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.