The essentials of raising capital

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1. Don’t send a 10 page NDA to prospective investors. This is the deal; investors promise to not steal your idea or tell a competitor about it, they promise to keep your private data private, and they promise not to poach staff they meet during the process. That shouldn’t take 10 pages to document. Their professional reputation is your best protection. If you are nervous about their integrity then don’t go to them.

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2. If you don’t have your business plan with detailed financial forecasts, then don’t ask for the meeting. It doesn’t matter how good your technology is and what the circumstances might be. Investors need to assess your company and they need a business plan to do that.

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3. Don’t organise a meeting if your pitch is not very, very convincing. Your fate will be determined by how well you pitch in this 60 minute meeting. <

(For the record… I know that I have repeated these two points. There’s a very good reason for that. THEY ARE IMPORTANT.)

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4. Don’t compare yourself to Google, as in: “What we’re doing is more robust than Google,” “What we’re doing is harder than Google,” or “We are going to be the next Google.”

5. Don’t go alone. It’s OK to have two or three people, but no more. You’ll need the support and it will show that you have a strong team behind you.

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6. Don’t disappoint the prospective investors. Follow up on everything from the meeting – send them material that you promised on time, let them know what’s happening, keep in touch, respect their comments.

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7. Don’t make wild claims. For example: “We’ll generate $50 million in just two years.” They’ll think that you’ve cracked, or worse that you don’t know what you’re talking about.

8. When talking future valuation, don’t use numbers that involve “billions”. As in, “we’ll be worth north of a billion by 2012”. People will think – fair or not – that you’re on drugs.

9. Don’t be offended if the investor turns you down, as long as they are polite about it. There is nothing personal in a rejection. <

These are the essential issues. Follow these do’s and don’ts and you’ll be on the right track.

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Till next week… <

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Gail Geronimos, is the founder of Achaeus, which helps entrepreneurs develop their businesses and she has just started a new site www.pitchingtoinvestors.com with tools and tips about how to develop killer presentations to raise capital.

To read more Gail Geronimos blogs, click here.

Comments

Reuben Buchanan writes: The pitch just like the skin on an apple. It’s just the surface – it’s whats inside the apple that will get you the money. If you impress investors with your pitch, you are about 5% there in terms of getting the money. A good pitch will ensure you don’t get pushed off the investors desk that day. Savvy investors (those who see 100 proposals a year) will then ask for info that backs up your pitch such as management profiles, historical financials, projections, valuation model, share capital structure, contracts, IP, etc etc. So a good pitch is essential however you’ll stumble at the next block if you don’t have your house in order. Even more so in the current market.