A Word from the Chairman of the Board

So if you are reading Blog it is likely that you are an entrepreneur. You may be a first time founder. Or you might be on your 5^th startup – this time as the Founder/CEO. In either case, you may now be asking yourself how you are going to fund your venture. Worse, you are likely fully aware that you are trying to raise money during the “Great Recession” and that capital is very hard to come by.

There are a number of resources available to help you understand and master the early stage fundraising process. Because I serve as the Chairman of The Capital Network (TCN), this post is about how TCN can help you. But TCN is not the only place that can help you. More important that coming to TCN is that you get the education and support you need. Speaking for TCN – our mission is to make sure that no fundable idea goes unfunded – that we help every entrepreneur, and particularly those with high growth ideas, find the capital that will sustain their company and grow our collective innovation economy.

TCN’s programming reflects the funding cycle and development phases of a start-up. That said, it is not a unitary program where you have to attend prior sessions to get a huge amount of content and connections at a current program. Instead, every program stands alone, but in the context of the curriculum.

So what might be your first question. What kind of capital is right for my business? Well, it all depends upon your business model, your product service mix, your industry, your development timeline, and well, frankly, lots of other factors. As you might imagine, building a company that designs MobileApps has very different capital needs and opportunities from a venture developing cancer therapeutics. On Sept. 7, TCN will run its Funding Options program, helping entrepreneurs understand whether the investment proposition in their company is a good match for:

• Friends and Family
• Angels
• Angel Groups
• Venture Capital
• Corporate Venture Capital
• Strategic Partners
• Bank Debt
• Venture Debt
• Federal and State Grants
• Bootstrapping

While many young ventures think they are a good fit for Venture Capital, this often turns out not to be true – sometimes because it is a bad deal for the entrepreneur – not because they can’t raise the capital! This program is designed to help you understand an investor’s needs, point of view and risks:

• Investment criteria
  • Development stage of product and team
  • Industry
  • Business Model
  • Margin Structure
  • Growth Potential
• Time to closing
• Investment range
• Return requirements (IRR/ROI)
• Success rates
• Control features
• Compliance requirements
• Costs of capital
• Uses of capital

Okay, so you attended the Funding Options program, or you have worked with industry folks to ask good questions, and you have determined that high growth finance is your path. Now you would like to know What are the terms of an Angel or Venture Capital Deal? What will this deal mean to you? In October, TCN will host first a panel discussion on Angel Group and Venture Capital Term Sheets and then a small group Deep Dive Expert Lunch a few days later. This will help you answer the question - What on earth are: anti-dilution rights, preemptive rights, co-sale rights, drags-along provisions, re-vesting, registration rights, redemption rights, dividend preferences, liquidation preferences, participation, pre-money valuation, fully diluted shares, performance milestones, tranches, board rights, negative covenants, closing conditions etc.? Wise entrepreneurs know that they will negotiate a better deal, or avoid a terrible deal, if they understand the specifics before talking to capital.

If, having learned all the legal-speak and the economics, you actually still want to have third party investors (which is by no means certain), then the question may arise: “How do I find, pitch and close on investors?” TCN’s Pitching the Plan will help you maximize your chances of identifying the right investors and securing the capital. The session includes how to create an “Elevator Pitch” and what to include in your PowerPoint style “Investment Deck”.

So now you decided you want capital, in specific, equity capital, and you understand the terms, and you have found investors – now the big question is: “How do you and the investors value your early stage company?” Welcome to TCN’s one of a kind Negotiation and Valuation program program. In an interactive and fun table format setting, you will learn what kinds of assets, opportunities and risks affect the valuation of the company and, in turn, the dilution you will incur from selling your equity. This session will also case study a recent successful financing to highlight how the theory translates to practice.

One of the big questions that plagues entrepreneurs is the chicken-egg dilemma of “no money, no team, no team no money.” That is, investors value the team even more than the idea, but it is hard to attract a “rock star” team in the absence of capital. TCN’s Building a Fundable Team program helps entrepreneurs understand how investors evaluate teams, the founder’s ongoing role, transition management, succession planning, compensation, how to attract talent and the use of interim or part-time personnel.

You should also look out for programs that focus on Strategic Capital, as customers, vendors and partners are often an ideal way to capitalize your company – that is, if you are extremely careful you understand the interplay between the commercial deal and the financial deal.

If all of the above wasn’t complicated enough, TCN also runs a program called Preparing for Growth and Exits – which ties to help you balance your short term capital objectives with your long term economic value and interests in growing or selling the company. The contradictions in these dual objectives mean that making informed trade-offs is the key to optimizing your success and satisfaction with being an entrepreneur.

Keep a look out for other key panel and lunch programs like

• Understanding Equity Compensation
• Understanding Dilution
• 409A and Equity Pricing
• D&O Insurance
• SBIR/STTR Funding
• SBA Loans
• Networking Strategies
• Founder Equity Issues
• Using Debt in Financing your Startup
• Accounting 101
• Funding through IP Licensing

Also, if you are now thinking, “Wow – all of that is a lot of content, but I don’t have a lot of time to learn” then the one day TCN Venture Fast Track Boot Camp may be the solution for you. But bring your A-Game, because this program is like drinking from a fire hose.

While not contained within the Roundtable Series, TCN also helps entrepreneurs solve other challenges. What are the special opportunities and challenges for companies in the Life Sciences? In Mobile? In Cleantech? TCN provides addition support to Women Entrepreneurs with programs that help entrepreneurs find and access the support systems and mentor that are invested in the success of women-led businesses. If you are an undergraduate or graduate student seeking on-campus programming and discussions of your challenges in fundraising, you should also take a look at the TCN University Series.

What do you do if you are trying to form longer term relationships related to capital raising and entrepreneurship. Some qualified entrepreneurs, after an application process, will be given access to the TCN’s Mentor Meal Program - one day mentors in a casual environment that will help build your knowledge base and your community, and/or the Venture Coaching Program - a longer term mentor team for those qualified ventures actively raising capital.

As the Fall season kicks off – I hope that all of you participate in The Capital Network. But most important, I hope that you continue to get the education and support you need to drive your venture towards success.

At the risk of repeating myself in the same post, my wish for the season remains that no fundable idea should go unfunded!