Raising capital as a means to fuel company growth and development is one of the most essential — yet perplexing — activities for possibly any company to pursue, be it a start-up business or a long-time company. Very new companies, particularly, experience the toughest time acquiring good sources of capital formation. The relatively young age of the new startup company, plus its non-existent or minimal performance record, plots — via less than perfect circular reasoning — to produce this capitalforbusiness terrible set of circumstances: The startup business is constrained when it wants to develop new product lines, manage growth, and achieve market dominance — to present a better track record — because it doesn’t have access to dependable ways to raise capital, and it can’t procure access to good capital sources because of its short performance record!
All the above begs for this question: How can any company, be it public or private, set itself free from the above financial limitations, and raise the capital that will allow it to take the next step in its business life? The less than optimal choices to raise capital, and in particular for start-ups, is not new to company founders, corporate directors, and other company officers; all have been exposed — to some degree or other — to the capital-raising paradox. The steps they took to overcome its limitations to company growth and expansion is the subject of this study. Your new business enterprise can overcome the above capitalization catch-22 and achieve great results! Here is a preliminary guide to help your company raise capital:
(a) Join business incubator focus groups, discussion groups, advisor boards, community business organizations, business development groups, business roundtables, professional business forums, local fraternal business chapters, and business blogs.
Seek the advice and tutoring of the older, more experienced CEO or CFO. This is such a golden opportunity on account that these older executives offer a lifetime of practical experience to share with younger upstarts; your company will benefit greatly from their generous business know-how and experience.
In addition, although the retired executives are no longer actively running their own companies, they enjoy assisting younger, up and struggling corporate officers because — in a vicarious way — they get to relive the romanticism of their younger “glory days,” and that is one of the reasons they are glad to help, and keep abreast of the action.
(b) Get your business plan ready! You should produce a well written and insightful business plan, since it is one of the most essential tools employed to raise capital. Few things are more essential for your company’s capitalization search than offering your capital funding sources a thoroughly researched and meaningful business plan. The presentation should get across your strategic corporate planning, the avenues your company intends to seek to grow and expand, and your general business experience.
However, the most vital part of any business plan is to appraise the proposed target — the investment advisor that may consider it — how your corporation will use the capital. What are the development steps your business is going to put in place to use the new capital? Remember to review and revise your company’s business plan as the need arises; it should reflect any new business opportunities, and pertinent information about the market outlook of your company.
I know I’ve already mentioned this, but it bears to be repeated: It should come as no surprise that a competent and resourcefully rendered business plan will greatly improve your company’s chances of raising capital.
(c) Scrutinize the funding sources you propose to contact. The proposed targets of your action to get corporate financing, consisting of: investment banks, venture capitalist (VC), angel investors, securities broker/dealers, investment advisor firms (IA), sophisticated investors, and accredited investors, should all be given a careful appraisal. The gist of the deal is to assess if they have specialized in your particular business. Analyze their resent funding activity to see if they have provided financial resources to comparable businesses in your market segment. There is a very strong chance they would be open to the idea of helping your business enterprise raise capital, too.
When invited to do a presentation, keep it short, sweet, and to the point. A four page outline of your business plan is more than enough. By all means, avoid the temptation of name dropping and only provide a short list of the principals and experts that are really engaged in your business enterprise. Remember: quality is much better than quantity!
(d) Additional avenues to explore, while your enterprise is busy raising capital, is professional “proof of concept” regarding your corporate structure, manufacturing, and feasibility studies. High technology companies blazing a new path, as an example, could be bringing to market items and innovations that are ahead of the curve, light years away from presently available systems.
Since nobody has ever seen — or even thought of the idea — there could be a degree of hesitation encountered from the directors at investment banks, corporate capital sourcing and broker/dealers. Professional and technical validation of your company and products can greatly help to provide answers to groups and individual investors that are the most important: your proposed sources of capital formation!
(e) Notwithstanding that this is mentioned last, it will serve to give life and action to everything we’ve discussed so far. The magic quality that makes raising capital, and corporate growth and expansion possible, is this: do not get frustrated and walk away! When your financial explorations lead but to a dead end, don’t dwell upon it and move on to the next one, since it could lead to this: the open door that has a receptive and open mind, and will be very actively involved in helping your company to raise capital.
(f) Every capital funding proposal should receive thought-provoking consideration prior to going on to the next deal. If you pursue this broad — yet specific — guide, your startup business will grow and conquer new markets through the art of raising capital.
Frank Roberson is a corporate finance consultant with long-term experience helping startup companies to access the USA capital markets. Mr. Roberson offers guidance to private or public companies that wish to raise capital. To peruse more information on corporate financial services, and to read more of Mr. Roberson’s articles, please click => raising capital