Funding

To obtain funding for your private venture (distinct from funding through existing partners, corporate sponsors or through a public offering), consider the following

Is your company far enough along to attract private investment from individuals or institutional investors (venture capital funds, banks, or corporate investors)?  Are you ready for outside capital?  Here is a quick self-assessment.  These are some of the questions you'll need to ask yourself and may help focus areas you need to address or immediate next steps:

a) Is the management team intact, nearly complete and with a solid track record in raising money for past ventures and/or your main focus industry?  

b) If early stage, do you have a business plan?  Does it make a compelling case for your products or services?  Can you express this "crying need" or "market pain" in 30 seconds or less?

c) Have you worked out the development budget and summarized the use of funds? What would you do with the capital if you had it in hand?  If offering to sell an equity interest or take on debt, what are the structures and terms of the offer?  Do you plan to retain majority interest (that is, 50% or more of the control)?  If so, how can you de-risk the investment for prospective partners?  What is their likely exit?

d) Have you identified your ideal investor partners?  Are your funding requirements and situation in line with what investors are likely to consider fair valuation?  What are the main risks and potential upsides for investors?  Does this fit with the risk/reward criteria of these target investors?  How do you know?

e) How will you reach and present your situation to prospective investors?  Do you have a way to reach them and knowledge of how they prefer to learn about your deal?

TAKE OUR FUNDRAISING QUIZ
You can also rate your present situation for each of the above areas on a scale from 0-5 points, with 5 as the highest. (0=nada, not at all a strength; 5=nirvana... couldn't be better.) 

Intepreting Your Score:  If you end up with a total of 15 points or more (top scores in 3 of 5 areas or at least 3 points for all 5 areas), and your venture is in a reputable and attractive space, you're probably positioned well enough to pursue outside funding. 

If not, your options are probably some combination of these three:

(1) Consider coaching or consulting assistance from us if you are working in the BioRenewables space

(2) Alternative funding and bootstrapping:
(a) Apply for and obtain grants from one or more sources
(b) Attract one or more angel investors that are willing to act more like philanthropists; that is, provide some "risk capital" with little or no expectations for return (warning:  these folks are a rare breed) 
(c) Fund the venture yourself through some combination of working equity partners and passive insiders -- founders, family, friends (3Fs) -- until ready for outside funding, if still required at that stage.  This is also a form of "bootstrapping" ... using what capital is at hand, demonstrating founder commitment. 
 
(3) If your funding requirements are now too great for grants, philanthropic angels (a rare breed) or 3F's, is your venture actually INVESTABLE?

Circle back to the earlier list of five key factors that private investors use to evaluate a venture's investibility; these center on accurately pinpointing risk/reward.  Your fundraising mission, should you choose to accept it (or persist in the efforts already under way) is to refine your plan and polish your presentation to help others rapidly pinpoint this risk/reward equation.  It isn't just about balancing risk vs. reward, as the conventional wisdom misses the boat:  if you do not focus on clarifying this equation, balanced or not, you lose your audience.  Few investors nowadays will sit through a lengthy pitch session that does not speak to this, their true interests.  Professional and sophisticated investors are usually quite willing to learn if you speak to what they want to learn -- risk and reward.

We hear some of you thinking "What!? Are you insane?  Disclose risks and potential downsides on the first date?!"  True, attactomg investor partners is somewhat akin to dating ... a numbers game with difficult odds, subject to false starts and first impressions that are terrifically difficult to recover from.  So, except for the rare contingent of unconcerned and/or wildy speculative investors (sluts, dreamers and desperados), we are indeed suggesting that you spill more than the beans as soon as possible.  "But," we hear your insistence, "isn't that tantamount to announcing to a new romantic interest that, despite your magnficent appearance (attractive exterior, promising future plans, etc.), that you have, perhaps, just a few screws loose, you sometimes bite, you are prone to off-color (certainly not green) remarks, temper tantrums, unplanned vacations, ... or worse, ... that you need money because, well, you don't have enough money?!" 

Yes, I suppose that's what we are indeed suggesting.  And yes, that's why skillful presentation can be so important.  You certainly don't want to blurt out "I bite!" until you know what (or whom) you may be sinking your teeth into.

(4) If your "deal" is ready or already known to be investable, here is a handy checklist of factors to consider before you contact the (next) wave of prospective investor partners: