Instructions: Keep an open mind! Try not to have any particular source of capital in mind when answering these questions. Imagine that there are an infinite number of sources of capital out there and that some of them are perfectly aligned with your needs, goals, and values. Create an image of the perfect source of capital before you start seeking investment. If you know exactly what you want, you are much more likely to find it!

  1. Do you really need to raise capital? Raising capital can be time-consuming and expensive. Is there a better way to get the resources you need? Revenues? Barter? Cut back on expenses?
  2. If you decide you do need to raise capital, what do you need to raise it for? Make a detailed list of the things you need to buy over the next year or two that you cannot buy with current cash flow.
  3. How much do you need to raise? Put dollar amounts next to the items you listed in Step 2. Add a 10-20% contingency line.
  4. How will having that Response money affect your business? For example, if you pay for two new sales reps, will that lead to more expenses e.g. will you have to hire a COO because of the growth of the business? If so, add those expenses to the list from Step 3.
  5. What is the long-term plan for the business – grow fast and sell to a larger business? Slow steady growth with no plans for a sale? Leave it to my children? Sell it to my employees in ten years? How does this affect how investors can get paid?
  6. Picture an investor walking up to you and offering a check for $1 million. What conditions would make your refuse the check? Examples could include the investor wanting a majority of the equity, a seat on the board, always choosing the lowest cost supplier regardless of how that supplier treats its workers . . . .
  7. Create financial projections assuming you reach your capital raising goal. Given how raising the money will affect your business’ financials, how much is left over to pay investors? For example, if you had to pay investors a cut of the profits every year, how much could you afford to pay?
  8. Create a profile of one or more ideal investors. What are they like? What kind of return are they looking for? What kind of interaction do you have with them? Do they sit on your board? Do they have the power to fire you? Do you just send them an annual check?
  9. Based on your answer to the previous questions, what would you like to offer to potential investors? Equity where the only exit can come from the sale of the company? Debt-like equity with annual dividends and a redemption option? Convertible debt? Straight debt? Revenue-based financing (payments to the investors vary based on the performance of the company)? Perks? Discount cards? A combination?
  10. What will be your compliance strategy for reaching your ideal investors? (raising capital is a heavily regulated activity so you must make sure you have a compliance plan before starting to talk to investors)
  11. What is your plan and timeline to reaching out to your ideal investors?