Yesterday I attended a workshop on raising capital, and got great value—particularly as it was free, thanks to NZ Trade and Industry.
As always, the thoughts and to-dos I took away are a mixture of memorable expressions and tips that relate to our own business situation, right now. Much of this is already known to Alice and me: but knowledge needs a kick in the backside now and then.
Numbers
- Sale of equity is the most expensive way to raise capital.
- The moment you mention two figures, you have stated a valuation for your company: $# capital for #% of equity = {do sums} = your company's value. Valuation is the starting point for negotiations.
- Investor needs money back with interest within 5-7 years, otherwise it's a donation, not an investment.
- Learn to tell the story of your company in numbers. Do a growth graph, past and predicted.
Hats and jobs
- Identify the hats you wear. Don't wear more than 2 out of 3: share holder, director or employee/ manager/ CEO.
- What jobs do you want to do? Carve out your role and write your own job description.
- Note what jobs you are worst at. (Marketing.) Get someone who is very good at that job.
Don't try to go it alone
- Among other things, investors look at people (and whether you're open to new ideas), governance (which evolves), and billing system.
- Get at least 2 advisors. Otherwise you land up in a parent-child relationship, doing what you're told.
- Change your advisors from time to time. They are right for a certain stage in your company's growth; later they are not so relevant.
Keep on your toes
- Practise your pitch and never blow it. Everyone you meet is a potential customer, word-of-mouth marketer, or investor.
- Get your own Due Diligence documents all in one file where you can access them immediately.
- Do your own Due Diligence check on investors. (And providers.)
- Prepare your company as if for investment, even if you aren't seeking investment right now. Your product is only one piece of the puzzle.
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