Advice For Raising Capital
By The Business Solutions Network
Unless you’re a lifestyle VAR happy to chug along with a modest business, you’ve probably at one time or another thought about raising capital to help your business reach the next level. Business Solutions recently held a Webinar on the topic of raising capital. While the guests were ISVs, the information they gave applies to any company looking for investors.
At one point in the Webinar, the panelists discussed some of the differences in working with VCs and angel investors. Joe Snell, Founder and CEO at TableSafe, said he currently has 73 angel investors. To achieve that many investors he had to meet with hundreds of potentials. In fact, he said that his close rate is about 1 in 12 meetings. “With angels, it’s often a numbers game,” he says. “You need to work your tail off.” He went on to say that, unlike VC whose business is investing, he feels personally responsible to work hard for the investors. “I can talk for 10 to 15 minutes about each of our investors because I’ve gotten to know them personally,” he says. “These are normal people depending on me to make them a profit. I find that highly motivating.”
Dan Chandre, SVP Strategic Partnerships, Booker Software says that working with VCs is very different than working with Angels. “VC is a business and they see pitches all the time,” he says. “These people have a narrow view of what an opportunity looks like. At times, working with VCs can feel like there’s less passion because it’s all about metrics.” He goes on to say that VCs have such narrow margins for success and if you’re not in range, the conversation doesn’t start. If your numbers are close, you’d better have a way to correct it.
Snell warned that there are an alarming number of investors who make commitments, but when push comes to shove, don’t give the second round they committed to without applying pressure and gaining large control. “There are some great firms out there, but there are also some sharks who will try to apply pressure when you need money most by changing what you originally agreed to,” he says. “Take time to look at references to find someone who makes commitments and follows through.”
In addition to talking about the different types of investors, the panelists on the Webinar also shared some best practices in raising capital. Steve McKean, VP of channel programs, TableSafe cautioned not to fall in love with your idea to the point that it clouds your judgement. “Understand if you have a ‘nice-to-have’ or ‘must-have’ product,” he says. “‘Must-have’ will give clearer path to success.”
Dan Chandre, SVP Strategic Partnerships, Booker Software, says that an idea by itself doesn’t get well-funded without a good model. “If you can’t show a trajectory toward sustainable growth, revenue, and good metrics, you won’t get to a second level conversation,” he says. “It’s great to have an idea. It’s great to be doing something with it. But unless you have a model that shows how to get somewhere, you won’t get the money.”
Tom Bronson, CEO, Granbury Restaurant Solutions, added that when you’re ready to seek funding, you need to know how much you need and what you’re going to use it for. Then, you need to be able to create a simple but succinct business plan that includes a very clear use of funds. “Investors want to know what their exit strategy is,” he says.
The above is just a sample of the amazing content shared on this Webinar. The guests were candid and shared very detailed information. If you’re even slightly interested in raising capital, you should listen to the full Webinar, available on demand at http://www.bsminfo.com/doc/isv-iq-webinar-series-part-raising-capital-0001.