Entrepreneurs have great ideas, and know how to execute the idea. Typically they are visionaries, and excel at articulating their business proposition, know who they are going to go after, and can sell their product to those that have a need for what they’ve got. Entrepreneurs are the most interesting people to work with, because they are the ones in the room what weren’t afraid to explore what was out there, to try something different outside of how everyone else was doing it, and are constantly soaking up information to transform the world. But there comes a time in all business lifecycle’s that the exploration of using additional sources of capital to achieve the objectives of the business is worthwhile, or viable.
Growing companies typically require some sort of capital infusion along the way. An acquisition opportunity appears, a company is outgrowing the capacity of their current lender, an owner (or equity partner) is interested in getting their liquidity out of the business, or getting a partner out of the business. Either a basic business loan, line of credit, or in the case of a larger scope endeavor, a more complicated financial business transaction must be explored. Funding is required. Does the entrepreneur have time to do this, have the experience to do this, or the energy to do this without disrupting their business? The answer is an overwhelming “No.”
But the real question is: How To Get Funding Sources Interested in Your Business?
Venture Capitalists and Bankers are corporate finance investors that excel at anticipating trends, and making a lucrative investment. They sail through the flowery sales jargon, the skills of your management team, and the overview of the competition. If your business plan lands on their pile, and meets their industry investment parameters, they immediately turn to the numbers and plug in your model into theirs. They care about the capital intensity of the business in order for it to realize it’s maximum potential (or how much they need to invest before they get their targeting ROI). In addition, they care about scalability of the business, and the unit economics. But most important for the entrepreneur to know is that when someone makes an equity investment in their company, they are looking for the exit strategy and the return on the investment. For a venture capitalist, it’s a quicker return on the investment to sell a company than take it public, as the IPO locks them into the investment for an additional six month to two years. Smaller companies tend to trade at a discount, so those investments don’t tend to be as lucrative for the venture capitalist or investor. Alternative Investment Funds and bankers additionally focus on the year over year return on their investment and the length of time until the investment is repaid. Can the borrower afford to borrow the money and can the cash flows of the business support the loan?
Venture Capitalists, Funds, and Bankers receive hundreds, if not thousands of business plans per year from companies looking for money. Out of these plans, they will typically fund just a handful. What is critical for any company looking for capital is that the business not only has a strategy for growth and execution strategy, but has a strong financial partner or team member that can get things done quickly and professionally, has the relations with the right service providers, and can negotiate the right pricing for the value of the financing being delivered.
Does the management team have a savvy elevator pitch that can get the investor to say, “I get it, continue…” Once an institution expresses interest in providing capital for your business, it is imperative that a company quickly can turn around the supplemental materials that the institution is going to require. Make sure the financial team member is in the meeting or on the call that can anticipate the questions, and give the key players the answers, or provide them as well?
The trick of getting funding sources interested in your business is thorough preparation, anticipation, and knowledge regarding what the audience wants to hear, is going to ask, and what those materials are going to be, and what the information is that they are looking for. Never give them too much until they ask for it, but getting it to them immediately. If the company can’t turn around what the institution requires in less than 24 hours, it just looks bad. Institutions don’t like it when a business runs a bad process towards raising capital.
Lantern Capital Advisors believes that entrepreneurs should surround themselves with people that represent their best interests. If a venture capitalist invests in a company and takes over control, they typically will insert their own people in key positions of the company in order to protect their investment. Those people work for the company, but they represent the investor. Just like your corporate attorney and tax accountant care about your long term protection and assets, your corporate finance advisor should represent you as well (not the funding source)!
What types of people do VCs insert into your company? The types of people that most companies don’t have as part of their team. Typically a VP of finance type of person; someone that goes beyond managing the books, and running the back of the business. These individuals can get results very quickly, are skilled at coming up with things such as pricing and selling strategies, or how to position a product, based on their experience with other companies. Sometimes VCs insert in a part-time CFO, that typically juggle multiple companies, and are very aligned with the goals and objectives of the investment firm, and their own personal investment in that company as well. Entrepreneurs should look to get that team member in place along side their tax accountant, attorney, and business coach.
Most of the time, these skill sets and the compensation required for a full time employee are outside of the budget parameters of a business. Enter Lantern Capital Advisors. The objectives and skill sets of investors should be exactly what the entrepreneur looks for when looking for a partner to help them raise capital to grow their business, except they are looking out for your best interest, your bottom line ownership, and your investment. Your partner should work towards achieving your business objective, and help you navigate the corporate finance landscape to get there. Just like hiring the best accounting firm, attorney, or money manager to serve and represent your best interest (they don’t take “a cut” of your success), Lantern is a trusted business advisor to entrepreneurs and companies that need help navigating the corporate financial world and serves as a corporate finance expert as it relates to the company and all things financial, venture capital, and banking.
There are investment bankers and brokers that work on a success basis, but Lantern Capital Advisors has a different business philosophy regarding working with clients. We specifically work with high growth clients that want to hit the ball out of the park, and want to maintain control of their company while doing so. We serve as an hourly based corporate financial consulting firm that rocks at helping companies plan for and raise capital, and we do so as if it is our job for the company that we are working with. We look at ourselves as an outsourced CFO that is an expert at helping companies realize their potential and at raising capital. We are experts at knowing the capital markets, and matching the right institutions to our clients.
Visit the Lantern Capital Advisors Website for more information on Raising Capital and Corporate Financial Planning