When it comes to raising capital, the clock has been reset back to pre-1995, times couldn't be more difficult for launching a
new high tech company. Anyone raising capital today is facing an increasingly difficult equity marketing problem with a
product called stock in a growing complex marketplace. Packaging the Equity Product with a qualified team of professionals
that leads to a more efficient Equity Sales Channel design.
First, the company needs to know whether or not it has a venture quality deal that meets today's new standards.
This assessment is based on the current deal flow from the Silicon Valley investor's perspective, not the CEO's.
Experienced entrepreneurs know that obtaining high quality, relevant feedback from VCs is very difficult,
since this can be very time consuming and requires analysis. VCs are not willing to invest resources or time until
they've decided totake a closer look, leaving the entrepreneur on their own to determine how to fix their own deal.
Fundamentally, VCs are not in the feedback or training business.
Second, finding high quality professionals is expensive, time consuming and runs the risk of dispersion of confidential info. If the deal is not quite ready, the company needs to be directed to professionals who are in the VC's network that can add substantial value.
Developing companies in the Information Age requires most importantly, a trusted network of experienced venture professionals to
assist in generating a top quality venture package and business case. For example, it is not enough to have a CPA develop your
financial model. The professionally developed deal is financially engineered with contributions from domain experts in
virtually all aspects of the venture design process which is recorded in the model. Best practices vary widely and CEOs can
unwittingly pay for "services" that take away more value than is added.
Third, developing a channel map to the money is the CEO's next greatest challenge that is expensive, time consuming and runs the risk of dispersion of confidential info. CEOs armed with a great venture package, still face an inefficient capital market that adds new investors everyday. The company needs to design an efficient path to best-fit investors, while observing the VC Golden Rules, which include not overshopping the deal.
This process requires acute insight and strategic direction to be performed on time and under budget. There are more sources and doorways than ever before, but fewer investors who must be contacted with a particular approach. Structuring a capital raising plan to reach sophisticated investors is a very complex process that involves strategy, research, well placed introductions, and careful choreography through closing.
For first timers, this is an arduous process, that often grinds the company to a halt in its never-ending search for capital. For experienced CEOs, recent C round financings have easily taken 6 months with depressed valuations. Process and strategic knowledge matters more than ever before.
The Ultimate Test of the CEO
Success depends on the ability of the CEO to learn the process, find the right gatekeeper, to provide trusted personal introductions to the right investor, with the right story before cash runs out. The best investors only have time to hear the story once - so it needs to be perfect. They don't take kindly to others selling the deal either.
"It's an Intelligence Problem"
Accurate market intelligence is mandatory. Selling to the wrong investor can cost valuable time-to-market, or other competitive advantages that the company may have spent months developing and result in grave consequences. CEOs who do not properly execute equity marketing do so at the company's peril. Investors do not respond to randomly targeted (i.e. 'spammed deals').
Success depends on intensely accurate relevance and alignment to the investor's fund strategy objectives. CEOs need to quickly learn what to ask, where to find it, how to acquire the intelligence that creates unfair advantages wherever possible.
The rules of the game have changed. Markets are more complex and the stakes are higher than ever. Shareholders place their trust in the CEO who knows the process, stays on top of the changes in the rules, and navigates to success. Those who don't, are soon out of a job.