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Dealing With the Challenges of Getting Funded

Guest post by: Stefan Doering

Article Overview: Raising capital for your (green) business can be intense. Things along the way WILL trip you up. Learn these six top challenges to avoid some of the major mistakes from your predecessors.

Dealing With the Challenges of Getting Funded

We all know raising money can be really tough. But some entrepreneurs make it look easy. Ron and David are two of those people.

We were chatting over the weekend as they are on my finance panel for next week’s Green Entrepreneur Summit. Ron last month raised a whopping eight-figure sum in only six months! David raised $2MM in one of the more creative ways I had heard before.

How they did it can be helpful for any green/non-green entrepreneur looking for capital.

Ron Bergamini, CEO of Action Environmental Services, one of the greenest carting companies in the country, is a very modest guy. He would never let on to what it took to raise more money than any small business I have known. That modesty showed up again today when I saw him speak on a panel with the founder of MeetUp.com and several other like-minded NYC entrepreneurs.

All Ron said on today’s panel was “it was tough raising it.”

What he didn’t mention is the banks put him through the ringer. Big time. What should have taken weeks took months. They didn’t double-check his finances, they triple-checked them. He told me, “Two years ago when you were just off on your projections, it was a simple call to the bank to explain things. Now the banks call me as soon as the slightest thing goes awry.”

Makes it tough to run a company that way. But now that he is very well capitalized, he is ready for his aggressive expansion plans.

David Kistner, Founder of Green Apple Cleaners, one of the biggest and greenest “wet cleaning” (environmental dry cleaning) businesses in the US, had a completely different experience. David raised about $2MM a couple of years ago in his second round of financing. How he did it was one of the more creative ways I’ve heard. He’ll be explaining this story next week at the event.

Like Ron, David is a very laid back guy, who would never let on how difficult raising capital was for him.

But the real lesson for him came after he raised his capital. He actually had to downsize from 10 locations to his current three.

The reason why reminded me of what I went through ten years earlier with my green retail stores.

He expanded too quickly. In his case it was because he could not keep up with the demand and maintain quality with his state-of-the-art environmental cleaning process for clothing.

This created serious log jams in his production, which in turn started to jeopardize Green Apple’s brand and image.

But speaking with him all I heard was his excitement. He now has a more grounded company with a solid infrastructure. And is ready to expand again!

Going through these experiences can make good entrepreneurs great, depending on how they handle the lessons. Lessons that can never be learned in school.

For both Ron and David, their experiences are helping them become environmental business leaders in their industries.

Here are some of the key challenges to deal with when raising capital:

1. Balancing Your Time— one of the biggest shocks to entrepreneurs when first raising capital is how much time it takes to write the business plan and then meetings and more meetings with prospective investors. Each one wants different information and/or have it in a different way. All this while you are trying to grow your business and expand your customer base.

2. Enough is Not Enough—one of the hardest things to do is get a check from an investor and NOT spend it right away. To put it in escrow until the right amount of money is raised. If it IS raised, then spend it. If it is NOT raised, then give it back.

3. Valuating the Company—every entrepreneur wants to tell their investors their investment is now worth more. But when raising money and you say your company is worth X, if that number is not accurate the next time you raise money, the company’s value may be lower than the previous round. You risk upsetting your investors.

4. Blue Skying—when raising money, investors want to know your growth potential. How much you can scale up. It is easy to say your market potential is far greater than reality. When doing this, it can look great on paper, but when it comes to delivering, you may have a very hard time explaining your failings to your investors.

5. Teaming Up—there is nothing more difficult than bringing on the wrong key management. If they don’t “get” your vision (especially green businesses) or have a very different strategy of getting there, it will be a rocky road. And if you’re not careful, your investors may fire you because of it. Remember when Steve Jobs was fired by Apple’s board in the 1980s?

6. Good vs Bad Money—when someone is dangling a check in front of you, it can be VERY difficult to say, “No thank you!” Yet if the check dangler is not in alignment with your company’s vision or strategy for growth, down the road it may come back to bite you in the you-know-what. This is especially true for green companies who are often on a different growth trajectory than traditional companies.

Ron and David are excited about what they are building and to teach it to us. Along the other equally great finance and marketing experts, they will be sharing lessons learned and things to avoid next Thursday, July 22^nd in Manhattan.

If you have a green business and want to learn from these folks as well as meet other great entrepreneurs just like you, Be UnReasonable and come.

And because you are a dedicated reader, just use special code SDPC01 for a massive discount (I’m embarrassed to say what it is!)

Check out the Green Entrepreneur Summit: Scaling Up Without Selling Out and use the discount code while we still have seats.

Action Steps for the Week

Raising capital are you? How seriously have you crunched your numbers? How prepared are you for being on the grill by experienced bankers/investors?

Ready, well then, OK! Start by making a list of what will most likely trip you up from the six Key Challenges above.

Mostly likely you will have elements of all six.

For each, create a strategy to keep your ambitions in check as you move forward.

Almost like when you are trying to lose weight and you ask your partner to stop you from ordering that dessert at the restaurant, make sure you have something in place to keep you in check as things start to heat up.

Most likely you’ll be glad you did.

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Article Tags: BEST Coaches, capital raising, Funding, Fundraising, green business, Green Entrepreneur Summit, green financing, raising capital, Stefan Doering



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