How To Raise Capital

MAY 12, 2011 BY GEORGE LOVATO JR
Not everyone is familiar with how to raise capital. There is an art as well as a science. Most entrepreneurs travel blindly down the Obstacle Course seeking capital from mostly inappropriate sources and thus wasting time. You hire a lawyer to handle matters you know little or nothing about. Your accountant is your wing man at tax time or when you need to prepare financial statements. You hire expert sales professionals when you need to move your product or service. You in essence build a team. The same goes for raising capital. You must hire the experts that know and can teach you how to play in this arena.
Do Your Due Diligence

Most recently I reviewed a website that cautioned the reader about the multitude of scammers and scoundrels called “Money Finders”. Indeed there are more good guys than bad in the industry. I have had my share of dealing with the bad guys time and again. I still can be fooled by the guy with the good story and persuasive manner. But for the most part I can spot the bad guys sooner than later. It is important to look at all aspects of the history of the person you are considering hiring to assist you. Not everyone is who they represent who they are. There are however some very good professionals in the game. You just have to do your due diligence.
Recently I had a fellow contact me saying all he needed was a loan and he would supply the collateral and he had plenty of it for other uses if needed. Well the US Treasury Bonds he was using as collateral were bogus. I found the fellow to be full of BS. The government was even on his tail as well as a host of others so take a look at this . Pay special attention to the “SR letter 02-13” link in the article. It is full of information about other scams out there.
You Need Experts

But back to the point; you need experts and a team to form capital. Your job is to run the business of the business. By spending an inordinate amount of time trying to find the right sources, pitching your request and scanning the horizon for anyone who will listen to you, your business will suffer. You need to deal with the good guys. You need team members that can assist you in attempting to accomplish your goals.
Try, Try and Try Again

And another important point. You may not be successful in raising the capital you seek. Not every capital formation project is successful. You may have a poorly structured transaction. Your timing in the market place may be ill timed. Your business may not have the capacity to borrow or the valuation of the company may be too far reaching. Albeit the team members may be able to assist you in avoiding some of these speed bumps but not every request gets filled just because you gave it your all. Sometimes it is just not meant to be. Rare but it does happen. Remember to try, try and try again. As you will see in my first book it took five tries to get to the finish line.
Find The Good Guys and Add Them to Your Team

About that website I mentioned earlier? Well I found the site to be well done. The site owner talked about how you never should pay “up-front fees” and that anyone who asked for them was a scammer. But he too had a product to sell and it was a two hour call. Unique and I would assume useful as long as the advice you received during the $149 call to be useful. At least what he was selling was advice over a very short call and not a business plan or a software package. His point is that he was giving advice and that is what I am saying in this blog. You need advisors, and good advice costs money. Sometimes you need access to contacts you do not possess. That too costs time and money. The fact is building a team takes time and money. No professional worth his salt works for free. Remember the lawyer you paid the retainer to? The same goes for the corporate finance professional that knows his way around and how to navigate the Obstacle Course. Find the good guys and add them to your team. When you are raising capital it is “People before projects!” as I say.