Venture Capitalist And How To Raise Capital For Your Company

I entered into business later in the career path after a successful run in education…many ask and are surprised to find out there isn’t that much difference between helping a teenager to succeed in academia and helping a young start-up company drive their business onto the global arena.

They both take a lot of time, patience, commitment and a whole lot of money you never saw when you started out!

After 10 years in business and starting from a not-for profit background as a fund manager then founding Valentine Addis in 2000 I have learnt that what companies seeking venture capital or private investment is often not money in isolation.

When I first enter a company the last document I ask for is there financial documents. There are far stronger signals than a good looking or disaster ridden end of year result that tells an experienced advisor if the company has growth potential or indeed is under performing.

Key Issues:

 

  • Are you creating cash flow out of the business in its current form?
  • Do you continually prop up the business financially, rather than make it pay for itself through income producing activity?
  • How much time do you actually spend on your company’s core business?
  • Who is responsible for your company’s growth?

 

If you are the owner director or the majority shareholder who is working in the business then the answer is simple – YOU!

I find a very easy way to take the “temperature” of a company i.e. see how healthy it’s heart beat is and if there is life in them thar bones, is a simple self assessment that you and your key reports can carry out to see what the current state of the nation is.

  1. Rate yourself out of ten for personal leadership
  2. Rate yourself out of ten for relationship to the business

If you asked all your key reports to do this and you got over 5 for leadership but under 5 for relationship and your sales figures or company performance is not what you wish it to be then you need to address these issues.

Of course there are far more comprehensive ways to test this kind of relationship to the organisation but leadership and emotional attachment for a start-up company or a company under 5 years old going into high growth is a critical life sign for the owner and it will also tell you how long your crew will be with you over the next 5 years.

What has this got to do with raising funds?

Often people will come to a company like mine and say “$500,000 NZD will sort everything out, that tells me and most venture capital advisors that $50,000 will sort out the key issues today….it’s really that if the company got $500,000 they wouldn’t necessarily make $5 million in 5 years which an investor would expect a reasonable amount of capital to produce.

You attract who you are in both life and business…take a moment to get hold of that….so we need to set our companies up to attract an intelligent investor.

Over 10 years of raising capital I stopped wanting to plug a problem with capital and learnt that getting a strong strategy going for a company and giving strong foundations to the business allows the company to self fund it’s most urgent needs and then attract an investor that has either some specific acumen in the same industry or the ability to add value in an advisory capacity as a successful entrepreneur or innovator with a strong track record.

As a company owner you need a partnership model with any investor if you are a start-up or company under 5 years old. Someone that will join with you to help you be the best you can be with a strong strategic outlook and an appreciation of the value you have already created. That’s what creates the win/win between investors and companies over the long haul.

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