What makes a good equity-raising entrepreneur? When you start a company everything you need to run it takes money, and the money you need will not just be given to you. No magic grants, no silver-bullet start-up loans. The serious dosh has to come from somewhere else. Therefore, entrepreneurs need to relish raising capital from the get-go. Though they may not have been academically or experientially trained for the task, it is “entrepreneur activity 101”. It is an activity inextricably woven into the job description, and the success of the troublesome task of raising capital will be inextricably woven into the success of the venture.
But little information exists on the way in which high net worth private investors choose a target of interest, or how funds or private venture capital screen thousands of deals a year to decide what they will invest in. The clue is in the name: private. They are difficult to reach. They safeguard their privacy, expressly avoiding any form of solicitation. Moreover, these investors do not have to invest. Their distinguishing characteristics are that they are very smart, they appreciate honesty and straightforward dealings, and they understand what you are going through. In many ways they are not dissimilar to you and, in many cases, they were once doing exactly what you are now trying to do The main lesson to recognise for entrepreneurs is to build on these similarities in the quest for capital:
This last point is the most challenging and, in my experience, is the defining success factor. The three questions to ask are as follows: 1 Is your deal financeable? Is the management team there, is the market there, do you understand your competition, is your industry emerging or growing, is your technology protected, does it work??? 2 Are you financeable? It is one thing to think about whether the deal is financeable, quite another as to whether you yourself are capable of being funded. One of the facts of life in private placement investment is that “plans do not get funded; people get funded”. No one can expect an investor to believe in a venture in which the entrepreneur has no confidence. 3 Is your risk financeable? Will the management team stick together, could the market change, is there still growth ahead??? As I have said, the main factor is that high net worth private or business angel/early stage venture capital investors, and even private trade buyers, do not have to invest. For this reason, the private investor has a different take on things. The private investor’s reasons for investing are not always exclusively economic. Therefore, the entrepreneur faces difficulty in judging which approach to adopt in trying to locate, attract, and build relationship with such investors. We can help with this process, and have plenty of experience with private investment placement. As Herman Holtz said, “Anyone can sell cold drinks to thirsty people. Marketing is the art of finding or inventing ways to make people thirsty.”
So the first thing to say is you need to have the intestinal constitution for the task.
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You need to overcome your insecurities about raising capital and asking for money. You need to reassess your values and attitudes towards asking for money and develop the skills to make money raising part of your job description. You need to take time to appreciate the art of successful private investing from experienced veterans who have made the most and survived to tell their stories.
The good news is that macro-economic conditions have created of substantial amounts of capital in recent years in the pockets of private (both individual and institutional) organisations. This has impacted general capital availability and competition among providers of that capital. A raft of alternative, non-traditional capital resources are now out there. It’s a “seller’s market” as far as capital raising opportunities for investee companies are concerned. The more challenging news is that we are talking entirely about the private investor market. This market is the principal source of serious capital contributions to smaller companies. Successful private investors deliver insight directly into the process of high risk, high return investing.
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