Finding Money Advice

No two business investors are alike in their interests, likes, dislikes, wants, needs, etc. In fact, there are some distinct differences between various types of investors. The Finding Money ebook Here are some insights into the nature of private investors, other companies, institutional venture capital, SBIC’s, and corporate venture capital.

Finding money from angels is very different than finding money from professional venture capitalists. Angels look for a product, service, company or entrepreneur with whom they can identify. They’ll invest because your deal tickles their fancy, and because they enjoy vicarious entrepreneurship. Many are genuinely looking to “do good” by bringing their capital and experience to the aid of a fledgling business.

In order to negotiate and structure deals with private business investors, you need to understand what makes them tick. Why are they in the deal? Are they out to do good? Do they want to earn big returns? Are they really turned on by your industry, product, or company? Are they lonely? Are they sharks waiting for you to make a mistake so they can own your company? Are they taken by the allure of entrepreneurship? Are they truly angels, with all of the knowledge and talent you need to help make it big? Before you negotiate a deal with a private investor, be sure you understand their motives.

When it comes time to close a deal, make sure the structure of your deal matches your investors’ needs. Don’t limit yourself to the run-of-the-mill money-for-equity approach; almost anything goes. These topics in the ebook including Pledge of a Certificate of Deposit, Purchase on Behalf of Company/Assignment of Receipts, Letter of Credit and Goods for Funds, Limited Partnership, Senior Debt plus Equity with Earnback, and Investment by Other Companies.

The institutional venture capital community is comprised of a variety of players including funds managed by venture capital partnerships, corporate venture capital, investment bankers, and Small Business Investment Corps (SBICss). The interests and motivations of each group differ depending on the nature of their source of funding. As with private business investors, it’s important to understand the motivations of those you choose to pursue. This understanding will not only help you determine which funds to approach, but it will also help you tailor your business plan, valuation, and negotiating strategy.

Private partnerships represent the bulk of the venture capital community. Typically, a handful of partners manage between $100-$200 Million of invested funds, although some funds grow as large a Billion dollars. The partners in these funds act as investment managers for the money they’ve raised from pension funds, corporations, foreign investors, insurance companies, trust funds, foundations, and wealthy individuals.

Most venture firms develop strong preferences for a certain industries, they have life stage (seed, start-up, second or third stage) preferences. Yes they’re explained in the ebook.

Companies like Apple, Dow Chemical, Ford, Johnson & Johnson, Matsushita, Walmart, and others have formed their own corporate venture capital programs to systematically invest in small companies for a variety of strategic reasons. Unlike traditional venture capitalists, the companies running these funds are primarily interested in incubating promising technologies, products, or services that complement their own. As a result, their return expectations may be lower than those of traditional venture capitalists.

Investment banking firms are broker/dealer firms, blessed by the SEC, that make their money helping companies go public. In order to enter on the ground floor of opportunities, some firms have established their own venture capital pools to help incubate companies they can later take public. The goals and interests of their fund’s management differs little from those of traditional venture capital firms.

Small Business Investment Corps (SBICs) leverage private money with federal dollars to establish their venture funds. SBIC’s and Special Small Business Investment Corps (SSBICs, which fund socially or economically disadvantages persons), are privately owned and operated; but they’re licensed, regulated, and in part, funded by the Small Business Administration.