Raising Entrepreneurial Capital
Do Business, and
Raise Capital, Globally
The Global Mindset
Your business is already global,
even if you are still writing the
first draft of your Business Plan.
Your challenge is to make the
most of this fact.
The Global Mindset:
“Going Global” is not a fashion
statement. Every business must take
account of the global market.
Look Both Ways: By offering foreign
companies something of value in the
U.S., you can become a global business
without leaving home. Remember: If
you don’t, somebody else will!
Observe national differences
Business practices, commercial laws,
and especially the tax codes of many
countries are substantially different from
Value-Added Tax (VAT), for example, is
unknown in the US, yet it is a major
source of government revenue in many
Global Mindset: Communications
Speak to your audience’s needs and
understanding, not yours.
Use simple, unambiguous language, but
remember: it always sounds blunt in
Avoid sports analogies, colloquialisms,
and idioms in business correspondence.
For example: In some languages, a
“bomb” means a huge success. In
American English it means a huge
Finding International Partners
A “partner” is anyone with whom you
establish a long-term relationship,
regardless of the legal form it takes.
Verify the legal status of any potential
partners in their home country. Check
all references thoroughly and proceed
slowly, step by step.
Can your partner prevent the local
competition from manipulating the local
legal system to put you out of business?
Partnering: Sources of Information
US Department of Commerce and other
agencies of the Federal government.
Your home state, city, and local
governments. They may offer export
incentives, and inducements to attract
foreign investment to your area.
Register with foreign government
consulates in your area. Foreign
companies often research potential US
partners this way.
Network through Chambers of
Commerce, especially bilateral
(Example: German-American Chamber
Use private consultants carefully
Trade Shows and Conferences
Attending and exhibiting at trade shows
and conferences in your target market is
an excellent way to meet potential
customers, suppliers, and partners.
Exhibiting at a trade show will increase
your credibility in the market.
Starting in Trade Shows
Start small and be flexible:
Share space with someone else.
Join a U.S. government trade mission or
Commerce Department pavilion.
Make full use of the exhibition web site
by setting up appointments in advance.
Market Testing: Direct Approach
Visit showrooms, warehouses, retail
outlets; talk with potential customers.
First hand impressions will often tell you
more than a statistical report or analysis
by a consultant with nothing at risk.
Consider using e-commerce auction web
sites to test price levels and demand for
your product without leaving home -
some find long-term partners this way!
Clearly define the rights and
responsibilities of each partner,
including how disputes will be resolved
and under what legal jurisdiction.
Each partner must agree to performance
targets and reporting requirements.
Agent or Reseller?
An agent is an independent sales
representative, typically receiving
commissions of 10-15%. They are not
entitled to make legally binding
commitments on behalf of your
company; sales are pending your
A reseller/distributor takes on more
accounting, customer service) in return
for a greater percentage of sales.
A network of agents and resellers is
often preferable to setting up company-
Start small: a non-exclusive
arrangement with specific sales targets
Create reasons to pay attention to your
product. If your partner is successful,
you won’t need another representative
in the same territory.
Alternatives to Exclusivity
Pitting multiple representatives against
each other can increase awareness of
your product, but be careful. Your
representatives must make money from
selling your products or they will stop
All relationships must be cancelable for
Equity Capital: International Sources
You must have a convincing answer to
the question: “Why are you here?”
Expect international investors to view
your motives with suspicion and to
believe you are naïve.
Just like at home, the most important
single factor in your fund raising success
will be the experience and credibility of
the management team.
Angels and Venture Capitalists
Infrastructure is often less well
developed outside the US, though the
gap is narrowing.
Finding competent and experienced
legal, accounting, and tax professionals
is a particular challenge.
Laws and tax regulations vary greatly.
Pay particular attention to potential
personal legal and financial liabilities.
Finding Prospective Investors
Prepare a list of angels, VC firms, and
large corporate investors specializing in
your type of project. These can be found
on the Internet.
Make sure your project falls within their
Investigate their past investments,
especially the successful ones. Contact
the portfolio companies to get their
perspective and advice.
Investors often insist that your project
be reviewed by their accountants or
lawyers before they will consider it.
