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Most entrepreneurs are continually concerned about their finances. Their companies perhaps not yet profitable, they may have a fear of "running out of dry powder? These entrepreneurs often have fallen in love with their company's technologies, products, and potential markets, but they require more resources. Invariably these emerging ventures shroud their fear of the grueling capital raising marathon by presenting voluminous business plans to potential investors. They often flaunt their "optimized business models" Investors, however, typically want to know why the potential investment is such a good deal The entrepreneur often wants guidance regarding what to say to whom in a changing financing environment.
In this article, our "Practitioner's Corner" associate editor Joe Levangie collaborates with a long-time colleague Paul Broude to address how businesses should "make their capital-raising initiatives happen." Levangie, a venture advisor and entrepreneur, first worked with Broude, a business and securities attorney, in 1985 when they went to London to pursue financing for an American startup. They successfully survived all-night drafting sessions, late-night clubbing by the company founder, and even sheet shooting and barbequing at the investment banker's country house to achieve the first "Greenfield" flotation by an American company on the Unlisted securities Market of the London Stock Exchange. To ascertain how the entrepreneur can determine what financing options exist in today's investing climate, read on.
We start with a quiz:
January 26, 1983, a date that forever altered how startup companies went about the grueling process of raising capital. Was it:
A. A spectacular rise or fall in the prices of NASDAQ stocks?
B. A dramatic change in securities laws governing the sale of stock?
C. A seismic shift in the Federal Reserve Board's interest rate policy?
The answer is "D, None of the Above." January 26, 1983, was the day Lotus Development Corporation released its first version of Lotus 1-2-3®, encouraging would-be entrepreneurs everywhere to create 50-page spreadsheets that forecast the successful growth of their fledgling enterprises. The process of obfuscation was set in motion: too much data with too little meaning. Worse yet, entrepreneurs started to believe that these spreadsheets were the "truth!"
Keeping It Simple
Fast-forward to 2006: The numbers still count, but today's entrepreneurs need to have more-and less-than an extensive Excel® spreadsheet to...