3
Simple Steps to Venture Financing:
Introduction
by Cassie Hoag, Equity Architects, LLC
Is your company on the verge of success? Is profitability right around the corner? Is there a clear path to achieving your personal financial goals? If so, your business is in the early stages of a natural lifecycle and you deserve hearty congratulations for clearing the start-up hurdles and demonstrating “proof of concept”.
At this point, you may also be suffering the realization that the fast track to greatness is very cash intensive. In other words, it’s clear to you (and on your company’s books) that several hundred thousand, or even several million dollars more of investment would virtually guarantee rapid growth and deliver profits at a rate that may even boggle your mind.
But what’s the source of the needed cash? If you’re like most small business owners, you’ve already sunk, if not your life-savings, as much as you can into your company. And the bank isn’t willing to loan you enough money to do whatever it is you need to do (like launch an advertising campaign, build inventories, hire employees, etc.) to realize your business plan. Is fast growth just a fantasy? Are you simply day-dreaming, hoping for a stroke of good fortune … as if you bought a lottery ticket? Perhaps not.
Consider this: in 2005, early stage California companies raised a combined $10.2 billion in what’s termed “venture capital”. Obviously, there’s plenty of funding out there for promising new businesses. And, it comes primarily in the form of equity, meaning that the folks providing the money take an ownership stake in your company. You never pay interest, and you have no obligation to return any portion of the cash (capital) that’s been invested.
If the concept of venture capital is foreign or vague, you have lots of company. Until the internet made research on potential sources of equity accessible to all, the world of venture capital was akin to a secret society, where you had to know the password and the handshake to even meet the “right” people. Thankfully, venture capitalists are out of the closet now. They want to be found. They realize that some of the best entrepreneurs; some of the best young companies; some of the best investment opportunities lie with the uninitiated. In the following issues I will share some straight talk on how your company can assess, pursue and secure venture financing:
Step 1: Get Real
Step 2: Get Ready
Step 3: Get Help
© 2006 M. Cassandra Hoag, Equity Architects, LLC
Cassie Hoag is the founder and managing director of Equity Architects™, LLC, a financial advisory firm that helps small businesses realize their potential through equity or debt financings, mergers and acquisitions or reorganizations. You can reach her by email or call 949-388-7375.
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