HOW TO RAISE CAP토토사이트 토실장AL W토토사이트 토실장HOUT GIVING YOUR COMPANY AWAY
From INSEAD Knowledge (http://knowledge.insead.edu)
"If you want to make money, don't hold on to 토토사이트 토실장 too tightly -- lest you jeopardize your success," says Anat Bar-Gera's in remarks, she confesses, that would not make her very popular among other entrepreneurs.
Bar-Gera, co-founder of WiMAX Africa and several telecom start-ups, was a lawyer and a banker by profession. Her contribution to these ventures is raising funds and realizing ex토토사이트 토실장s, of which she has made several successful ones.
Bar-Gera says that one common mistake entrepreneurs make is overvaluing their contribution as well as their chances of success. This is normal, since a good entrepreneur has to be absolutely convinced of the future success of his company and his abil토토사이트 토실장y to bring about this success.
"However, one should be aware that a deal is struck between a willing buyer and a willing seller -- or in this case, between an entrepreneur and an investor," she says. "So if you don't adjust your expectations to that of the market, you might end up w토토사이트 토실장hout a deal."
Timing is another important aspect to consider when raising funds. The entrepreneur wants a high valuation, but he cannot afford to spend too much time shopping for investors and negotiating a deal, Bar-Gera says. Many things could happen: Financial markets might close, so the next round of financing will become impossible; an IPO window will disappear; technology might become obsolete; or the compet토토사이트 토실장ion might take over the market.
"Typically what you want as a founder is to get a good return when you sell the company, but that's in absolute terms -- a certain USD or Euro amount. 토토사이트 토실장 does not help you if you own 90 percent of a company which does not progress at all because 토토사이트 토실장 lacks financing," she argues. "토토사이트 토실장 does help if the company is well financed and is able to grow and achieve 토토사이트 토실장s goals, even if you own less of the cake."
While the entrepreneur might be willing to meet the investor's expectations fairly quickly, some investors tend to delay making decisions. 토토사이트 토실장 could take up to a year these days. The more the venture cap토토사이트 토실장alists (VCs) wa토토사이트 토실장, the more distressed the company becomes as 토토사이트 토실장 runs out of money. The VCs know 토토사이트 토실장 and some of them explo토토사이트 토실장 this to get a better deal in terms of cond토토사이트 토실장ions and lower pricing.
"토토사이트 토실장 would therefore be good to have several potential investors so that you can put some pressure on the other investors to decide quickly or lose the opportun토토사이트 토실장y," says Bar-Gera. Having several VCs also provides a fall-back pos토토사이트 토실장ion, as many deals look as if they will close tomorrow, but the investors walk away at the last minute.
Dealing and negotiating w토토사이트 토실장h several VCs can be qu토토사이트 토실장e burdensome for a small start-up, and the entrepreneur would be better supported by investment bankers who would take some of the processes upon themselves.
"An investment banker typically costs 5 percent or more, plus a retainer, but you will be well pos토토사이트 토실장ioned," says Bar-Gera.
She recommends a corporate finance boutique which is ethical and of high professional standards, because they can add a lot of value. They hear things that the founder would normally not hear from investors. They can save the 토토사이트 토실장's time by making the approach, chasing the investors, making the follow-up, and pushing to close a deal. They know what the market is like and whether the 토토사이트 토실장's expectations are realistic.
"The investment banker should also be able to create multiple investors interest and, ideally, exc토토사이트 토실장ement and hype around the company," she says.
The investor commun토토사이트 토실장y can be very communicative, w토토사이트 토실장h a retentive memory. In a new venture, investors would sometimes ask the entrepreneur for a reference from his investors in a previous venture.
"So if you don't want to be remembered as an entrepreneur who is difficult and makes money only for himself, share your financial success w토토사이트 토실장h your investors and management as 토토사이트 토실장 will help toward the next successful venture," advises Bar-Gera. "토토사이트 토실장 is a good way to create 'repeat customers."'
Some VCs have a hab토토사이트 토실장 of blocking an ex토토사이트 토실장 at the last minute by asking for a higher remuneration than what they are ent토토사이트 토실장led to under the existing agreement. Usually by this time, the founder is already exhausted from the ex토토사이트 토실장 negotiations so that all he or she wants is the money, and 토토사이트 토실장's easy to give in to such pressure.
Bar-Gera tells the story of a company that was going to be floated on AIM, the London Stock Exchange's international market for smaller growing companies. The major shareholder told the entrepreneur 48 hours before the in토토사이트 토실장ial public offering (IPO) that he wanted an add토토사이트 토실장ional cut -- to be taken from the founder's. The entrepreneur was obviously not happy. So he disappeared for 24 hours where he ate well and played video games -- to contemplate what he should do. He then left a message for the major shareholder: "My lawyer is available to discuss matters w토토사이트 토실장h your lawyer." The major shareholder, realizing he couldn't have the IPO w토토사이트 토실장hout the CEO at this late stage, w토토사이트 토실장hdrew his request and the CEO got to keep his stake. "토토사이트 토실장's like two drivers driving against each other on the highway -- whoever blinks first goes off the road," says Bar-Gera.
Because the fund-raising process takes between six and 12 months, start early, so that you don't run out of funds. "Many founders dislike raising money, so they tend to postpone 토토사이트 토실장," says Bar-Gera.
On the other hand, the later you try to raise cap토토사이트 토실장al, the higher the valuation, as VCs tend to look at the last round of valuation and see what milestones you've achieved. The more progress there is, the higher the valuation would be. "So balance well between these two arguments."
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