Venture Capital Advisors

To be fair, it’s entirely possible to raise capital for your business without ever spending a nickel, but if you had to place your bets, you’re probably going to spend at least a little bit of cash on your fundraising campaign.

Let’s first assume that if you were industrious enough, you can probably figure out how to do anything on this list for free. What we’ll talk about here is what most people wind up spending if and when they do decide to use paid services.

Incorporation

($50 – $500)

Setting up an incorporated company is about the easiest thing you can do. While the concept of picking a C-Corp versus a LLC may sound a little bit confusing right now, the amount of time and cost is worth the investment.

Just about any type of capital from a business credit card to a venture capital investment is going to require you to be incorporated, so this is a must.

There are dozens of sites that will allow you to incorporate online in less than an hour and all electronically. Just about any type of capital from a business credit card to a venture capital investment is going to require you to be incorporated, so this is a must. They will also setup your tax-id for an additional fee or you can set it up directly on the IRS website yourself.

Business Plan Writing

($500 – $10,000)

The Business Plan is easily the most misunderstood part of the whole fundraising process.

Business Plans are not applications for capital. They are the output of having spent a lot of time critically thinking about every aspect of your business idea. When you hear investors ask for your business plan, they certainly want to review the plan, but they are also implicitly asking “Have you done your homework?”

The price of business plans range based on how prepared you are. If you’ve spent a great deal of time researching your business and simply need someone to ghost write your whole concept into a document, you can do that for as little as $500, maybe less.

The price starts to escalate quickly when you have done very little preparation and you need someone to really build the plan from scratch. At that point you’re really hiring a consultant to become part of your team, which like any other service can get expensive.

Website

($150 – $5,000)

Whether or not you have an idea that is relevant to the Internet, these days everyone goes to the Web to do their homework, and investors are no exception.

Therefore having a Web presence for your company is very important, even if it’s just a single page with an overview of who you are.

Since this will likely be the first impression most people get of your business, it’s worth making a good one. A good Web site can be built for you for a few hundred dollars using a stock professional template with your information inserted. There’s no good reason to show up with a terrible looking Web site anymore.

If your needs become more significant, your costs will jump quickly as you add the ability to do e-commerce and other features. If all you need to do is put up a professional face, a small Web site for a few hundred dollars will certainly suffice.

Brand and Collateral Design

Business Plans are not applications for capital. They are the output of having spent a lot of time critically thinking about every aspect of your business idea.

($100 – $2,000)

Investing in a little bit of brand identity is always worthwhile. Items like a logo, a nice color palette, and some associated collateral items like cards and a Web site go a long way toward conveying the right image for your company.

At the very least you can go online and purchase a stock logo with some business cards for less than $100. If you want to take it up a notch, you can have a custom logo designed which may also give your company its own color palette and design touches that you can use on your business plan, Web site, pitch deck and other collateral materials.

The costs begin to escalate when you engage a designer to spend lots of cycles doing custom designs in search of the perfect look. If you’re satisfied with something simple, you can avoid much of the associated expense.

Funding Research

($50 – $1,000)

Finding the right list of funding prospects to pitch isn’t about availability (there are lots of directories of investors) it’s about relevancy.

When evaluating a funding database, focus on whether or not you are getting access to the actual investors.

Your best bet is always going to be references you can get from business colleagues. However, if you’re like most people, that list is pretty short. Therefore you will likely seek out a way to identify more investors to pitch.

When evaluating a funding database, focus on whether or not you are getting access to the actual investors. Most funding databases will list general contact information for companies that provide investment. A better funding database will provide more detail about the actual investors, and in the best sense, a direct contact to them.

Summary

Starting a company is synonymous with cutting costs and skimping, and certainly your approach to a fundraising budget will be no different. However, don’t lose sight of the fact that even small investments in these assets can go a long way toward making your fundraising campaign far more successful.

