Strong financial planning and well-prepared business plans are absolutely necessary to attract capital to realize a company's potential. This section includes brief discussions on the some types and sources of financing.
The process of capital sourcing can be a time-consuming, frustrating and confusing experience. A major phase is the proper assessment of appropriate capital sources identified by creation of appropriate capital structures. Venture Associates brings several decades of financing experience to its clients in capital formation and assessing appropriate capital markets.The secret in obtaining capital is to engage in "financial market planning." This is a process where a distinct marketing plan is developed to market a company's financing plan.
Without a doubt, family and friends is the most common form of financing for start ups, and the most accessible for small enterprises. Friends and family investments provide more than ten times the total amount of traditional venture capital monies. Friends and family financing is also the most common financing method for early stage companies that need to boost performance or enhance balance sheets prior to obtaining more formal secondary money. However, the pitfalls are many.
The most common mistake made by entrepreneurs using family and friends hard earned dollars to launch their enterprises is "over-valuation." This is where the total valuation of the company far exceeds the practical, substantiated and earnings or grow justified value of the young enterprise. There are thousands of horror stories about later round squash-downs, not to mention secondary financing turn-downs because of mis-valuation mistakes.
Venture Associates has been there many, many times. We guide family and friends financing structuring efforts to establishing realistic valuations and incentive clauses that will assist and not deter a company's financing efforts.
Traditional debt can encompass many different forms. Banks or other commercial lending organizations are the most commonly thought of. However, there are dozens of others that may be appropriate for your company. These can include: SBA, SBIR or other forms of government assisted organizations. Debt can be obtained in multiple forms such as short- or long-term, convertible, subordinated, lines of credit, venture capital leasing and many combinations, some with equity type kickers.
Asset based lending is commonly described as lending where a company's fixed or renewable assets are used as security for loans. This form of financing has gained in popularity and acceptance in recent years. There are more lenders, including banks, which have developed expertise and knowledge in this specialized financing area. Used most frequently by existing companies with larger fixed asset bases, asset based lending is now expanding to companies with solid receivables and rapidly turning inventories.
This catch-all financing category includes some well know areas such as factoring and receivable financing as well as some seldom used areas such as credit cards, credit enhancement, trade credit and off-balance sheet financing. Many companies lack experience in the intricacies of taping into both debt and equity alternative financing. However, these sometimes though of as "exotic forms" of financing have numerous rewarding applications.
Other capital formation services might include:
Securing venture capital can be a long and difficult task that requires a great deal of perseverance and patience. Traditional venture capital sources are becoming a thing of the past. Venture capital today has gone "boutique". Hundreds of competitive sources are available for the companies that qualify. Venture Associates has many years of experience and resources that prove invaluable in assisting companies in structuring, preparing for, seeking and securing venture capital. For more information on venture capital, see
Venture Capital Explained
Often thought of as the ultimate reward for successful entrepreneurs, taking ones company public is usually a once-in-a-life-time experience. It requires a highly qualified team of
professionals to bring it off successfully and timing and preparation are two keys to success.
Venture Associates has many years of experience involving over fifty initial public
offerings. We advise companies with early stage consideration, corporate structure, broker identification and selection, and aftermarket investor relation tactics. For more information, click Going Public.
For more information on taking a company public via a reverse merger, click Reverse Mergers
(James B. Arkebauer is the author of the book Going Public Everything You Need to know to Take Your Company Public, Including Internet Direct Public Offerings (DPOs) - Dearborn Financial Publishing)