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All rights reserved. No part of this publication may be reproduced in any form or by
any means graphic, electronic or mechanical including recording, photocopying or by
any other information storage or retrieval system, without the written consent of the
publisher.
This publication is sold as an educational reference only. While all attempts have
been made to verify information provided in this publication, neither the author nor
the Publisher assumes any responsibility for errors, omissions or contrary
interpretation of the subject matter herein.
This publication is not intended for use as a source of legal or accounting advice. The
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or liability whatsoever on the behalf of any purchaser or reader of these materials.
We expressly do not guarantee any results you may or may not get as a result of
following our recommendations.
Table of Contents
I. Introduction .................................................................................. 1
II. Types of Capital........................................................................... 2
III. Insider Secrets to Raising Capital ............................................. 5
Venture Capital Secrets.................................................................................... 5
Insider Secret #1 Narrow Your List of Venture Capital Firms .............................................. 5
Insider Secret #2 Never Send a Business Plan ................................................................... 7
I. Introduction
Capital, funding, or money (they all mean the same thing) is the fuel that
allows businesses to grow. Without capital, businesses fail. With capital,
early stage companies can begin to grow, and mature companies can
achieve even greater scale.
For early stage companies, particularly those with little or no track record
of success, the challenge is to find the capital they need.
Because the vast majority of businesses fail, banks, venture capital firms
and other lenders and investors are often highly skeptical and not willing
to part with their dollars unless significant conditions are met.
However, there are ways to attract this kind of capital, and there are tons
of capital sources that are largely overlooked by entrepreneurs
This report identifies the three core sources of funding available to
entrepreneurs and business owners looking to start or grow their
businesses, and then presents key insider secrets for successfully
raising these types of capital.
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Capital provider
gets
equity/shares
of company
Company
accepting
capital must
repay loan
Company
accepting capital
must often put
up collateral
Debt
Lender
No
Yes
Yes
Equity
Investor
Yes
No
No
Creative/
Alternative
Financing
Depends
Sometimes
(but rarely)
Sometimes
(but rarely)
Sometimes
(but rarely)
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Market Sector:
Sector Many venture capital firms focus on specific
sectors such as healthcare, information technology (IT), wireless
technologies, etc. In most cases, even if you have a great
company, if you fall outside of the VC's sector preference, they'll
pass on the opportunity.
Stage preference:
preference VCs tend to focus on different stages of
ventures. For instance, some VCs prefer early stage ventures
where the risk is great, but so are the potential returns.
Conversely, some VCs focus on providing capital to firms to
bridge capital gaps before they go public.
Geographic location:
location Most venture capital firms only invest
within 100 to 200 miles of their office(s). By investing close to
home, the firms are able to more actively get involved with and
add value to their portfolio companies.
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Virtually all VCs have websites that make this information readily
available. Find investors that are a fit with your company for all three of
these areas. For instance, if you are a pre-revenue software company
based in Chicago, your best bet is to find a venture capital firm within
200 miles of Chicago that has experience funding pre-revenue software
companies.
If you dont do this, 1) you will waste your time, and 2) you will risk overshopping your company. With regards to over-shopping, the venture
capital community is fairly tight-knit. That is, most VCs know each other.
They work together on deals, sit together on Boards, meet each other at
conferences, etc.
One risk factor that this presents is that if one investor passes on a deal,
it oftentimes frightens other investors, as they start thinking if that VC
passed, he/she must have found something wrong with the deal. As
such, you dont want to present your company to VCs that will pass on
your deal because it wasnt a fit for them, and not because your
company lacks merit.
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Angel investors are not going to find you. You have to find them.
One great way to find angels is through active networking. Networking
(e.g., attending events, constantly expanding your network by asking for
more introductions from your existing contacts) works extremely well, but
does take time and diligence - so you must stick with it.
Heres a quick lesson regarding how Google raised its angel round of
capital. Founder's Larry Page and Sergey Brin told their ideas to others in
hopes that they would get great advice and connections. And sure
enough, it worked. Page and Brin discussed their concept with their
computer science professor David R. Cheriton. Cheriton then introduced
them to his friend Andy Bechtolsheim.
Bechtolsheim then wrote Google a check for $100,000.
You can also find angel investors through focused prospecting. For
example, understanding that many angel investors are retired
executives, you can find them by doing via searches on Google.
