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Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250 http://capitalmatchpoint.com

When you raise money for your company as an entrepreneur or capital seeker, you are going to find that there are many legal and financial vehicles that can be employed that will balance the needs of the individual and mutual concerns. In this part we're going to discuss the mutual needs. And again you should have retained a good securities attorney at this stage and additionally this is a part where you're going to need a good solid CPA or accountant to get guidance on what suits your needs best as well as the mutual needs. We can offer some more  ideas here as well with regard to the mutual needs.  This part you're going to have some help because the investor is working with you be it private equity, a venture capital firm or an angel investor. We are going to be looking at both parties coming out with the best possible scenario here, so one of the things is retention of the key management. You've got to consider this very carefully. What does your management structure look like now? Are you looking for key people? A lot of times you're going to find that the capital provider is in a position to provide resources in the form of management for you through their experience in dealing with many, many companies. Another thing is the composition of the board of directors. Ultimately you’re probably going to see a representative of your capital source on your board of directors and I would welcome that, there’s some valuable insights that you’re going to be able to get from that. Another thing is governance documents. When you get into this stage and you’re at a term sheet, you’re going to be establishing some guidelines that may be a little bit more than what you started out with previous to the funding. This provides a forum for making decisions, changing things that may have been established, and resolving any conflicts between the investor’s wishes or needs or wants and yours. So this is one that you want to take very slowly and carefully. Now another item that is a mutual need in the term sheet would deal with the health of the post funded company. In other words after the funds are in there should be mutually agreed upon uses of proceeds and governance documents are put into place to look at expenditures, investments, ratios. The investor is going to want to check up and see that those funds are being put to use in the places that were agreed to mutually. Additionally some of the items under that would be things like the tax consequences of the investments that are being made and the expenditures that are being made. For example, expenditures on payroll have ultimately some tax consequences, whereas expenditures in other areas may have some tax benefits.

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Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250, http://capitalmatchpoint.com

 This is part 2 of a 3-part series where we’re going to talk a little bit more about term sheets. In this section we’re going to discuss the needs of the investor with regard to the term sheet. Now, the structure of capital transactions such as those that would involve private equity or even angel investors are more reflective of the needs and the preferences of the parties involved. So you are going to see a lot of differences between term sheets and you should have at this point already consulted with and retained a good securities attorney to get guidance on which suits you best. From the investor’s perspective, his needs are pretty clear. First and foremost is return on investment is what he’s thinking about so you’ll see various different items addressing what his expectations are. Also the risk level that the investor is taking, you’ll find some mitigators in there as well. Liquidity is a big concern as well so regardless of what structure you’re going with look for clauses that are going to address his rights to liquidity. Now your company’s valuation at exit, there may be a benchmark set for that. And here is one that you’ll definitely see, the investor rights. In the event you are headed for a market liquidity event such as an IPO, the investor’s going to want to be first in line to some extent, so look for that. The level of participation in the management of the company; think about this, having been on both sides of the table for many years, I can tell you that as an entrepreneur we tend not to want to give up control. Plan on giving some up. You’ve got to cede some of your control in exchange for investment, whether it be a seat on the board of directors or a voting right, you will be bringing in a partner of sorts and these are your financial partners. The next item is rights in future rounds of financing. Typically an investor gets in with a company and you meet your benchmarks, they’re going top want to be there for you and do what they do best which is financing, so look for language on that. And opportunities to provide future rounds of financing are easier for the investor group so you’ll see language on that.

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Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250, http://capitalmatchpoint.com

I'd like to talk a little about term sheets. A term sheet is a document written early on between the entrepreneur and funding source such as venture capital firm or angel investor.  The term sheet is much like a letter of intent, in that it is pre-cursor to due diligence but with more detailed information about terms of financing and rights and privileges.

Term sheets are non-binding except for confidentiality and exclusivity in negotiation.  Nevertheless, the term sheet is complex and should be negotiated vigorously before signing as it is difficult to materially change during the construction and negotiation of the final agreement.

The structure of capital transactions such as those that involve venture or angel capital are less dependent on boiler plate stipulations and more reflective of the needs and preferences of the parties involved.  Many legal and financial vehicles can be employed to balance the needs of both parties individual and mutual concerns.  You should consult your attorney to get guidance on which suits you best.  However, we can offer some food for thought when considering a term sheet.

