Wednesday, November 08, 2006

Will you ever, ever, EVER raise investment capital?

This past week, I've spoken to a handful of entrepreneurs who are trying to raise capital for the wrong reason: to avoid death.

It's unfortunate, because each of them are good companies with great business models. The CEOs simply got so busy running their businesses that they didn't start raising money until they were nearly out. Now they are raising money with absolutely no BATNA (best alternative to a negotiated agreement) to bring to the negotiation table. As soon as an investor gives them an offer, they'll have nothing to fall back on and are therefore much more likely to accept less than favorable terms.

Every entrepreneur should ask herself if she will EVER raise investment capital -- in six months, seven months, a year, two years, whenever.

If raising money is in your future, start talking to investors now and (prepare for shameless plug) subscribe to FundingUniverse's AngelReady Subscription to learn everything you can about raising angel capital. A combination of know-how, relationships, and (most importantly) execution on your business model will make you an attractive copmpany. Starting the process when you have plenty of ramp time ahead of you will also give you the ability to walk away from unattractive terms without risking death.

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