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Wednesday, May 25, 2011

Launching the $$ Attack | VENTURE FINANCE – REALITY VS. RUMOR

Dick Brown
Venture Finance - Reality vs. Rumors with Dick Brown

It’s estimated that some 50% of all businesses in the US are seeking capital – right now, today. (If business is good, they need more capital to grow. If it’s bad, they probably need more funding to survive.)

These range from huge conglomerates to the smallest start-up. The former has multiple channels available to raise funds - ranging from merchant banks to various stock exchanges to multiple bond markets. Assuming profitability, large companies only need choose from the many “money-raisers” that they probably already know and regularly contact them.

Although far larger in numbers, the smaller companies and newer ventures have far fewer alternatives. Most are naïve in “money-matters” and are only vaguely aware of banks, VC’s and angels as sources of money but have no intimate knowledge or close contacts amongst these organizations.

Even worst, the huge majority of small companies seeking capital have no sales or marketing experience … and, first and foremost, raising money is a tough, complex sales and marketing task. It’s easy to understand why estimates are that only 1% to 5% of all these money-seekers succeed.

Having touched on many of the other aspects of finding funding, this month we’ll talk about how to launch and manage such campaigns to increase these odds in your favor.

The first impediment that newer fund-seekers have is ignorance.

To begin: I am forever astounded by how few of our smaller entrepreneurs make any effort to educate themselves about selling to investors or to learn the characteristics of the companies that provide funds and the personalities of the executives that run them. Few will even read books, magazines or articles relating to these industries. They also avoid: the simple purchase of a Wall St Journal; joining an angel or investment club; or signing on to Facebook or LinkedIn. Let’s rule out all these people since they are both losers and “believers” and have conjured up some fantasy that they are so brilliant and their venture so important that the “money people will find me”.

Also, this column will address those that seek financing from “professional money sources”, such as VC’s and merchant banks - generally, a minimum of $2.5 million. Angel and other “individual” sources of funds require compliance with state and federal securities laws and raise a whole different set of problems.

For the rest of the “qualified” fund-seekers, what should be your beginning “tool-kit” for your successful sales and marketing campaign? You and all your team must:

• Recognize that these campaigns take time and money and more of both than most neophytes estimate.
• Have realistic models that estimate the capital required, with a substantial “safety” margin.
• Create a professional BP including credible financing requirements and your estimate of what you’ll give up to get this funding. (Never fall into the trap of letting your potential investor do this)
• Implement attractive “sales support” materials – including your Executive Summary and PowerPoint presentations.
• Forge an initial, professional “web page” … plus business cards and stationery.
• Develop a “team” – and it’s critical that all your people will help you raise the funds you need as well as be the key individuals that will make your venture succeed.
• Solicit and distribute testimonials for you, your team and the products or services you’ll provide.
• … Etc.

These are all the classic tools that you’ll find listed in any other column, article or book about raising money.

Now, let’s list the things that insiders know you really need to have …
1. Some well-known company or individual that will introduce you and your venture to the financial community. (This simple act will give you instant credibility.)
2. A way to send your ES/PP’s via email to multiple investors, world-wide.
3. These emails delivered to specific, named executives and not be intercepted or rejected as spam by their corporate computers.
4. All responses delivered to you and your team for sales follow-up.
5. The services of a consultant or organization experienced in “concept selling” and fund-raising. These same people can usually also guide you through the minefields of final negotiations and the closing.
6. The services of an experienced corporate attorney to translate all the “term-sheet-legalese” into simple English for you and your team and also to find and de-fuse any “bombs” hidden in the fine print.

Further, not long ago, most VC’s, merchant banks and investors would only consider investing in ventures convenient to their geographic location. Today two factors have changed:
• The sheer number of investors has grown while the availability of reasonable deals hasn’t changed all that much.
• The investor community has expanded geographically (or created many alliances) and today clever entrepreneurs can generate investment inquiries from all over the US, if not all over the world.

So, to succeed in closing the required funding entrepreneurs must now expose their venture to many more potential investor groups and not limit their search to North America, but project out to profit-driven investors across both Western and Eastern financial investment cultures.

Of course, this factor sharply increases the amount of preparatory work required by successful entrepreneurs, but it will also very substantially improve the probability of success.

How to do this efficiently and inexpensively will be the subject of next month’s column. If you’d like an advance “peek”, just contact me.

Finally, A Brief Commercial!
Dick’s consulting company is American World (AW). His web site is You can reach him at or call at 843-237-9802.

Now, AW introduces the “Entrepreneurs’ Edge” (EE) - a complete service for entrepreneurs that seek funding. EE begins by providing a real-world "Investor's Review" of your Executive Summary and Business Plan followed by the creation of an appropriate "Financing Strategy". Next, AW distributes "your story" with a unique, eye-catching introduction to 800+ of our world-wide list of qualified investors. AW will then continue to work with you to close your financing.

AW also publishes his book: How to Raise Money, Insider Edition. Dick feels he put in “everything you’ll ever need to know to raise money”. It includes extensive tips on how to raise money, including the common pitfalls that await the unwary entrepreneur. It costs only $9.95 and is available as a downloaded file at

If you have questions, comments or suggestions, send them along. Contact Dick at American World, You’ll get an answer.

For more information, please visit Dick's TNNWC Bio.

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