Your personal needs:

Capital

Maintain Control of Company

Dilution of personal stock

Stock re-purchase in the event of retirement or termination as manager

Operational support and guidance that investor can offer-now many of us as entrepreneurs, and having been on both sides of the table, don't like to surrender too much control. Be careful what you give up as far as guidance and investor control-they are all going to want to have some role as to the future of the company so be prepared for that and govern yourself accordingly. If you have any questions about dealing with term sheets, just give us a call at The Capital Matchpoint. We deal with these all the time and will be happy to guide you through.

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Hosted by Dave Dambro, EVP, The Capital Matchpoint, http://capitalmatchpoint.com

770-433-8250

Okay, so you have spent countless hours building the best business plan you know how; maybe even 100 or 200 hours researching and compiling information into a presentation. But, I have to tell you something. There really is no perfect business plan. So, during a presentation, here is a strategy you want to adopt. You want to highlight the strengths of the company and you want to down play, but acknowledge and make the investor aware, of any weaknesses that you perceive in the company. Have a compensating strategy for them too. Now, a good example would be, you have a good business. It is in a great growth industry. You have stellar management, but maybe you are a little weak on the financials. Well, it is your job now to make the investor impressed with your strengths.

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 Hosted by Dave Dambro, The Capital MatchPoint, http://capitalmatchpoint.com

 770.433.8250...I would like to address the subject of competitive advantage. For those of you seeking capital out there, you need to know if you have a competitive advantage and you need to know how to portray that to our investors when you are seeking capital.

Warren Buffet, arguably the worlds best and most successful investor, boils it down to just one thing when evaluating a company that he want's to invest in. That is competitive advantage. So, ask the question, does your company have one? Here is how you portray it to the investor. There is a formula to it. Take your business name, add to it what you are the best at, and then, why?

I'll give you an example. We are the Capital Match Point. We are the best at matching quality capital seekers with quality funding providers. The reason why is, we take the time to use our propriety matching process in order to put our capital seekers in front of our investors [who] are interested in their opportunity. We do it with pin-point accuracy.

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Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250, http://capitalmatchpoint.com

...One burning question in the mind of the capital seeker, since the dawn of time has been, how long does it really take to get a funding done? Now, in my 25 years, being on both sides of the fence as a capital provider and also as a capital seeker, I could tell you ultimately, plan on about six months. It could take longer, rarely does it take shorter.

Now, there are eight key steps in the process and being aware of those will help you understand the process and the time.

The first thing that happens, typically, is a review of the business and an evaluation of your financials. This is the point where the capital provider is making a decision on whether they want to interview you and take some further time up for consideration.

Number two, there's going to be a meeting and a presentation. Typically this one is going to be done in person and it is what we call a "dog and pony show." It is where you present your company and parade the merits of it in front of the capital provider. The capital seeker then will find themselves in a due diligence period. Now, this cuts both ways. They're doing due diligence on the capital seeker, our investors want to know, are all the facts there? Is everything in line? Do a little homework, check some facts. You should be doing the same thing as a capital seeker while they are doing there's, know who you are dealing with.

Number four, there is going to be a series of follow up questions, ultimately. You need to be prepared to answer those.

Number five comes; finally a term sheet. This is a first take, or draft, at a letter of intent to provide the funding and it will spell out: what are the terms of the funding, what type of funding equity get, what have you.

And number six, what always follows a term sheet is a negotiation. Because you never, as a capital seeker, want to take the first deal that's put on the table.

Number seven is, after negotiations conclude, typically there is a formal agreement.

And number eight is the closing. So, there are a lot of steps that you go through on the way to being funded. Being aware of those will help you to understand the time that is involved with that.

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Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250, http://capitalmatchpoint.com

I'm often asked, should I go it alone when it comes to funding, or should I seek the assistance of a professional? I think the best way to answer that is ask yourself a couple of questions. I've got four in particular that you need to keep in mind.

First of all, you have limited contact. You're probably great at the business that you are engaged in, but you do not want to call your friend the lawyer, or your buddy the accountant, and see who they know who raises money for your company.

Number two, you are probably strapped for time if you're running a business, and let's face it, time is a precious resource, treat it like one.

