Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Thoughts on raising capital


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

Thoughts on raising capital

  2. 2. Raising Capital is Multi-dependent <ul><li>Government </li></ul><ul><ul><li>Business codes </li></ul></ul><ul><ul><li>Laws </li></ul></ul><ul><ul><li>enforcement </li></ul></ul><ul><li>Culture </li></ul><ul><ul><li>Risk-taking </li></ul></ul><ul><ul><li>Saving vs debtor </li></ul></ul><ul><ul><li>Interest friendly </li></ul></ul><ul><li>Business type </li></ul><ul><ul><li>Product vs service </li></ul></ul><ul><ul><li>Key asset </li></ul></ul><ul><ul><li>Large vs small </li></ul></ul><ul><ul><li>Risk level </li></ul></ul>
  3. 3. Multi-dependence (con’t) <ul><li>Business climate </li></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><li>economy </li></ul></ul><ul><li>Size of deal </li></ul><ul><li>Investor type </li></ul><ul><ul><li>Family/ friends </li></ul></ul><ul><ul><li>High net worth individuals (“angels”) </li></ul></ul><ul><ul><li>Other businesses (e.g., partners) </li></ul></ul><ul><ul><li>Professional investors (e.g., venture capitalists) </li></ul></ul><ul><ul><li>Lenders </li></ul></ul><ul><ul><li>governments </li></ul></ul>
  4. 4. The Forgotten <ul><li>Three factors are frequently overlooked by those raising capital, and weigh heavily on investor decisions: </li></ul><ul><ul><li>Risk </li></ul></ul><ul><ul><li>Threshold amount </li></ul></ul><ul><ul><li>Liquidity </li></ul></ul>
  5. 5. Risk versus Value Specification Product Development Alpha Test Beta Test First Customer Ship Marketing Risk Value Expense Predictability
  6. 6. Threshold Amount <ul><li>The threshold amount is that sum which is needed to fund the company until it can either: </li></ul><ul><ul><li>Raise more capital </li></ul></ul><ul><ul><li>Ensure liquidity </li></ul></ul>
  7. 7. Liquidity <ul><li>Liquidity is necessary for an investor to profit from an investment </li></ul><ul><li>Liquidity events could be: </li></ul><ul><ul><li>From profits </li></ul></ul><ul><ul><li>From the sale of assets </li></ul></ul><ul><ul><li>From the sale of the business </li></ul></ul><ul><ul><li>From becoming a Public company (allowing the sale of an individual’s stake in the business) </li></ul></ul>
  8. 8. Deal Structure <ul><li>Can alter risk, threshold amount and liquidity </li></ul><ul><li>Should be specific to the investor audience </li></ul><ul><li>Thus, multiple versions of a Business Plan may be appropriate </li></ul>
  9. 9. Decision Process <ul><li>Investor decision making is primarily a process of “due diligence” </li></ul><ul><li>Due diligence is often an investigation of why a business will NOT succeed. It is a hunt for “horribles” </li></ul><ul><li>Your role is to provide independent evidence that “bad things” will not happen </li></ul>
  10. 10. Managing Due Diligence <ul><li>Do not emphasize your own convictions. These are opinions. Investors want evidence. </li></ul><ul><li>Use research and analysis, the more independent, the better. </li></ul><ul><li>Keep a record of all possible concerns </li></ul><ul><li>Respond only when prepared </li></ul><ul><li>Follow up on all concerns (thoroughly) </li></ul><ul><li>Admit risks or unknowns </li></ul>
  11. 11. The Decision <ul><li>Remember, investors decide to invest when “they” conclude the business will succeed, not when “you” conclude it will succeed. </li></ul><ul><li>Focus on the “lead” </li></ul><ul><li>Follow up aggressively, but not obnoxiously </li></ul><ul><li>Be flexible </li></ul><ul><li>Be prepare for a long process </li></ul>