3 Simple Steps to Venture Financing—Step 3: Get Help (#4 of 4-part series)
by Cassie Hoag, Equity Architects, LLC

If you’ve gone through the list in Step 2, and everything’s in hand and in order – GREAT! If not, get someone to help you with the missing pieces. This could be an investment banker, a financial advisor or a consultant, depending on what needs to be done. Just make sure that you engage someone who knows the venture fundraising process and is connected in the investment community. Now, it’s time to go to “the money.”

As for your approach to potential investors, take heed: although Venture Capitalists are always on the lookout for good deals and appear welcoming, they’ll be the first to tell you that the best way to get their attention is through a referral. This means, literally, that it takes a VC to know a VC: if someone they trust clues them into an investment opportunity, they’ll be much more responsive. You therefore need to find an advisor entrenched in the angel/venture investment community to make introductions for you. As mentioned before, venture funding is highly specialized. You’ll need help from someone who knows which Angels and/or which funds will be most responsive to your particular opportunity.

Be appreciative of the funding timeline. A best case scenario is three months. This occurs when the stars align; e.g., there’s an angel investor in the wings who knows (and likes) you and your company. He or she would love to invest, you come to terms and due diligence goes smoothly. It’s conceivable that the deal can close in 90 days. However, if your rich uncle passed away (or is incarcerated for tax evasion), then be prepared for a 6-18 month process. The three steps are indeed simple; they are not, however, fast. Strategic business planning assures that you start this process early, before you reach a cash crisis.

Bottom line: venture financing should have been taught in high school or as a required course in college. It wasn’t, so those of us who didn’t major in Finance have to learn it from scratch. You now know more than most small business owners about equity fundraising. Have confidence in your new-found knowledge, thoughtfully draft your documents, get help as needed, be bold and go forth into the venture world...they’ll be waiting with open arms (and eventually, an open checkbook!).

© 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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