For example if you were seeking angel investors for an aviation company,
doing Google searches on retired Boeing executive and former Boeing
executive will produce names of potential angels.
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Likewise, you can find the names of executives and Board members of
local companies, contact them and see if they are interested in investing
in your company.
In Growthinks upcoming Capital Raising Bootcamp, we will take you
through the entire process of raising angel capital; from understanding
exactly how to find angel investors, to presenting your company to them
like a pro, to structuring the deal terms so the angel funding hits your
bank account without delay.
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Traditional bank loans have very low interest rates and are often perfect
for entrepreneurs and business owners. The challenge is getting these
loans.
One insider tip for getting these loans is to establishing a history with
your bank before you really need the loan.
Banks (like equity investors) like to invest in business owners with which
they have a pre-existing relationship. This relationship breeds trust and
confidence that the business owner will spend their money wisely.
As such, its a good idea to establish a credit history with your bank six to
twelve months BEFORE you need the loan. Even if you simply take out a
$5,000 loan and show that you are able to make payments each month
for a year, your business will be more likely to receive the larger loan you
seek later.
In Growthinks upcoming Capital Raising Bootcamp, we will walk you
through the process and allow you to quickly and easily raise SBA and
bank loans for your business. We will teach you about all of the types of
bank and SBA loans that are available for your business, how
how to choose
the right one, and a stepstep-byby-step process for quickly and easily securing a
loan for your business.
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One famous example of vendor financing is that early on, shoe maker
Kenneth Cole sought out a struggling Italian shoe manufacturer knowing
that they needed clients and would probably be wiling to offer financing.
The Italian shoe manufacturer funded the then fledgling company.
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Insider Secret #10 The Best Place to Find Grants for Your Business
The first step in locating the appropriate grant for your company is
answering the following question: What industry does my business
serve?
The answer to this question will tell you where to begin your search for a
grant.
Lets use an example business called Wendys Windfarm to walk through
the process. Wendys Windfarm serves the Energy industry and the first
place to begin a search is the Federal Governments Grant Website
www.grants.gov.
Once there you can click on the Menu Option entitled Find Grant
Opportunities. Once you have clicked on that, you can choose to search
by category this is where you recognition of industry comes in handy
click on Energy.
Once you click that link, you are able to view the date that the grant
ends, the name of the opportunity, and the agency distributing the grant.
Likewise, to find the grants that are available to you and your business,
you can conduct an Advanced Search. Using the Wendys Windfarm
example, you would select the following:
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1.
2.
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Your business plan is your roadmap for growing your company. It also
serves to communicate your companys value proposition to your
employees, advisors, partners, customers and investors. Business plans
are the vehicle by which you get in the door, and are the documents
most heavily scrutinized by investors and lenders.
To establish credibility, it is critical that your business plan does not
overestimate market sizes, underestimate competition, or project results
over-aggressively. Rather, your plan must present a realistic game plan
for achieving success, including:
Highlighting past accomplishments: The best indicator of future
success is your companys past track record. The business plans of
previously funded companies must show what milestones they
have achieved with those funds. New companies must show how
the past successes of the management team will enable the
company to overcome expected challenges.
Understanding and defining the relevant market: Improper sizing
of your companys target market is a telltale sign of a poorly
reasoned business plan. For example, though the U.S. healthcare
market is a trillion dollar market, there is no company that could
reap $1 trillion in healthcare sales. Rather, a more meaningful
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The Financial Plan and projections section of your business plan explains
how the execution of your companys vision will reap great financial
rewards for the investor or partner and/or give the lender confidence
that they will eventually be paid back. As such, it is the section that they
often spend the most time scrutinizing.
Among other things, the Financial Plan must numerically detail the
revenue model through past (if applicable) and pro-forma (projected)
Income Statements, Balance Sheets and Cash Flow Statements.
It is critical that the figures used in these statements flow from the
analyses in every other section of the business plan.
plan For instance, the
relevant market size (Industry Analysis) should be reflected, as should
competitors operating margins (Competitive Analysis), customer
acquisition costs (Marketing Plan), employee requirements (Operations
Plan), etc.
Integrating your financials with the rest of your business plan gives
investors and lenders a greater confidence and understanding of your
business and your ability to successfully execute on the opportunity.
In Growthinks upcoming Capital Raising Bootcamp, we will teach you
exactly how to create an expert business plan that raises capital and
positions you to grow a successful business.
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