Number three, you've got to ask yourself, do you have the experience? And if you haven't been down the road of funding a company before while running it, you probably want to seek the advise of a pro.

Lastly, you want to keep in mind this one, raising capital is a two headed monster. You've got to ask yourself the question, am I capable of running this company effectively and efficiently while raising capital?

I typically recommend help. Now, you get back to the business of running your business, and leave it to the people like Capital Match Point. We have been doing this a long time. We are here to help capital seekers like yourselves, and we are happy to take your phone call at any time and help you decide whether you should go it alone, or get some assistance.

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Hosted by Dave Dambro, The Capital Matchpoint, 770-433-8250, http://capitalmatchpoint.com

Capital seekers at all stages need to understand: what stage they are really at, how to classify and clarify for our investors, and how to speak the language a little bit. So I want to tell you about business stages that we classify and use in our matching process in the Capital Match Point system.

First, you have the light-bulb stage. And, as a reference suggests, this is just an idea, a great idea. It could be as crude as scratched on the back of a napkin, but it has some merit to it.

Number two is where you have seed stage. Seed is where you are structuring and developing the business plan and the financials, and there is some capital expenditures going on there.

Three, there is a start-up, and a start-up is usually broken into a series. Series A, typically, a lot of times you'll see a series B when milestones are reached. Occasionally you'll see a series C and even a series D.

Number Four is early stage. Generally an early stage company is considered to be generating revenue and probably within about a million dollars, plus or minus, break even.

And number 5 is late stage company's. These company's are typically established, and mature, and looking for expansion capital.

Six, we've got a category called special situations. This is a pretty broad category, but it encompasses things like: leverage buyout propositions, mergers and acquisitions, anything at all that would enhance the company's business model, beef up the balance sheet, and add assets as well.

Now, if you are a capital seeker and you are not sure what category you fit into exactly, give us a call at the Capital Match Point. That is what we're here for. We look at companies all the time and we'd be glad to help you sort this out. It's important to know which stage you're in, so that we could target you to the correct capital provider.

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 Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250, http://.capitalmatchpoint.com

What is going on inside the mind of the investor? Every capital seeker needs to answer that question and I've got a couple of key points to make on that subject.

First of all, you want to realize that as an investor, especially on the professional level, you're listening to stories for several times a day, several days a week, several weeks out of the month, months turn into years, you do the math. It's an awful lot of presentations. So we're looking for sisync answers to the questions we're asking, as opposed to stories.

Secondly, we're looking for specific things and in fact the questions are generally formatted in a very pointed way to get those answers out.

So, thirdly, you wanna be on guard not to oversell your opportunity your company or your companies merits. Answer the question, don't tell a story.

And fourth, when you're asked a question, you need to be prepared to answer it. So, go over questions in advance, have a presentation, organize in your mind, and expect that question to come up.

An investor, overall, really is just trying to answer this simple question, "What happens if I put one dollar in the front end of this company? What do I expect to see come out the back?" And capital seekers that keep that in mind really will know what's going on inside the investors head.

And those that have questions about the nature of what's going on inside the investors head, and how to speak to them, are always welcome to give us a call at Capital MatchPoint. That's what we do and we'll be glad to help.

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Hosted by Dave Dambro, The Capital MatchPoint, 770-433-8250, http://capitalmatchpoint.com

...I get a lot of questions from capital seekers about the type of money that is available on the Capital Match Point. I have several categories, and we classify them and categorize them for a reason. There are angel investors and angel investor groups. There are venture capital funds, commonly referred to as "VC's". We also have private equity funding sources. Then there are hedge funds; additionally private investors. Then we have a category called "other", which pretty much encompasses all other accredited investors, that would be investors of significant net worth and sophistication to make investments on their own. Now, what is important here, as a capital seeker you need to understand the differences between capital providers. They're very specific. And secondly, you need to be able to identify the source that you need to target for your particular capital needs. Now, getting in front of the right capital provider is paramount to getting your company funded. So, what we're looking for here is, the key is efficiencies. Don't waste time chasing the wrong kind of money, and don't waste money doing that either. The thing you need to be doing is running your business. So, take the most efficient route to capital. If there are any questions on this subject I always invite the capital seekers to call. That is what we do on a daily basis here at Capital Match Point, and we can easily help you identify the type of capital sources that would be most efficient for you to use.