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Steps to Raising Money for Your New Venture

Guest post by: Stephen Blakesley

Article Overview: Raising money can be intimidating, especially if you are new at it. Learn the documents you need to prepare, in advance to maximize your chances of getting everything you want from investors. Prepare a "One Line Pitch," develop a Business Summary, and craft a Power-Point presentation that motivates rather than putting potential investors asleep.

Steps to Raising Money for Your New Venture

There is no single best way to raise money for your new venture. What works for me may be less than effective for you. However, there are some guidelines that can be very helpful if this is your first effort in raising money. Here are a few guidelines that can make the job easier and hopefully, more effective.

First, determine how much money you want to raise. It is likely, if this is your first money raising effort, that you will be talking to angel investors or micro Venture Capital firms and sums of money less than $1,000,000. The amount of money you will need should be determined by understanding the next major milestone in the business growth process, how you believe you can get there, what you will need to reach the goal, and how long it will take to get there. For instance, if you are developing software and are currently in the "beta stage," how long will it take to have a marketable product and what will it cost to run the company until you get there, also know as the burn rate. It may take $30,000/month for 10 months or $300,000 to get that marketable product. One thing you can be sure of is that you will most likely be wrong in the time it will take but you should not be far off when it comes to your monthly expenses. Give yourself a month or two cushion in case you encounter problems and ask for $360,000, first round. Being specific gives the investors confidence that you are reasonable sure of achieving your goal and reasonably sure of reaching it in the estimated time frame.

Second, you will need a few documents that describe your business. One being the "One Line Pitch" like "The patented Grey-Spook widget is recommended by Doctors at the Madness Clinic and designed to reduce the pain of surgery by simply holding it between your teeth for 14 minutes immediately after you awaken from anesthesia." Another being the Business Summary, a paragraph that explains the business process and what your product does, like: "Grey Spook, pain relief widgets are used everywhere to reduce pain

and discomfort from surgery. Patients rave about the effectiveness of this simple, yet effective tool for managing pain. The "Grey-Spook" is priced at only $25 and we estimate the market to be three billion annually. There are no known competitors." Finally, you should have a Management Summary, something like: "Robert E. Nuff, invented Grey-Spook and has had 15 years managing pain relief at Robert E. Lee hospital in Houston TX as head nurse. Tammy Toogood has 30 years manufacturing experience with the leading manufacturer of pain management devices in Galveston, TX. " These tools are intended to impart maximum knowledge in the shortest possible time.

Once you have gotten the attention of a potential investor be prepared to deliver a more detailed Executive Summary, possibly as long as 3-4 pages. This short, focused description should be carefully crafted and void of anything that resembles "fluff." It will likely be the first substantive information several investors will ever see regarding your company, so make it good. In this summary, you should include the problem you are solving, why it needs solving, how your product solves the problem in unique and intriguing ways and finally why you and your team are the best choice to "deliver the goods." End with a "hook" about the financial end-game and how your approach will distance you from any competition. Don't go overboard here, but do be aggressive. Have this summary prepared and send to any VC that requests it. Wait, however, until it is requested. Be a little hard to get, not too much so, but a little.

Lastly, build a 7-15 page Power-Point Presentation. This should be your most detailed description, yet. Understand that, on average each page (I still call them slides) will take about 3 minutes to present. So, on average a 7 pager will take 21 minutes to present and leave 9 minutes for questions in a 30 minute presentation and a 15 pager will take 45 minutes and leave 15 minutes for questions in an hour presentation. It is good to have at least 2 versions as you are often time limited and 2 versions will allow flexibility to meet most needs. Remember in preparing your pages (slides) keep the information on the slide at a minimum. Never have to say, "I know you can't see this very well." The Power-Point presentation should be practiced using key words and leveraging "attention getters." Be certain you include summary financials and how you will use them. Most good presentations are the shorter versions.

This brief, and certainly not "all inclusive" commentary is intended to give a quick overview of what investors ask for and need to make decisions about investing in your company. Follow them and increase your chances of success.

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Article Tags: angel investors, investors, pitch, raising money, venture capital



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