Some gentle advice for the Fall capital-raising season

The roads are busier, the weather has turned, a line-up has suddenly appeared at Jimmy The Greek’s for a morning Western sandwich. This can only mean one thing: the Fall business season is upon us.

We had a really good call yesterday regarding a new deal opportunity, and it struck me that there are some similarities to good first outings. The CEO and CFO of the would-be portfolio company were both on, and their experience in dealing with venture capital folks shone through. Herewith, are the few takeaways for everyone planning to raise capital this fall (not all of these lessons arose yesterday, btw):

– provide the financials and corporate overview in advance; you want people to have the chance to think about your business before you tell the story (see prior post “5 tools to make raising capital easier” Sept 3-08)
– ensure the forecast doesn’t project $1 billion of revenue four years out (do I have to mention this every time?)
– CEO does business and market overview, CFO does financial affairs, cap table, $ needs
– plan on 30-60 minutes for the intro call; no one has 90 minutes to hear a story for the first time, unless things are going so well that you’ve been asked 75 different questions
– don’t start off by asking about the fund’s background, who the limited partners are, etc.; that’ll either be relevant or it won’t be, but one has to assume that the call is happening ’cause the VC firm thinks their might be a fit “stage-wise”
– however, that doesn’t mean you shouldn’t ask about the fund’s process: that’s a polite angle to use to understand where you might stand, and how quickly the fund can move if it wanted to
– don’t belittle your current VCs, their funding situation, or commitment to the story (see prior post “Do’s and Don’ts of raising capital” Jan 14-08)
– propose a sensible timeline to the proposed capital raising process; fire drills suggest you’re either disorganized, there’s been a materially adverse event, or you’ve been turned down aplenty and have run out of time
– don’t start negotiating the deal terms
– keep track of which firms you’ve spoken to in the past: this can be handy 6-18 months later

The good news is that people are taking meetings and deals are closing. Customers are buying. Firms are growing. M&A is back on. VCs know this, and, from what we’ve seen, are ready to do business.

MRM