Capital Formation Plan

Are You Ready to Raise Capital?

Really, Really Ready? • Can you handle the responsibilities?

– Fiduciary. – Ethical and moral. – Legal and psychological.

• Can you be: – Transparent, attentive, responsive, respectful?

• Will you be accountable for: – Mistakes in judgment? – Errors in decision-making?

Engaging Seed/Early Stage Investors • Less than $5 M of investment. • Promising concept. • Validated by early customers. • Not yet at cash-flow break even. • Typically, angels or seed stage VCs provide

this type of capital. • May not invest outside of geographic area. • Take an active role in the company.

Growth and Late Stage • $5M - $100M+ investment amount. • Private placements, angels, super angels,

institutional venture capital, lenders, venture leasing companies, joint ventures, corporate venture funds, SBIC’s, minority enterprise investment companies.

• Depends on rate and method of growth.

When to Engage Later Stage Investors • Growth stage:

– Proven business model. – Profitable or on the path to sustainable profits. – Market penetration. – $5M - $20M investment range.

• Late Stage: – Mature and profitable companies. – Strategic initiatives. – $10M - $100M+ investment.

Ready To Raise Capital – Summary • Before you engage investors, it is critical

that you understand what responsibilities you are taking on.

• Knowing the various stages of fund raising can make the difference between success and failure.

• Don’t make the mistake of engaging investors before you can demonstrate that you meet their criteria.