Speaking of Business: Prepare quick answers for investor questions

Q: What is the simplest way to raise money? I have read many books, gone to many forms on and for raising capital and it still seems to be the hardest thing I have ever done. What are you doing to raise money for your fund?

A: As a venture capitalist, we look at a number of ideas from individuals who are looking for money, skills, planning and other resources. We work with both angel investors, wealthy individuals and institutional investors, banks, venture capitalists, pension funds, etc. One of the largest-growing sources of acquiring money is through angel investors, my focus today. Money invested by angel investors is used to refine and sell new technologies. Not all angel investors are going to like all ideas. Therefore, it is necessary to determine which angel investor(s) match up well with the idea. You can do so by following these simple guidelines:

* Identify angel investors. Anyone with money is a candidate, but not everyone who is a candidate will invest. There are clubs, forums and services that formally try to match you up with angels. You can call recently funded companies to find out who invested.

* Determine their investment interests. The interests of an investor will vary widely. You must know if they invest in management, technologies or certain industries. Do they invest in companies that are concept, prototype, sales or growth levels? Are they investing to pay the bills, to fill up their retirement time or to have something to talk about with a friend at the next social party? Know their favorite charities, hobbies, social circles and other pertinent background information.

Do not assume that investors invest only to make money. That is a given. Wealthy individuals already have success. For them, the key reason for investing is almost always something personal.

* Determine who makes the decision. Angels often look to others to advise them or manage their money (i.e., a money manager). The larger the amount of money involved, the more this is likely to be true. This adviser may be as key as the investor.

* Qualify investors who match with you. By now you will have filtered through your list of investors that should match your business. Now, you need to filter again to determine who the best investors are for your company. These are individuals who share your vision and passion.

* State the opportunity. Even if the investor is a good match, you still have to sell them. They need to put their money to work, and you must convince them that you are a better place to put their money than any other investment. We emphasize our strengths: custom project teams, speed to market, low capital requirements and higher return on investment.

* Negotiate a deal. It’s rarely a simple stock-for-cash deal structure. The investor may want to sit on your board, consult or take an employment position. They may want a ‘sweetener’ or other enticement in the form of stock options or an exclusive sales territory. Be creative. For example, we have a variety of paid positions for board advisers, consultants or project team members. Also, we can offer stock in Tekquity or in one of our projects.

These steps represent a process. It is unlikely that you will get money from the first investor you address. And if you do, it’s likely they will not provide you with all the money you need. Therefore, you will have to repeat this process a number of times. This calls for creation of a fund-raising system. The system must set forth each of the tasks, who is responsible, how each task is to be performed and capture and update information on each investor candidate.

The following lists some of the basics of fund raising, which are minimum specifications to get in the door with an investor. Without all of the above, you have little chance of matching up with an angel because most likely you are unprepared.

* Clearly know what you are doing.

* Know how much money you need and when.

* Know how an investor can get involved.

* Clearly and concisely communicate what you know.

Often we have been approached by a number of innovators who could not complete the following important questions:

* In thirty seconds, what is your business?

* What are your key business milestones over the next three years?

* What is your long-term plan?

* When and why do you need money?

We answer most of the above questions by stating:

* We are a venture-capital firm that operates as a technology-management company that seeks to generate continuing revenues from the development, license and sale of exciting new technologies to established businesses. We have three technologies under current management with a goal of establishing a portfolio of 100 technologies.

* We are currently seeking $10 million dollars to expand our current operations and take on a few more technologies.

* An investor, for a minimum of $25,000, can become a principal/member in our firm, where they may look forward to distributions of earnings from the sale/license of individual technologies that may start as early as the end of this year.

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