Are You Ready to Raise Capital?
Entrepreneurs continually tell us how difficult starting a new venture is in the current economic climate. Newsflash! Talk to every entrepreneur who has ever started a new company, it has never been easy. You have a brilliant new idea, surround it with the right management team to make it a success, and acquire your first customers. Lots of hurdles along the way, but the most challenging of all for most entrepreneurs is finding the capital required to launch and sustain the company through to positive cash flow.
The idea that investors will quickly grasp the brillance of your idea and eagerly write the checks to finance it, is a fantasy common to many entrepreneurs until faced with the stark realities and challenges of raising capital. If you hope to be among the ten percent (1 in 10) of entrepreneurs seeking early stage capital that obtains funding, it is important that you approach it in a disciplined and professional manner with an understanding of what is required to be successful.
The intention of this series of posts is to assist entrepreneurs in self-assessment of their readiness to raise capital. Entrepreneurs seeking early stage funding for their new company will learn how to prepare for seeking capital.
There are three primary areas to consider prior to seeking funding:
- 1. What stage of development is the company currently seeking to fund and what types and sources of funding best match that stage?
- 2. Completion of a comprehensive and professional business plan for presentation to investors.
- 3. Understanding what investors are looking for and being certain to address those concerns and interests.
Follow the above links to the posts on each of these topics
I have heard such mixed information regarding business plans. Especially internet industry business plans. Some companies don't like plans that are too detailed and more than 20 pages/slides. Others state comprehensive, detailed plans. What do you recommend?
ReplyDeleteFirst of all, slides or Powerpoint presentations are not a business plan, they are used to present a business plan. In our post on business plans within this series we discuss the importance of being able to deliver a clear and concise presentation of the business plan to prospective investors in 15 to 20 minutes. We also discuss the important points to cover in the presentation.
ReplyDeleteAs to the Business Plan itself. the length of the plan is not what is important, it is the content. It is our own personal belief that it is difficult to cover all of the required content in 20 pages. However, if you read the post in this series on this topic and can adequately cover in sufficient detail the content we suggest in 20 pages, then go for it.
Remember the purpose of a Business Plan goes beyond simply a presentation to encourage investors to contribute capital to your enterprise. The Business Plan is designed first to thoroughly test your idea - is it sound and will it be successful? It also provides a roadmap to the company's journey to success and will be used to guide decisions once the business is launched and to measure its progress. Founders and management will be held accountable for performance against projected results described in the plan.
We prefer a well thought out and comprehensive, detailed Business Plan supported by a more concise Executive Summary written after the Business Plan is complete. The Executive Summary is used to gage interest in prospective investors in the opportunity. The full Business Plan can then be shared with those having interest. The Executive Summary can also be used in discussions with others such as potential , managers and key employees, suppliers, distributors, and other relationship partners during their recruitment,
I hope this helps explain our thoughts on your question.
Bruce Carpenter
Principal, Harbour Bridge Ventures
www.HBVinc.com
Do you happen to have a feel for what the venture market is like for film and cross-media entertainment? We have a rock-solid concept, an A-list team and board of advisors, and we've identified a strong need. But while the response has been glowing, we've been hearing a lot of "Wow, if I wasn't concentrating exclusively on technology (or real estate, or energy, or ...) I'd be all over this." Any thoughts?
ReplyDeleteThanks!
John Adcox
jadcox@mindspring.com
John:
ReplyDeleteAs we point out in this series of posts, it is important to focus your approach to investors on those with a history of supporting opportunities in the same general space as your own, or those who have some history or relationship to the same industry.
Yes, there are sources focused on the entertainment sector. We even have relationships with several to whom we have carried such projects. Of course, these sources just as those for any other industry vertical turn down far more opportunities than they fund.
If you read our post on 2008 Angel Investor Activity, you will note that we point out that in a typical year1 in 10 opportunities seeking Angel funding is actually funded. The competition is therefore intense.
As our post describes, keys to successfully obtaining funding are a quality opportunity with a good chance of success (lower risk), surrounded by a team with a proven history of successful execution, a proposed capital structure that is attractive to investors, and q quality and professional presentation of the opportunity. These factors should be combined with a focus on investor sources attracted to the type of opportunity you are trying to fund.
If you feel you are following all of these guidelines, and your opportunity truly meets the hurdles we have pointed out. Be sure you focus on the right sources and keep asking. Remember, even for great opportunities there are likely to be nine no's for every yes.
Hold onto your dreams and we wish you success in your efforts.
Bruce Carpenter
Principal, Harbour Bridge Ventures
www.HBVinc.com