Category Equity Financing

Need Funding? Here’s How to Catch an Investor’s Eye

Having sat on both sides of the desk as an investor over the past 20 years and as a capital seeker as well, I could tell you, there is some eye catchers that are going to pop out at you and really grab your attention versus those are the deals that are going in the to-do file.

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What is Equity Financing?

Equity capital generally is composed of funds that are raised by a business in exchange for an ownership interest in your company. This interest can be in the form of ownership of common or preferred stock or instruments that convert into stock. In addition to taking an ownership interest in your company, equity investors may also participate as a member of the company’s board of directors and take an active role in managing your company. However, in comparison to debt financing, which must be repaid over time, equity financing does not have to be repaid.

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Valuation

When you do a financing deal based on equity, you will need to come to a landing on a valuation for your company. This can be hard because there is no exact science to valuing early stage companies. In this article, I will illustrate how investors look at valuation and why it is important in realizing their investment objectives.

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The KPIs of Raising Capital

The best tool that we have found for managing business partners, joint ventures, and team members are Key Performance Indicators (KPIs). A KPI is a measure of an action or activity which lets you know if work is getting done, if that work is leading to results, and what the yield is on the time invested in that activity.

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Why Investors Aren’t Calling You Back

Entrepreneurs are constantly befuddled by how an investor would choose one deal over another to review or invest in. The refrain pretty much looks like this:

“What?! How can that investor possibly invest in {Insert Undeserving Name} when my company is far more attractive?”

The truth is there are lots of potential reasons for these decisions, but it’s important to understand what the landscape looks like, and how your deal stacks up to others.

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When to say “no” to investors!

You may think that when someone offers you money to fund your startup, you should find a way to take their money. But even more important than landing an investment offer is knowing when to say yes to investors and when to say, “Thanks, but no thanks.”

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