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10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
10 Mistakes When Raising Capital
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10 Mistakes When Raising Capital

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10 Mistakes To Avoid When Raising Capital

10 Mistakes To Avoid When Raising Capital

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  • 1. 10 Mistakes Entrepreneurs Often <br />Make When Raising Capital<br />Andy Cars, CEO<br />Seedcap AB<br />2010 © Seedcap AB www.seedcap.se<br />
  • 2. 1. Trying to raise money too late <br />Raising money is time consuming! <br />Count with an absolute minimum of 3 months, <br /> with a more likely scenario being 5 - 7 months.<br />2-4 weeks 2-4 months 1-2 months Total: 3 - 7 months<br />2010 © Seedcap AB www.seedcap.se<br />
  • 3. 2. Trying to raise money too early <br />There should be a logical relationship between the <br />perceived value of the company in need of cash <br />and the amount of cash to be raised. <br />Trying to raise significant sums simply <br />based on an idea usually fails.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 4. 3. Lacking a realistic assessment <br />of the companys' value<br />Some entrepreneurs seem unaware of what <br />drives value and ignore the importance of <br />building some form of substance before <br />approaching investors. <br />2010 © Seedcap AB www.seedcap.se<br />
  • 5. 4. Not building enough substance <br />before approaching investors<br />• Team, advisory board and board of directors<br /> • Strategic partnerships<br /> • Customers and customer value<br /> • Prototype/proof of concept<br /> • Immaterial rights/protection<br /> • Scaleability and market potential<br />Before approaching investors ask yourself what <br />you can do right now to build substance.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 6. 5. Not splitting the message into <br />smaller chunks<br />Although having an impressive business plan <br />is often a requirement for obtaining financing, <br />the importance of creating a variety of pitch materials <br />that are tailored to the different stages of the <br />communication cycle, is often overlooked.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 7. 5. Not splitting the message into <br />smaller chunks<br />Split the message into smaller chunks to <br />make it easier for investors to digest it.<br /> • The 15 second "elevator pitch".<br /> • The "Executive summary" or "Flyer".<br /> • The 10 minute power point.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 8. 6. Preparing poor pitch material<br />Preparing poor pitch documents that raise more <br />questions than answers is all too common. <br />2010 © Seedcap AB www.seedcap.se<br />
  • 9. 6. Preparing poor pitch material<br />Ignoring the importance of the team, <br />board of directors and advisory board <br />Most investors choose an a-class team with a <br />b-class business idea before a b-class team <br />with an a-class business idea.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 10. 6. Preparing poor pitch material<br />Ignoring your customers<br />Not talking to potential customers early on <br />is a very common mistake. A true entrepreneur<br />will always include the customer in the <br />development process. <br />The inventoris usually the person shutting <br />himself off from the world to develop the <br />most brilliant product on the planet that in <br />the end no one wants.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 11. 6. Preparing poor pitch material<br />Ignoring to clearly state how to reach the market <br />Simply stating word-of-mouth is not enough <br />or<br />Defining future market share as an <br />imaginary percent of the total market instead <br />of basing future potential market share on <br />product offering, budget and planned <br />marketing activities.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 12. 6. Preparing poor pitch material<br />Ignoring the competition <br />If there is no competition <br />there is usually no market. <br />2010 © Seedcap AB www.seedcap.se<br />
  • 13. 6. Preparing poor pitch material<br />Ignoring hidden agendas<br />Although the product may be great and offer true value <br />to the consumer, there may be hidden agendas <br />preventing the product from catching on. <br />For example, any product or service that shifts <br />the power balance within an organization cannot <br />simply be pitched based on value to the end consumer.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 14. 6. Preparing poor pitch material<br />Ignoring your strategic partners <br />Gaining market acceptance and quickly building a <br />significant user base is usually not possible without <br />strategic partnerships. <br />How much time do you spend on building <br />your strategic partnerships within manufacturing, distribution, marketing and sales?<br />2010 © Seedcap AB www.seedcap.se<br />
  • 15. 6. Preparing poor pitch material<br />Ignoring the importance of scaleability<br />What can you do to improve scaleability?<br />2010 © Seedcap AB www.seedcap.se<br />
  • 16. 6. Preparing poor pitch material<br />Ignoring the international market<br />Your local market is usually not large enough. <br />From day one define your<br />potential international markets<br />and how to reach them.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 17. 6. Preparing poor pitch material<br />Ignoring future milestones<br />Be clear on what your milestones are and <br />what you need in order to achieve them. <br />Investors will hold you accountable with regards <br />to the milestones that you set. <br />Make sure to make them realistic. <br />2010 © Seedcap AB www.seedcap.se<br />
  • 18. 6. Preparing poor pitch material<br />2010 © Seedcap AB<br />2010 © Seedcap AB www.seedcap.se<br />
  • 19. 7. Pitching to the wrong investors<br />Establish contacts with financiers who have <br />deep enough pockets so that they can participate <br />in the next financing round. <br />Be clear on what type of investors you are looking <br />for and what you expect from them. <br />- Investment horizon<br />- Competence and network<br />- Cash and time that they can put in<br />2010 © Seedcap AB www.seedcap.se<br />
  • 20. 8. Not pitching at all<br />Don't worry excessively about communicating the value offering to others thinking that they will "steal the idea". <br />It is not the idea that is the most important but the <br />successful execution of the idea that matters. <br />Welcome feedback on how to develop your business idea <br />and business modell to make it even better. <br />Be open to forming strategic partnerships.<br />2010 © Seedcap AB www.seedcap.se<br />
  • 21. 9. Getting too greedy<br />Getting the right kind of investors onboard can mean the difference between making it and not making it at all. <br />Be prepared to give up around 20% during round 1. <br />Offering less than 10% is usually pointless. <br />Offering more than 50% during round 1 <br />probably means that you are looking for <br />too much money too early. <br />2010 © Seedcap AB www.seedcap.se<br />
  • 22. 10. Not willing to share risk<br />Investors tend to favour those who <br />put their money where their mouth is. <br />Entrepreneurs who want "out" by <br />trying to raise money to pay off <br />personal loans normally end up <br />with nothing. <br />If the entrepreneur shows that they do not believe <br />in the venture why should the investor?<br />2010 © Seedcap AB www.seedcap.se<br />
  • 23. Thank you for your attention !<br />Andy Cars, CEO<br />Seedcap AB<br />www.seedcap.se<br />2010 © Seedcap AB www.seedcap.se<br />

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