Capital raising is a form of marketing, like any business, your journey to raise capital should be regarded as a marketing activity. I have heard a phrase that Capital Raising is 80% Marketing and 20% Finance, a point which I tend to agree.
First is leads generation process: Generating leads – finding private equity firms and venture capital firms, identify them from capital providers guides or databases.
Second is to prepare for your “Sales Pitch” – why should venture capital providers look at your business. Have you conducted competitors analysis that maybe your business is just the same as others? Create your unique selling points – USPs – so that you can convince the private equity and venture capital providers about it.
Third – create a summary page – create a 3-5 pager summary about your business, and use that as a document to approach private equity and venture capital providers. Some capital providers like to see the whole business plan, but usually start off with the summary page.
Fourth – You are the best sales person for your business, not the corporate advisors, there will always be lots of corporate advisors try to help you, fees vary, but at the end of the day, private equity and venture capital providers are not really interested in talking to corporate advisors. In fact, many private equity firms and venture capital providers have no-advisor approach policy. So you can only use corporate advisors to open doors, but you have to close the deal yourself.
Fifth – Always look for global opportunities – look for venture capital providers offshore. If you have an international plan, you can always have a much better chance in raising capital from venture capital firms.
Sixth – Prepare marketing materials – upgrade your website, change them to more investment grade websites, add more contents to your website and implement more marketing activities especially web marketing activities.
Seventh – Prepare for an interview – interviews with private equity and venture capital firms are not an easy process.
I have been through quite a few myself, and these are harder than job interviews. Many innovators are introvert people, or tend to talk too much technical terms, these are not suitable for private equity and venture capital firms. Remember, you are asking for money from them – they care about the returns they can make.
Remember, keep things in simple language, companies have raised capital using a 5 pager summary instead of 300 pages business plans – because investors understand what they are talking about. Warren Buffet’s investment principals include Never Invest In Products You Don’t Understand, venture capital firms do the same as well – try not to talk too much technical expressions or include them in your business plan.