Getting Ready to Seek Investors

Entrepreneurial ventures are constantly in the marketin detail.o Financial Statements--both for the past few
for new capital. Experienced entrepreneurs realizeyears and pro forma projections (balance sheets,
that the financing of companies is done in stages andincome statements, and cash flows) for the next 3-5
that they have to be flexible in identifying the latestyears, showing the effect anticipated if the project is
trends in financing.undertaken and if the financing is secured. (This
For many startup entrepreneurs, initial financing canshould include an analysis of key variables affecting
be the hardest part of launching their new business.financial performance, showing what could happen if
It is a popular misconception that an idea, a startupthe projected level of revenue is not attained.)o
team, and a preliminary business plan will get them inCapitalization--a list of shareholders, how much is
the venture capitalist door. They expect to exit,invested to date, and in what form (equity/debt).o
happily, with the check in hand.Biographical Sketches--the work histories and
Unfortunately, traditional venture capital, i.e. fundsqualifications of key owners/employees.o Principal
supported by institutional investors, only finances aSuppliers and Customerso Problems Anticipated and
fraction of the new companies started each year.Other Pertinent Information--a candid discussion of
Over 90 percent of startup money comes fromany contingent liabilities, pending litigation, tax or
private sources and it is up to the individualpatent difficulties, and any other contingencies that
entrepreneur to identify and sell their project tomight affect the project you're proposing.o
these financing sources.Advantages--a discussion of what's special about
Begin With a Business Planyour product, service, marketing plans or channels
Whether you need to raise money or not, anythat gives your project unique leverage.o Provisions
prospective venture should begin with a business plan.of the Investment Proposal--State the financial offer
This should include:o Purpose and Objectives--aprecisely. For a loan, state what interest rate you are
summary of the what and why of the project.owilling to pay, and whether on a monthly, quarterly or
Proposed Financing--the amount of money you'll needannual basis. For investors, are you offering a certain
from the beginning to the maturity of the projectpercentage of the profits, a percentage of business
proposed, how the proceeds will be used, how youownership, a seat on your board of directors?
plan to structure the financing, and why the amountVenture investors are usually quite familiar with "high
designated is required.o Marketing--a description ofrisk" proposals, yet they all want to minimize that risk
the market segment you've got or plan to get, theas much as possible. Include a listing of your business
competition, the characteristics of the market, andand personal assets with documentation. In most
your plans (with costs) for getting or holding thecases, if you've got a good idea and you've done
market segment you're aiming at.o History of theyour homework properly, an interested investor will
Firm--a summary of significant financial andbuy in.
organizational milestones, description of employeesWhat all entrepreneurs soon discover is that there
and employee relations, explanations of bankingare several factors that are affected by the method
relationships, recounting of major services orof raising funds, such as distribution of equity
products your firm has offered during its existence,ownership, potential restrictions on daily operating
and the like.o Description of the Product or Service--aflexibility, and debt-imposed constraints on future
full description of the product (process) or servicegrowth.
offered by the firm and the costs associated with it