Lets talk Venture Capital and Private Investors for your project…

Frequently, we get news from the media that the next big bank or lender is going to stumble and fall. Today the rumor is CIT, a Commercial Lender who reports $76 billion in assets and has been in business since 1908. The rumor began as CIT started trading in the bond market as if it may fail. So the question is, who is going to lend to a "Start-Up" Business when the biggest banks in our country are failing at a record pace?

Sure it’s rough out there in the lending market…but not impossible. You have a great idea, but who will listen to your pitch and what is the best way to present that great idea?

From what we see at CMI Capital Group, your best bet for funding is the following:

TEAM

Your idea is only as strong as your TEAM. The Principals and the team members must be the very best qualified in your field. You may have a great vision or perhaps a great solution to a big problem, but if you don’t have the team with the skills to execute your vision, it simply will not get funded. Most investors feel if you have a great idea, chances are there are a dozen other people working on that same idea. Why you? Why your team? In other words, everyone can ride a bicycle…but can everyone ride a bike, stand on their head and pedal with their hands? You need to be a STAND OUT to get noticed and having the very Best Team is the best way to start. Keep in mind…your idea may be great, but what you are really selling is the PEOPLE and the investor’s question will be, can those people pull it off successfully.

BUSINESS PLAN

A good business plan should be 25-30 pages long. Keep the technical 'mumble jumble' on the last page or use foot notes. Make it understandable for a novice to read your Business Plan. Any investor who accepts your idea and invites you to the next level will have his "Due Diligence" done by experts in the field. Unless, your investor is a scientist or computer geek he just won’t get it. He can certainly read your Bio and know you have the credentials…just don’t try to impress him with your smarts…be a human first. Better yet, include a 1-3 page Executive Summary with all of the nuts and bolts of your plan simply laid out in an orderly review….neat, tidy and easy to read. There is a lot of "on-line" help for drafting business plans and if you can afford it hire a professional consultant to assist you with your plan.

BIOS

Biography for all principals and team members is a must. Individual Bios with the proper background, knowledge, past experience and past successes will set the pace for the investor to realize you chose the very best individuals to be a part of your well-thought out team.

THE PITCH

When you meet your investor you only get one chance, so it better be good. You need to be well-rehearsed, but again be yourself, friendly and professional. Always be prepared for a "30-second" Elevator Pitch…you could meet your future investor on a bus, out to dinner or in a hotel lobby.

At a recent conference a Venture Capitalist shared what he considered key advice when meeting a new entrepreneur.

1. Do your due diligence and research on your future investor. Know him, his firm and what kind of companies he likes to invest in.

2. Prove that you got what it takes to make it in a tough market. Give the best possible presentation you can. Communicate with enthusiasm and passion. As a communicator, stand out, sell yourself – not just your idea, and make a Human Connection.

After your presentation your investor may say, "So what"? Be prepared to have a swift and good reply. Next he may say, "Who cares"? Again, stay with him…prepare to be at your level sharpest. If he is still with you…then you may have just found yourself an investor.

EXIT STRATEGY

When the enthusiasm is at its highest level for a new Business Plan the last thing anyone wants to think of is their "Exit Strategy". However, any investor considering your new venture will want to know your focus on the return of their investment.

What if this great idea doesn’t work? What’s your plan B? How are you going to pay the debt? When will you repay the debt? Ultimately, this will be designed into the client’s exit strategy—the method by which they will pay off the debt or equity position. The most traditional method of the exit is utilizing the company’s cash flow, based upon their operations, to pay down the debt over time. Alternatively, the client can pay off in a lump sum. Typically this is achieved by a public offering of stocks, a sell-off of assets, or other actions which result in a large flow of revenue. Client’s need to be aware that many investors will have a timeline in which they expect to be in the relationship--this will be secured by either prepayment penalties, contractual obligations, or other requirements. Clients’ should expect at least a five-year commitment.

I hope this review helps new entrepreneurs with some sound advice to get started in their new venture! We welcome your comments.

Meet Our New Summer Intern: Emily Thompson

Emily Thompson - Intern Extraordinare!

You may be wondering who the new pleasant voice belongs to when you call our office? Well...let me introduce you to our new summer intern, Emily Thompson, from the University of Illinois in Champaign, IL. Emily is an accounting major and is wonderfully talented. We love her sweet disposition and determined work ethic. We have our fingers crossed that she will want to join our CMI team when she graduates in 2010. I am not quite sure if she loves the Florida summer heat (really warm!), but we are grateful she is here. We love you, Em!

Please feel free to send her a friendly hello at ethompson@cmicapitalgroup.com.

Not All Bad News is Bad News for Everyone...

An alarming article written by David Enrich and Gregory Zuckerman in the Wall Street Journal stunned the financial industry today with their announcement that 3 large banks (originally chosen by the US Treasury Department as strong banks in late fall 2008) could no longer repay their debt to the government . As a matter of fact, one of those banks, Pacific Capital Bankcorp of Santa Barbara, California, has posted a net loss of $49.7M. This is after receiving $180.6 Million in late fall or early December 2008.


The cash-strapped banks the Wall Street Journal refers to are:
· Pacific Capital Bankcorp – Santa Barbara, California (original loan $180.6M)
· Midwest Banc Holdings – Melrose, IL (original loan $84.8M)
· Seacoast Banking Corporation – Stuart, FL (original loan $50M)


$200 Billion in total went to 600 banks across the US by the TARP’s Capital Purchase Program in the months of October, November, and December 2008; and similar to the automotive industry...it only bought them more time. The concern flooding every financial site today is the possibility that many more will follow suit. Additional alarmist fear more credit tightening in an already stagnant credit market.

CMI answers those concerns with the following question: Really? Does someone know of any bank lending money right now?

We are grateful to our dedicated research team for firming up relationships with lenders and investors outside the banking world. I suppose some banks have allowed a few government backed products…such as the SBA loan. That is of course if your client doesn’t mind completing the 70+page application and the 120-160 day waiting period to see if the loan is rejected or approved (and most likely rejected)…and if approved, everything but the client’s last born child will have a lien against it. Under those circumstances, then I guess some banks may be lending - but not many.

It all sounded good when banks were receiving funds to ease up the credit crisis, but the reality is those banks are still strapped with troubled delinquent loans in residential and commercial markets. The commercial market has not hit its all time low according to most reports. Two years ago absolutely no one expected the Commercial Industry to run into trouble. I remember the highly respected Deutsche Bank "conference call" less than two years ago; set up specifically to steady concerns regarding Commercial Paper and the possibility of it following the same road as the Sub-Prime mortgage market. “Not going to happen,” was the response from their experts quoting, "LTV, cash flow, and debt service strengths". No one predicted our current crisis in respect to Commercial Paper…No One.

In the world of Financial Analysts, Consultants, Commercial Brokers, and Investment Bankers, this is the time to take advantage and work diligently with the few streams of revenue sources that you now have. It was announced yesterday, that new Hedge Funds are reopening every day with big backers…including the Roc backed by Deutsche Bank to open in July-2009. We all need to be more creative and appreciate every funding source we have!

It is our opportunity; use it wisely.