential investors are not available to them, actually blocked from them getting access to them.   It is crazy to think they would go to one broker to get access to their investors, pay the fees, then go to another one, pay their fees, and so on.   They typically will work with one broker for a while and then forge out on their own trying to find the individual investors.   If they go the broker route, they typically can’t go back and work with angel groups because the structure of the stock offering is set in stone.   The greed of the brokers won’t let the entrepreneur just pay the broker a commission or to have the affiliated broker take it to one or two of their high net worth clients that have expressed an interest private placement opportunities.   And because of the fear that the affiliate broker has in losing their license if they are accused of “selling away”, they won’t even tell the client about the investment opportunity and NOT take a commission.   When the licensed financial adviser knows the client wants to make real estate investments or buy a franchise, they will refer them to a source for those deals and help them to understand the implications on their financial diversification and asset allocation, and any tax and estate implications.  They don’t collect a commission, they don’t think of this as selling away, they think of it as providing full service to their client based on the client’s interest in different investment options.

So what is the solution?

For investors, that want to be involved in angel investing and they don’t have the benefit counsel from their investment adviser they should do the following:

  1. Buy the series Learn to Be an Angel Investor…it is concise look at the history, process and structure for angel investing taken from 5 years of working with successful investors and their secrets to success and countless industry reference materials. 5 books, or one compiled “Secrets….”
  2. As part of the Compassionate Capitalist Radio Show where Karen Rands revealed the insights gained recently on why so many wealthy people don’t know about or participate in angel investing. Podcast file is include in this posting….

  3. Form a team of advisers that will help you and protect you…this includes a lawyer accountant and financial planner/wealth manager.  They should all have made angel investments in the past or at least counseled others in that arena, either entrepreneurs or investors in early stage capital.
  4. Attend a seminar that can teach you how to be an angel investor or be a better one if you have not achieved the results you hoped for in your previous investments. 

Karen Rands on Seed Stage Venture Capital from Angel Investors

Karen Rands on this Compassionate Capitalist Radio Show will feature the companies that will be participating in the Start-up Round-Up event in Atlanta sponsored by LAUNCHfn, NBAI, and iStanta, a seed stage capital fund. As a special guest, we will feature Matt Oguz of the iStanta Fund to talk about having a VC mentality in the SE Angel Investor Market. We will also hear from a few of the companies that will be showcased at the NBAI Angel Investor Member event the following evening. We’ll explore the difference between investment decisions at the start up and the emerging growth stages.

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Check out these investment websites: Karen’s twitter page: @Karen_Rands, www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

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Selecting The Right Employees and Building Strategic Partnerships Wisely

Karen Rands, during her Compassionate Capitalism show will engage her featured guests on a topic important to all start up and growing companies. When a start-up founder realizes he or her needs to build a team, bring on expertise to compliment their own skills how can they identify those people, confirm they will enhance their business and at the same time, protect the business they founded. They need to know what skills are needed on his/her team, identify the right resource, then negotiate for that person to join the company and protecting the company long term.

This is important for investors considering an investment in a private company.   When a company first starts out, they have limited resources and limited management structure, but as the organization grows, they add people, skills, resources.   Building effective teams and the leadership of those running the company is critical to the company’s success.   In the case of a key person coming on board, either as an active investor — an “Exec with a Check”, or when a key resource is brought in that may share in the equity as part of their compensation, it becomes all that more critical to make sure that there is a good mix for the personalities and to protect the company legally in the event it doesn’t work out as planned.

Guests are Kenneth Darryl Brown of E3C (www.BetterSalesandProfitsNow.com) and Hugh Massie, CEO of DNA Behavior (www.BusinessDNAResources.com) to discuss how a CEO can learn about their leadership and communication strengths and understand what to look for in potential team members. Bob Van Rossum, President of MarketPro, (www.marketproinc.com) the nation’s leading executive search and contract staffing agency specifically focused on marketing, interactive, creative and advertising talent will discuss identifying and qualifying a potential candidate for the management team. Glenn Garnes, Relationship Marketing Center, will discuss protecting your interests when bringing on partners…the subject of his new book:”Let’s Not Be Partners, Things you Must Do Before You Tie the Knot (“not”). Sure to be a dynamic show for all aspiring entrepreneurs.

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Check out these investment websites: Karen’s twitter page: @Karen_Rands, www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com,  www.entrepreneurblogspace.com and www.dothedeal.org

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What Is Your Business DNA?

Karen Rands will interview special guests: Hugh Massie, CEO of DNA Behavior (www.businessdnaresources.com) and Kenneth Darryl Brown, E3C (www.bettersalesandprofitsnow.com), They discuss the Business DNA Profile and how it can be used to determine an individual’s talents and struggles. As a result, people learn what their strengths are and how to focus them in the area of business where they can excel. Additionally, they learn how they like to communicate with their communicate style.

