Business Venture Advice Article:
Raising Capital for Your Business - How Long Does it Take?
Most companies vastly underestimate the time commitment necessary to successfully complete a financing. In actuality, a company seeking financing needs to budget between 500 to 1000 work-hours to the capital-raising process, spread out over a 6-9 month time period.
The key processes in the capital-raising process include 1) perfecting the business plan, offering memorandum, and other company due diligence materials, 2) developing a comprehensive, targeted prospective investor list, 3) contacting this list and responding to investor due diligence requests, and 4) negotiating the transaction.
Completing the business plan typically requires at least 200 hours of work. This time is dedicated to conducting the market research to validate the opportunity, developing a comprehensive financial model, determining the most effective way to lay out the business strategy, and actually writing and proofing the business plan.
The next step, developing a comprehensive, targeted prospective investor list is also very time consuming. There are thousands of potential investors, each of which has very different tastes regarding the types of ventures that interest them. Some invest by market sector (e.g., healthcare vs. telecommunications), stage (seed stage vs. later stage), geography, or a combination of these. Many hours must be dedicated to determine which investors are the right fit for your venture. This process involves creating a master investor list, visiting each investor's website to view investment criteria and past investments, and determining who is the right contact at the firm.
To see how easily the time adds up, consider that only about 25% of prospective investors who show an initial interest in a transaction actually progress to detailed company due diligence. Only about 10% of this 25% actually progress to a bonafide offer of funds, of which only 25% of these actually result in an investment transaction. So completing a financing transaction requires, on average, contacting approximately 160 pre-qualified prospective investors.
The due diligence process, where investors scrutinize the investment, can also be very time consuming for the company. Investors often request many documents, some of which can be easily retrieved from files (e.g., prior tax returns), while others may take more time to prepare (e.g., additional market analysis, customer lists with past purchases, contact information, etc.). Finally, negotiating a transaction can take a significant amount of time depending upon the complexity of the transaction and number of parties involved.
Too many companies fail to raise capital since they are unaware of the significant time requirements to do so. Those firms who understand these requirements and budget accordingly are the ones most likely to persevere and end up with the capital they need.
As President of Growthink Business Plans, Dave Lavinsky has helped the company become one of the premier business plan development firms. Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share.
Related Business News and Articles From ezinearticles.com
Are you a budding amateur photographer who gets a kick out of taking photos and friend's weddings, friend's christening or portraits of your partner and kids outside? Have you ever thought about turning this hobby into a paid hobby?! Read on to learn more...
Entrepreneurs stay ahead of information. It takes to see what other people did not see to be an entrepreneur.
This article will share how you can set up your office anywhere in the world using free tools available online. You just need to own a laptop and have access to wi-fi.
An entrepreneur is someone who undertakes an enterprise, according to the dictionary. Most people think of entrepreneurs as schemers looking to make money from an idea, but the real path to success is to strive for greatness in your achievements, and once you've done that, people and money will find you.
In a world where image is everything, wherein the degree of physical beauty and style of an individual may determine the eventuality of one's success in life, we cannot help but to conform or loose to the most undeserving of competition. So everyone would like to improve their over-all appearance by consulting a dermatologist, by going to the spa or by regularly visiting a salon. But mostly, we improve on our physique by going to the gym.
To many people, the idea of starting their own business can be scary, and it is often a risk that few are willing to take. However, the fact remains that entrepreneurs are the lifeblood of a stable and flourishing economy, and for those who do have the courage to dive in, the prospects can be very rewarding in the long run. The decision to become an entrepreneur and start a business, however, is not dependent upon the desire to become wealthy by any means.
Ever wondered what kind of people entrepreneurs are in general? Well, let us look at Onassis. Did you know he went bankrupt at least twice during his lifetime? But did you also know that he worked two jobs during the lean years of his life? There are scores of examples of this type of events in most entrepreneurial careers, yet each time, these personalities get a trouncing from life, they bounce back with a vengeance. So what sets them apart from the average crowd? Here are ten reasons why.
There is nothing more exciting than being successful at a business we build ourselves. But you will need to educate yourself on how to run a business.
Most entrepreneurs consider it a lucky day when they make a sale. Even better if the client buys a recurring program, like a subscription to a service or a coaching program that meets every month. But many entrepreneurs don't realize they might be leaving money on the table.
Napoleon, one of the strongest personalities in the history of mankind, wanted to change the world. He knew that it was possible because he had changed his own life. In his immortal words you can find the key to greatness in personal development, leadership, wealth, honesty and a path to success.