1. Thou shalt focus, focus, focus thy plan. Make sure that our strategy is a rifle shot, not a shotgun blast. And always keep in mind the problem that you’re trying to solve. Proprietary, protectable, and sustainable technology is a necessity, but it’s not a sufficient condition for success. Identify the collective IP to commercialize. Carve up target markets finely and restrict yourself to two or three well-defined segments.

2. Thou shalt weave a story. Remember, all potential investors are looking for a reason to believe. Create excitement around our plan and show energy, enthusiasm, and Commitment when we present it. We detail both the mystic and the mundane. Cover our long-term vision, and then spell out short-term practicalities of its implementation.

3. Thou shalt understand thy audience. Research and understand our target audience — both for our plan and our pitch. Understand our prospective investor’s history, areas of expertise, rolodex, prior areas of investment, any obvious predictable conflicts and so Forth. Don’t forget that you’re in the selling mode, and you need to understand your Prospect’s hot buttons. Knowing as much, or more about them than they due about us is A show of respect and professionalism.

4. Thou shalt arrive via referral. Nothing turns off a prospective investor more than something coming in over the transom, regardless of the medium. An industry expert or an insider friend of the investor, a reference will instantly give you credibility, visibility, and the investor’s attention.

5. Thou shalt be crisp in thy plan. Keep your plan succinct, and remember a picture is often worth a thousand words. Although graphics can be overdone, they convey information efficiently and add impact. Your plan should be no more than 25 pages and the executive summary no more than 2 pages.

6. Thou shalt fine-tune thy presentation. Your presentation is not a fireside chat. Plan your pitch and pitch your plan, preferably a half hour but no more than an hour. Have backup for all claims, slides for common questions, and prepare a reference list in Advance. Efficiency in both plan and presentation will create a good impression that often is taken as a proxy for how you will run your business. You get one shot in front of your prospective investor. There are no dress rehearsals.

7. Thou shalt thoroughly research and evaluate current and prospective competition. All startups have competition of one sort or another. Thoroughly map out the competition, and honestly assess our relative status. Openly disclose the management team’s background strengths and weaknesses. Today, marketing and sales execution is more important than ever.

8. Thou shalt get real about financial projections. Investors understand that financials for new businesses in undefined markets are very hard to estimate, much less verify, but be realistic. Even if you believe that you can build a $500 million business in five years, understand that this kind of growth would make you one of the fastest-growing companies in American history. To the extent possible, build projections from the ground up, not the top down.

There is no substitute for showing investors direct prospect/customer contacts who are willing to vouch for the product and company.

9. Thou shalt not obsess on valuation. Valuation is clearly very important, but don’t be penny-wise and pound-foolish. The entrepreneur must give credit to the value-add of the angel or professional investor. By understanding this, hopefully everyone gets a piece of a much larger pie than would otherwise be the case.

10. Thou shalt understand potential exit strategies. Although the investor’s first thought is the excitement of getting into an investment, his next priority is how he’s going to get out of it. An IPO is one obvious path, but today, strategic buyers are acquiring more and more companies. Be explicit about potential buyers or licensees and the rationale for their interest in your company.

Here are the biggest “disaster moves” when you pitch your business.

1) THE RUN-ON SENTENCE: One of biggest mistakes is to drone on for a 45-minute monologue. In your big moment, your instinct is to communicate everything you know, the entire history of your idea, and endless amusing anecdotes. Remember! Your pitch will be 100 times more powerful if you can make it concise. Make every word count.

Your PowerPoint presentation should include 12-15 slides. Each slide should only have a few lines of text on it (30 words absolute max per slide). Having and practicing the slides will force you to avoid the “run-on sentence” and rather deliver a succinct, hard-hitting presentation.

2) THE FACT LEAP: Remember an investor always turns on their highly-developed BS-detector to full tilt. They will be questioning everything you say and trying to poke holes in your story. So the minute you exaggerate a stat, make an outrageous claim, or state a fact that can be challenged, your credibility crumbles.