CEOs need to understand their communication and leadership styles as part of their building a qualified team. We’ll explore how these programs help entrepreneurs understand their team dynamics and what they can do to build the team and put the other elements in place to effectively attract business capital. Lastly, Business DNA can be used as a tool to demonstrate to prove to investors that the company has a team can execute on its business models.

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This show is part of a dynamic and informative session covering one of the many components that Launch Funding Network offers clients seeking capital necessary for raising early stage venture capital and angel stage investment.

Attend the next Art of Raising Capital Workshop on December 15, 2009 at 1pm. (http://launchfn.com/id337.html) At the conclusion of the workshop, graduates will be able to pitch to angel investors at the Network of Business Angels and Investors Capital Celebration at 5pm.

Check out these investment websites: Karen’s twitter page: @Karen_Rands, www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

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Bumper Music by Bryan Hunley of New Whyne Music

Top 75 Angel Investor Groups in the US – NBAI on the list!

Since 2005, we have been working diligently to rebuild the angel group, the Network of Business Angels & Investors.   We have positioned ourselves a little different that other traditional angel groups.   The members of NBAI collaborate on due diligence, but make indendent decisions.   They are willing to invest early stage capital in companies not from Georgia, as long as there is a lead group of investors in that company’s back yard.  Lastly, they are somewhat industry agnostic, having invested a wide variety of emerging growth companies since inception in 1994 and since the rebirth in 2005 (http://www.launchfn.com/id155.html  more are being added as I write).  The angel investor members of NBAI look to see that the business model makes sense, they have a solid management team that can execute, a unique value proposition to the market and can the investor expect to make money on the investment.   As one of our investors at the last NBAI Meeting so apply demonstrated with his t-shirt under his jacket “What’s $$$ in it for me?”.   Anybody that thinks angel investors aren’t ultimately motivated by a positive return on investment is simply naive.  Yes they may have double bottom line motivations….minority owned business, or good for the environment, or solve a terrible health problem….but at the end of the day it still needs to produce a return.   Think about, if it doesn’t produce a return, that means the company failed and any other motivation they had to be a “Compassionate Capitalist” to bring innovation to the market, create jobs, create a legacy….also vanished with the failing of the company.  

Making the Inc Magazine’s Top 75 Angel Investor Group is validation and reward for the hard work of the last 4 years to bring to Atlanta and the Southeast a “country club” for small business investors who want to look at good deals that have potential, make friends among their socio-economic peers, and make some money by being “Compassionat Capitalists”!  http://www.inc.com/magazine/20090101/wingmen-and-women.html

Currently the NBAI Member Meeting is held on the 2nd Wed of each month in Atlanta.  Our next event is on June 10th, followed by August 12th.   All the details about the event, attending as a non-member and applying to be considered for entrepreneurs can be found at http://www.launchfn.com/id150.html

New Members get a copy of the 5 book series authored by Karen Rands “Learn to Be an Angel Investor” that goes through the history, process and decision cycle for a new investor.  http://kyrmedia.com/index.php

NBAI (www.nbai.net) has great plans instore for the remainder of this year.   We are joining the Angel Capital Association and we are using AngelSoft so our members can collaborate on deals they like and then syndicate with other angel groups.   We are laying the foundation to start an angel fund for providing the first capital in on the A Round.   It is truly an exciting time as NBAI grows to new heights.

Picture from a recent NBAI Meeting

SPEC 2009 Review : Collaborant , Lagotek, Blackwell Capital and Play Golf Planet

Southeast Private Equity Conference is coming April 14th and 15th. Hear from the innovative companies that will be participating, speakers, investors and other attendees. SPEC is the only event of its kind that brings together investors and early stage companies seeking angel investment or their first institutional VC (venture capital) round of investment. Get all the information about attending as an investor, entrepreneur or sponsor at www.sePrivateEquity.org

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SPEC 2009 Review : Collaborant , Lagotek, Blackwell Capital and Play Golf Planet

David Akers, www.Collaborant.org, Eugene Luskin, www.Lagotek.com, David Adams, Blackwell Capital Advisory and Cameron Cress and Joseph Nemchik, www.PlayGolfPlanet.com

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

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SPEC 2009 Review: Chuck Lewis, My Georgia Bank and Ian Adlington, Newport Capital, Private Investor and Fund Manager

Southeast Private Equity Conference is coming April 14th and 15th. Hear from the innovative companies that will be participating, speakers, investors and other attendees. SPEC is the only event of its kind that brings together investors and early stage companies seeking angel investment or their first institutional VC (venture capital) round of investment. Get all the information about attending as an investor, entrepreneur or sponsor at www.sePrivateEquity.org

Chuck Lewis, CEO and Co-Founder One Georgia Bank www.onegeorgiabank.com and Ian Adlington, Newport Capital, Private Investor and Fund Manager

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SPEC 2009 Review : Chuck Lewis, My Georgia Bank and Ian Adlington, Newport Capital, Private Investor and Fund Manager

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

Listen, Learn, Enjoy and Share with a Business Associate!