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Overview for Raising Money for Your Start

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									Overview for Raising Money for Your Start-up Company
Entrepreneurs face a great deal of challenges in building a successful venture. They have to
identify a good opportunity, in a thriving industry, organize a competent management team,
out pace the competition, and build a product and/or provide a service that is worthwhile to
others. However, in spite of all these obstacles, raising money to seed or grow a company is
often the largest challenge of all. The following paper will discuss the business and legal
process of raising capital.

There are various stages in the lifecycle of a business, and each has their own unique funding
requirements. Our discussion will primarily concern scalable businesses that are headed
towards professional or venture investment. The vast majority of businesses will never get any
professional investment. The entrepreneur may fund the business themselves, take out loans,
or raise some money from friends and family. The primary distinction is the end goal. A
lifestyle business is one that provides its owners, shareholders, or members with revenues and
profits sufficient to sustain their needs (even extravagant ones). These businesses may or may
not have resale value, but typically would not provide outside investors with a substantial
return. In contrast a venture business, while much riskier, typically will provide outside
investors with a liquidity event that has the potential to provide very large returns.

Idea Phase
        o Entrepreneur has the idea for a product or service
        o Writes a business plan to identify the critical business and financial issues
        o Bootstraps the initial product or service

Seed Phase
        o    Entrepreneur seeks to validate their concept
        o    Additional capital is required to buy more product or offer the service
        o    A combination of Bootstrapping and raising money from Friends and Family
Round A
        o  The concept has been validated or the market opportunity is large and the
           business is very scalable
         o Entrepreneur needs more access to capital to stay competitive in the marketplace
           and grow their business
         o Entrepreneur seeks our Angel Investment

Venture Round

         o The business has a viable opportunity for a large exit either through an
           acquisition or an Initial Public Offering
         o Management team needs access to a large amount of capital to make it to
           profitability, exponentially grow the business, and/or position the company for
           an acquisition.

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