I mention this a lot when discussing business plan writing. Avoid superlatives (e.g., we are the best, the market is absolutely exploding, etc.) unless you can immediately back them up with facts.

3) THE OVERSELL: If you make a strong point once, it resonates. If you feel the need to make the same point several times you end up diluting the power of the message. If you keep pushing a point, you transform before our eyes from a passionate world-changer to a used-car-salesperson or infomercial pitchman. If what you are pitching it that special, you don’t need to oversell it.

This goes back to my first point. Having a concise PowerPoint presentation and practicing enables you to avoid this pitfall.

4) THE S.A.T.: When responding to a question, just answer it directly. If you tell a four-minute story that includes 73 data points, the listener feels like they are taking an S.A.T. exam in which they need to sift through all the irrelevant stuff in order to get the answer. This does not help you shine or get your message heard.

In practicing your presentation, identify the questions that you might be asked, and answer them. I like to create back-up slides that I show when certain questions are asked; they show you are prepared and ensure you answer them succinctly.

5) THE GREAT GATSBY: Grandiose braggers may entertain at cocktail parties, but they rarely win the battle of the pitch. Keep it authentic and real. Your startup with 11 beta customers isn’t a billion-dollar company just yet. Think big, but stay humble. After hearing a pitch where the daring hero outperforms Groupon and Apple in their second year with trillions of revenue and six billion customers, I’m ready for a shower instead of a closing dinner.There are three important kinds of projections. I’ll outline each of them.

1) Projections – These are a set of numbers, both financial and operational, that you make about your business for various purposes, including raising capital. They are aspirational and are often done with a “what could be” perspective.

2) Budgets – These are a set of numbers, both financial and operational, that the management team prepares each year, usually in the fall, that outline what the company plans to achieve in the coming year. They are presented and approved by the board and the management team’s compensation is often driven by them.

3) Forecasts – These are iterations of the budget that are done intra-year by the management team to indicate what is likely to occur. They reflect the fact that the actual performance is going to vary from budget (in both positive and negative ways) and it is important to know where the numbers will actually end up.

Presentation Guidelines
Slideshows with under 20 slides are generally most effective. Use the limited time you have for your presentation to emphasize the compelling factors about your investment opportunity and save unnecessary technology details for future meetings. The following guidelines are provided to you as a suggested format, based on our observations of the successful attributes of the hundreds of pitches that have been made to us over the last five years. You will have 15 minutes to present and 5 minutes for Q & A.
Your goal is to offer a high-level, summarized view of the company, to excite investors and convince them to attend a follow-up due diligence session. Keep the following points in mind:
We strongly suggest putting your slides in the following order (although this is not mandatory, you should have a really, really good reason for doing it some other way, and should expect to have your presentation completely re-worked if your angel training coach doesn’t agree that your reason is really, really good):

1.Company Title Page with the name and logo of the company, the name and title of your presenter, and a one-line description or tag line about the company
2.Business Overview boiling down your elevator pitch to one or two short sentences or bullet points. Tell us what you sell or do in very concrete language, as this sets the context for the rest of your presentation
3.Management Team- talent & experience, with one line background on each member
4.Market – what is the environment, how big are the segments, what are the pain points
5.Product – How do you solve the pain, and what exactly do you do. This can be illustrated with a clear product or screen shot, or a simple process diagram, but if we don’t know what you do, we won’t know why we should fund you. (But don’t spend too much time on this, since you’re pitching the company here, not the product.)
6.Business Model – who pays, how much and from where, annualized revenue streams
7.Customers – how many, who are they, distribution process, attracted, retained
8.Strategic Relationships – if you have any, make sure we know about them
9.Competition – who and how threatening, what are differentiation factors. Remember that everyone has competition, even if it is just ‘the old way’ of doing something, and if you tell us that there isn’t any, you are unlikely to get funded. Include both direct and indirect competitors.
10.Barriers to Entry – how will other competitors be kept at bay
11.Financial Overview – top line revenues and expenses, EBITDA, two years back and four years out
12.Potential for Business/Use of Proceeds – where will our money take you
13.Capital Structure & Valuation – how much have you raised previously, who are your current investors, what are you looking for in this round, and how do you come to your suggested valuation
14.Summary – a review of your strongest features, narrowed to the five or six most important points, ending on a high note.
15.[Due Diligence Session info (we'll give you), and your Contact information] This should be included in the handout, but not necessarily in your presentationSince its inception in 1989, Venture Capital Advisor has devoted itself to the belief that clients come first. That has led us to create a business model designed to serve the needs – and achieve the goals – of our clients. This means that we are independent and conflict-free. We operate the firm with integrity, prudence and a view toward creating long-term value.

