Only those who attempt the absurd will achieve the impossible.
Maurits Cornelis Escher
Deciding to take money from an external investor is a big step for any entrepreneur. You are effectively taking on a partner to help you grow your business but in most cases you don’t know the partner well and most importantly you don’t know what they will be like as a partner once the honeymoon is over. A good equity partner can help you accelerate your business and navigate the challenges that come with a high growth business. The wrong partner can have a negative impact on your business.
The fact you are on our website means you are considering equity financing for your business and want to know whether Eventi Capital would be a good fit for you. We will outline a few things to consider when deciding what type of capital you need, when you should start looking for it and how to pick the right equity or debt partner.
Start talking to investors and bankers long before you think you need the money. Learn about who is interested in the market you are focused on and what they look for in a new investment. Get a warm introduction if you can when you are not asking for anything except their time. Start a regular dialogue with the ones you like and update them on your progress as you go. The ones that like you will start to demonstrate their potential value to you by providing advice, insights and helpful introductions.
Be very prepared to discuss your business in detail. PowerPoint presentations and Offering Memorandums can help you organize your thoughts but most sophisticated investors are looking for domain expertise and leadership capabiilties from the person they are going to invest in. Be prepared to get beyond superficial characteristics that define your customer – large enterprise, or SMB or consumer do not demonstrate a real depth of knowledge. Operating metrics and deep customer insights can help prove the level of expertise and insight you have into what will make your business successful.
Due diligence takes time for both groups to do it effectively – be patient. Make sure you leave enough time to meet the investor’s timelines as well allowing yourself a chance to get to know them. As much as an investor will want to get to know you and check references you should be performing a similar level of due diligence on your potential investor. What is their track record in your industry or customer segment? What do their previous investments say about them? And make sure you ask the tough questions – everyone will want to introduce you to their best deals but you want to know how your potential investors behaved in the bad ones too.
From the time of your first introduction to a potential new investor to completing a transaction depends a lot on what stage your business is in and how well that investor understands your space. Venture debt deals can get done in less than 60 days and equity deals in later stage companies can be done in 3-4 months. Our focus sectors are pretty hot right now with many investors competing on deals and we would suggest a deal process from intro to close will still run 4-6 months.
Knowing what the key drivers are in your business will help you determine which areas you need the most help on. Raising capital should be about more than the money. As you evaluate what the major barriers are to accelerating your business probe how the potential investors can help you overcome those barriers. Do they have industry knowledge that will help you avoid potential mistakes. Can they make client or partner introductions to help accelerate business development? Do they have operating expertise in key areas to help mentor your management team. Are they coaches, facilitators, strategists, visionaries or passive invesors. It’s important to know what role they can and want to play and what role you feel you need the most.