Investors want to see a successful track
record in similar ventures and a
defensible business plan: You must
convince them you can make good on
Never “hype” or oversell your project.
Expect an intense and lengthy due
diligence process by the investor.
Investment criteria are similar around
the world, but the emphasis can vary
Outside the US, and especially in
transitional economies, your experience
and skills can be a significant
incremental advantage in some local
Due Diligence: The Proposal
Most important screening criteria:
Timing and nature of exit
Percentage ownership, size of
Industry and products
Due Diligence: Management
Skills and experience are key.
You must have a credible plan for filling
management team gaps. Show an
understanding of the local labor market.
Legal requirements could restrict your
ability to hire.
Due Diligence: Exit Strategy
Cash in after no more than five years.
Management Buy Out
Due Diligence: Exit specifics
Your proposal must specifically address
exit in a convincing manner.
General statements about “going public”
will receive a cold response from
If you anticipate a trade sale, you must
state who will buy it and why you
believe it will happen.
Due Diligence: Investor Measures
Investors have specific requirements as
to size of total investment (often
between $500,000 and $10 million) and
percentage ownership at exit.
Performance measure is usually Internal
Rate of Return (IRR). The required IRR
increases with the risk of the
investment. Start-ups are considered by
far the most risky.
Due Diligence: Niche
Provide a strong case for your
Ideally, you should be in a high growth
industry with a uniquely positioned
product; however, within reason,
investors are less concerned about this
criterion when you have a strong
proposal on all other counts.
Due Diligence: Valuation
Most common methodology is some
variation of price/earnings multiple,
incorporating a very high projected
Internal Rate of Return (IRR).
For start-up or early-stage projects,
investors want to see an IRR of up to
60% in your plan and strong justification
that it can be achieved. This is to
compensate investors for the extra risk
Due Diligence: Monitoring
Investors will insist upon regular
oversight of your project, including
reporting of financial results, and
attendance at regular Board meetings.
Negotiate and clarify oversight
requirements as part of the funding
package. Oversight can be very positive
for your business if handled properly.
Due Diligence: Regional
Angels and VCs exist in every major
Information sources are readily
National or local venture capital
associations (e.g., Taiwan Venture
Venture Economics (a service of
2002 Report to the World Bank
Asian companies tend to resist giving
up control, thus making exit
strategies more difficult.
Corporate venturing is
disproportionately important in Asia.
Asian Universities and their research
programs are not as closely tied to
private industry as in the US. China is
Stock Exchanges Outside the U.S.
Raising capital on a foreign stock
exchange can make sense, especially if
a large portion of your business is
carried out in that country.
Listed companies generally command a
higher nominal valuation than privately
A listing, almost no matter where, will
increase the prestige of your company.
National exchanges, especially in
Europe, compete with each other for
new listings. It can pay to shop around
for the best deal.
Listing outside the US can be the first
step towards a listing in the US for
companies that do not yet qualify for a
Markets outside the US are often less
liquid. The “float,” or percentage of
issued shares traded regularly, can be
very small, especially for smaller
The result is increased price volatility
from any given transaction.
Moreover, it may not be possible for
large investors to sell their shares in a
reasonable time frame.
Analysts rarely report on smaller
companies. You must fight for attention.
There might be unwanted legal or tax
consequences to a foreign listing. You
must research this thoroughly before
Listing: How to Proceed
Obtain exchange listing requirements
and options, often available online.
Some options are tailored specifically to
the needs of smaller companies with
brief track records.
Exchanges list approved advisors.
Contact advisors who have brought to
market companies similar to yours.
Speak with some of their former clients
about the process.
The London Stock Exchange (LSE) is the
oldest and probably the most liquid
stock exchange outside US. It offers
several listing options, including listings
directed specifically at smaller
companies with limited history.
A.I.M. : Alternative Investment
techMark: similar to AIM, but
specializing in tech companies
Listing: Other Examples in Europe
Plus SX Exchange: Less stringent
standards, lower in prestige.
EURONEXT: Consolidates the Paris,
Amsterdam, and Brussels exchanges.
Germany and other countries in Europe
offer competing exchanges with varying
degrees of liquidity.