Call 860-350-4440 or 203-775-9999

We provide strategic solutions to complex corporate, financial or real estate problems. That might mean leveraging our extensive expertise to develop a creative financial solution to a specialized client need, or working through complex legal and capital considerations to arrive at the optimal capital structure in a restructuring or recapitalization.

If you would like to speak with a partner in our advisory practice please email us at tom@venturecapital-advisor.com\
Raising capital for small business can utilize SEC Regulation S, which would enable them to locate accredited investors using “General Solicitation/Advertising”. In addition, a small business can also utilize mailing lists and pay finders fees to non-broker dealers. A small business can also utilize Reg D to offer a private placement of securities to U.S. investors as well. By combining both a U.S. Private Placement Offering and a “foreign” Direct Public Offering, the small business has a broader chance of raising the required capital they need.
Regulation D Series

REG D 504 – Raise up to $1 million, unlimited number of non-accredited investors.
REG D 505 – Raise up to $5 million, unlimited number of accredited investors.
REG D 506 – Raise an unlimited amount, unlimited number of accredited investors.
Our Services Includes

Business formation (Selecting the right business entity – Corporation or Limited Liability Company)
Forming in the right State
Creating the right marketing tools for investors to review (Power Point Presentation, Information Banner)
Extended Executive Summary (8 to 15 pages)
Reg D Memorandum
Consultation & Coaching
Full Business Plan (Additional Fee)
Video Commercial (Additional Fee)

The Company additionally provides an e-mail service which notifies it’s investor database of your offering. It is recommended that 3 separate mailings be done over a 3 week period. This is an economical way to reach investors with your offering. All investors interested in your project will contact you directly.

Financial Assistance

Generally, to raise capital a company must register its stock or securities with the federal Securities and Exchange Commission (SEC), and with each state. Registration typically involves providing and obtaining approval from the federal and state governments for complex information about a company and its financing. Registration is time consuming and expensive. Most registration “exemptions” limit the number of investors, the dollar amount of the offering, and the manner in which money may be raised.

The most common exemption from registration is the private offering. Private offerings are generally sold through a legal disclosure document known as a private placement memorandum. Although private offerings are exempt from federal and state registration requirements, complex “notice” filing requirements still exist and many states further qualify a private offering. Finally, private offerings may not be sold by means of general advertising or solicitation. Normally a preexisting relationship between the company and the investor is required. Most entrepreneurs do not know enough qualified investors to finance a private offering. It is therefore easy to inadvertently turn a private offering into a public one, which then defeats the exemption and requires registration and/or return of investors’ money.

The SEC has created a “safe harbor” guideline to enable companies to stay within the private offering exemption. Regulation D (17 C.F.R. Sec. 230.500 et. seq.), Rule 506 allows a company to sell an unlimited dollar amount of securities to an unlimited number of “accredited” (generally wealthy investors and institutions, see Rule 501) investors, and to up to 35 nonaccredited investors. While Reg. D provides burdensome disclosure requirements for offerings over $7.5 million such as expensive and time consuming audited financial statements, these requirements are lessened if the offering is limited to accredited investors.

Reg. D offerings must still comply with state exemption filing and qualification requirements (“blue sky laws”). However, Rule 506 offerings are not subject to burdensome state qualifications, only to state notice filings and fee requirements. See 15 USC Sec. 77r.

For emerging as well as many established companies, the best way to raise capital is through a Reg. D, Rule 506, offering limited to accredited investors. The only remaining problem is Reg. D’s prohibition (see Rule 502) on Rule 506 offerings utilizing any form of “general solicitation or advertising”.

Of course, the questions are what is and what is not “general solicitation or advertising”, and whether or not it is possible to raise capital on the internet without violating this prohibition. A review of relevant SEC opinions on these matters is in order.

In H.B. Shaine & Co., Inc., No Action Letter dated May 1, 1987, the SEC staff indicated that the distribution by a securities dealer of questionnaires to prospective accredited investors to determine their suitability to participate in private offerings would not be a “general solicitation or advertisement”. This view was premised upon several factors, including the use of a generic questionnaire and upon the elapse of a sufficient period of time between the completion of the questionnaire and the contemplation or inception of any particular offering. 45 days has been held to be a “sufficient period of time”. See E.F. Hutton, SEC No-Action Letter (Dec. 3, 1985).

In IPONET, SEC No Action Letter (Division of Corporate Finance and Market Regulation Interpretive Letter dated July 26, 1996), the SEC staff indicated that a securities dealer and underwriter could distribute questionnaires to prospective accredited investors to determine their suitability to participate in private offerings, and that those investors may be invited to access a secured web-site to review private placement offerings not contemplated or commenced prior to the lapse of a sufficient period of time after completion of an investor’s questionnaire.

In SEC Interpretation: Use of Electronic Media (Securities Act Release No. 7856; Exchange Act Release No. 4278; Investment Company Release No. 24426-4/28/00), the SEC staff noted that “third party service providers who are neither registered broker-dealers nor affiliated with registered broker-dealers have established web-sites that generally invite prospective investors to qualify as accredited or sophisticated as a prelude to participation, on an access-restricted basis, in limited or private offerings transmitted on those web-site.” While the staff expressed some concern that certain sites have deviated from the format approved by IPONET, the staff went on to state that “the presence or absence of a general solicitation is always dependent on the facts and circumstances of each particular case” (citing and quoting Securities Act Rel. No. 6825-March 15, 1989, at n. 12 “the staff has never suggested, and it is not the case, that prior relationship is the only way to show the absence of a general solicitation”). The conclusion was that “a third party, other than a registered broker-dealer, could establish a ‘pre-existing, substantive relationship’ sufficient to avoid a ‘general solicitation’”. While it is permissible for these web-sites to accept a fee for their listing services, these sites may not act as broker-dealers by attempting to induce sales of the securities of others without being licensed to do so.

There are many web-sites purporting to match entrepreneurs with accredited investors. Some of these sites may be found at http://www..wall-street.com/vcpp.html. While it is legally permissible to sell securities to accredited investors through properly structured on-line services, most of these sites do not provide enough accredited investor leads to properly capitalize many private offerings. A conservative rule of thumb is to contact 1000 accredited investors to raise $25,000. Because most of these sites do not have 1000 accredited investors, it is difficult to raise the amount of money needed solely from these sites.

