Chapter 20 Capital Raising Presentation – The Rainmaker

CHAPTER 20

Capital Raising Presentation

Funding Steps

There are two steps to funding your concept, project, or company.

First, you must prepare a persuasive market-driven and investor-centered business plan. A well-documented and targeted plan is 50 percent to getting your loans.

Second, you must successfully present your plan to investors. Seeking financing requires courage; this endeavor is not for the weak, timid, or impulsive man or woman.

Proposal Evaluation

Whether you are seeking debt or equity financing, start by looking at bank managers, venture capitalists, or private investors as people who adhere to certain financing criteria and policies. And accept that they have set these policies up for specific reasons. One such reason is that they receive hundreds of requests weekly and have limited funds to invest. They are thus in control of the process, and many would see the situation in this manner: If I lose out on a great project, there will always be another 10 great projects tomorrow.

Consequently, these funders have a primary goal to quickly eliminate any request that seems to have the slightest flaw. This five-step evaluation process explains funders’ methodology:

Filter out requests according to their sphere of interest.

Screen out any request that doesn’t meet funders’ criteria.

Evaluate those requests that do meet criteria.

Select the top five requests.

Request meetings with the selected entrepreneurs.

Filter

The funder first sorts through business plans and quickly rejects proposals that don’t fit the established criteria. This rigid criterion defines their investment policy and usually concern the following:

Your location.

The industry you are involved in.

Whether you are targeting a niche market or a general business area.

The amount of money you require.

Poorly prepared or template plans.

Ninety percent of the proposals submitted to funders are rejected during the initial sorting phase. Basic templates with blanks to be filled in and other easily recognizable downloadable plans are promptly rejected.

Screen

The plan is next screened for management, feasibility, and product/services. The quality of the CEO, board of directors, and key personnel is a principle screening asset. The investor focuses on key factors such as competence and character issues of your team, capable management, and unquestioned integrity.

Evaluate

The evaluation phase is broad and subjective, and focuses on the market niche, financials, and technology.

The life cycle of the product or service is reviewed and analyzed. You will need a product line that will boost sales over a period of years.

Select

Lastly, funders take their time, though you may have little time. They often monitor an investment project for up to 6 months, and this timeline depends upon investment level, quality of documentation, and the complexity of the proposal.

In the real world, funders use your business plan as an indication of your professionalism and desire to succeed, both in terms of its preparation and presentation. After all, you are asking someone to place large funds in your hands. Keep this evaluation process in mind when preparing your plan.

Funding Stages

There are essentially five stages of project funding requirements. Each stage has specific funding needs.

Seed Capital

Seed capital enables you to pay for the initial evaluation of your business concept. As such, it enables you to pay for market analysis, due diligence, prototype analysis and development, and the preparation of a professional business plan.

Start-Up Capital

Funds are used to purchase fixed and variable assets that enable you to launch your business or product.

Two Rounds of Financing

Funding is required to expand the business into a more established company and then to finance growth into new products and regions. Funds are also used to expand marketing activities and manufacturing capability.

Working Capital Loans

These are funds acquired to gain market share.

Additional Information

It is always a good idea to have the following information ready, in case they are asked for:

List of fixed assets.

Updated asset appraisals.

Personal financial statements.

Company and personal credit reports.

Business and personal tax returns.

Articles of incorporation.

Copies of orders.

Customer, bank, and trade references.

Copies of patents, trademarks, or licenses

Presentation

General Guidelines

Take note of the following:

First impressions are critical and lasting.

Use color in the cover of your presentation.

Bind the material in such a way that allows for easy reading.

Each section should be easy to find.

Information must be concise, clear, and logical.

Use diagrams and tables where possible.

Support assumptions with research and statistics.

After developing a business plan, consider making visuals an integral part of your presentation to investors. Visuals are a dramatic way to present quantitative information in a condensed, easy-to-read form. Research shows that about half of us are verbally oriented and the other half are visually oriented.

As half of your funders would get their information from the narrative and the other half would get most of their information from visuals, it is necessary to cater to both types of investors.

Proposal visuals can consist of the following:

Lists

Tables and charts

Graphics and maps

Illustrations and drawings

Photographs

Visuals must be informative and convincing. The use of these tools will help you to accomplish the following:

Consolidate and focus critical information

Depict basic data graphically

Identify patterns

Facilitate analysis and evaluation

Add emphasis

Improve comprehension and retention

Management Illustrations

These illustrations are used to summarize data and present key points. Such visuals support conclusions in your narrative and are called technical. They usually appear in your exhibits or as attachments to your plan.

The guidelines for management visuals are as follows:

Keep them simple.

Make sure that the key point of each visual is clear.

Integrate visuals with narrative or oral presentation so that they work well together.

Eliminate immaterial information from your visuals.

Technical Visuals: These visuals let the investors draw their own conclusions. These visuals are usually complex and require special knowledge to understand them completely. Use technical visuals sparingly in your presentation. The guidelines for technical visuals are as follows:

Review symbols, abbreviations, and other conventions for accuracy and clarity.

Make sure your visuals are uncluttered.

Provide data to back up conclusions.

Use captions to help your investor interpret the data.

Schedule of assets.

Personal financial statements.

Credit report releases.

Business tax returns.

Personal tax returns.

Articles of incorporation.

Copies of orders or invoices.

Customer testimonials.

Trade references.

Banking references.

Title reports (equipment, real estate, etc.).

Asset appraisals.

Patents, trademarks, or licenses.

In Summary

Research tells us that an effective presentation has to fulfill the following guidelines:

8 percent words.

36 percent tone of voice.

56 percent appearance.

First impressions are lasting, so make a good one.

Use a colored product brochure as a cover.

Bind the material in such a way that allows for easy reading.

Tab each section for direct access.

Keep your information concise and to the point.

Pictures are worth a thousand words, so include good ones.

Support assumptions with facts, not more assumptions.

Rainmaker Observation: Your goal is to communicate information and emphasize the key points of your plan. So regardless of the specific technique used, make the focus of your visuals clear and easy to understand.