A more effective alternative involves the purchase or rental of voluminous “accredited investor lists”. However, the mere fact that solicitations are directed solely to accredited investors may be insufficient to prove that solicitations are limited if no safeguards are taken to ensure that non-accredited offerees are not solicited. See In re CGI Capital Inc. Securities Act Release No. 33-7904 (9/29/00) (“CGI Capital”). In CGI Capital, the company sent e-mail messages to several thousand potential investors (some of whom the company did not have preexisting relationships with) regarding a private placement offering. Prospective investors were provided a “password” to a restricted web-site which contained the offering. However, offerees were not restricted from forwarding the password to others, nor otherwise advised that the password was restricted. Neither were offerees required to verify their accredited investor status prior to viewing the offering on the web-site. The SEC found CGI Capital had engaged in a general solicitation and advertisement because of a combination of three factors: (1) The e-mail was sent to thousands of offerees, many of whom lacked preexisting relationships with the company or its agents; (2) Offerees were not required to verify their accredited investor status prior to viewing the offering on the web-site; (3) There were inadequate restrictions on accessing the offering on the web-site-i.e., the password was not restricted from being forwarded and offerees were not advised the password was restricted to personal use. While it is important that the SEC found the lack of preexisting relationships a factor in finding CGI Capital had engaged in general advertising and solicitation, it is important to remember that the presence or absence of a general solicitation is always dependent upon the facts and circumstances of a particular case. As already mentioned, the SEC “staff has never suggested, and it is not the case, that prior relationship is the only way to show the absence of a general solicitation.” See Securities Act Release No. 6825 (3/15/89 at n. 12.

Secured third party web-sites matching entrepreneurs with accredited investors, where the site has established preexisting relationships with accredited investors, is generally permissible. Use of large accredited investor lists, such as e-mails or direct mailings, would be appropriate if the list owner has established preexisting relationships with accredited investors. The stronger the relationships established the better. For example, buying or renting a list from a company of its existing accredited investor-shareholders is preferable to purchasing a list derived from public property records. However, preexisting relationships are not determinative. The other factors cited in CGI Capital should be heeded: (1) Prior to viewing the offering prospective investors should verify their accredited status; (2) Safeguards should be in place to ensure only those to whom the solicitation is sent are able to view the offering.

506D offerings have the advantages of allowing a company to raise an unlimited amount of funds without the headaches of registration or burdensome blue sky compliances (beyond notice filings and fees). By limiting investors to those who are “accredited”, burdensome disclosure requirements are greatly lessened. The problem has been compliance with the ban on “general solicitation and advertising”. In light of recent SEC releases, it is possible to target large accredited investor databases provided those databases were properly generated, prospective investors verify their accreditation prior to viewing the offering, and safeguards are in place to ensure those not solicited do not view the offering. Legal counsel is advisable not only to ensure compliance with 506D offering requirements, but to assist in maximizing the number of investors to whom an offering may legally be targeted.
WHAT IS A “REG S” FOREIGN DIRECT OFFERING AND HOW CAN IT HELP RAISE CAPITAL FOR MY BUSINESS?

The Regulation S Offering (Reg. S) is an exemption designed by the SEC for companies seeking to raise capital from investors located OUTSIDE of the United States.

CAN I SOLICIT CAPITAL FROM NON-U.S. INVESTORS THROUGH GENERAL ADVERTISING AND GENERAL SOLICITATION?

YES. Unlike the restrictions imposed by Regulation D, a U.S. company or any person acting on its behalf seeking to raise capital utilizing Regulation S exemption MAY:

• Use any form of non-US “general solicitation” or “general advertising”
• Use foreign investor direct mailing lists
• Pay non-U.S. finders fees
• Place tombstone ads in foreign magazines and newspapers

Our Fundraising FOREIGN STOCK OFFERING SOLUTION includes:

• Preparing a Foreign Private Placement Memorandum
• Preparing a Foreign Subscription Agreement with all Reg S disclaimers
• Preparing an Foreign Offering Circular
• Purchaser Qualifying Questionnaire prepared for non-U.S. investors
• Financial Spreadsheet
• Tracking Spreadsheet
• Designing a password-protected SEC compliant web page
• List of countries which permit the sale of private placement securities
• List of foreign newspapers and magazine publications
• Design a tombstone placement advertisement
• FREE LIST OF 5,000 potential NON-U.S. ACCREDITED INVESTORS
• Inclusion for one year in a foreign angel investors network
• Introduction to foreign placement agents and capital finders

FOREIGN STOCK OFFERING SOLUTION…………………….US $14,900