Articles and Guides for Startup Companies

Though venture capital and other investments can get your company to go global, sometimes it can be hard to find an investor to fund your venture, especially when it’s still on the drawing board. In many cases, before finding venture or angel capital, many people often turn to unique and different ways to raise the needed seed capital for their business.

Sweat Equity to Raise Seed Capital

One of the ways to raise the seed capital you need to start your business is the old fashioned way of sweat equity, or hard work. The fact is that many entrepreneurs worked very hard and placed the vast majority of their paycheck into their venture. This can still work today, even in an environment where jobs may be hard to come by. Before you think that this might be for you, you need to ask yourself the following questions:

A) What is your business and how much capital do you need to get started? This is very important. Obviously, you would be living in dreamland if you think that your salary from frying hamburgers at your local McDonald’s is going to immediately turn your venture into a multimillion dollar international company. It won’t, at least not yet. What it will do, however, is to allow you to start raising the necessary capital to get the basic things you need to get started. Though working at a fast food joint may not be the best way to raise capital, try finding an entry level job in the field of your business. This way you can get a higher wage and gain the necessary experience to build a successful company.

B) Keep good rapport with your employers. Wherever you work, keep a good rapport with your employers. You never know what your bosses can do for you. They may even be able to get you into contact with other sources of funding, such as angel investors.

C) As you work, save your money and spend the majority of your paycheck on needed equipment and real estate. Allow your paychecks to accumulate and then purchase the necessary equipment needed to start developing and manufacturing your product. Likewise, look into buying the necessary real estate for your business, such as office space and manufacturing facilities.

Using Your Website to Raise Capital

The internet allowed some entrepreneurs to be very creative when it comes to raising capital for their businesses. One entrepreneur set up his website with a simple product to encourage people to donate in order to raise seed capital for his company. After doing this, he got the attention of an angel investor who later introduced him to more serious formal investors. His company is now one of the Fortune 500 companies and is worth several billions of dollars. It is very easy to get a website that is designed for an e-commerce site with a PayPal checkout that accepts credit cards.

How Can You Raise Seed Capital for a Business Overseas with Part-Time and Full-Time Jobs

Are you one of those who dream about living the wonderful life of an expat and want to build a company overseas to keep you sustained for the rest of your life? Well, you can do that, depending on the country you choose to live in. The fact is that there are many developing countries all over the world, where building a business can be easy and affordable for Westerners. The fact is that in many of these countries, many of the locals do come to richer countries, such as the United States, Canada, and Europe to do just that. They work a while and use the money they earned to build a business. The question is how can you do this?

A) Research the country you want to invest in. This is very important. Every foreign country is different from all others and has different laws. You want to know the laws of that country and keep up to date with current events. The slightest change can spark a revolution or other political unrest, causing you to lose everything, if you are not careful.

B) The prices in the country of investment vs. US and European prices - know the difference! This is also very important. Find out where you can get things affordably from. While doing this, also look at trends. What is forecasted to go up? What are the moments you can take advantage of, etc. When you invest, you want to invest in a business that will give you a good profit.

C) Get to know someone in that country who can be a trustworthy partner. This is very important! You want to be able to know someone who you can trust and will not hide or spend your money improperly. The truth is that when you invest in any foreign country, and you are not there, you may have to transfer money to a person who can purchase on your behalf. Furthermore, your partner who lives in that country should have good business knowledge and also to know how business is done in that country.

D) Work and send. Once you developed a good partnership with someone in the country of your choice, work and send what you can to purchase real estate, equipment, etc. In some countries, you can raise enough seed capital to get in half the time of what you can get in the US.

The fact is that there are many entrepreneurs who are knowledgeable about a foreign country where things can be obtained cheaply and are projected to rise in value and they invest. Real estate is always a good investment, because real estate always goes up in value. Furthermore, if real estate is low, you can also purchase other equipment at a low cost. Many people would make great profits doing this if they invested correctly.

One way for an entrepreneur who may not have much by the standards of the US to make it big in a developing country is by working in the US or his home country in the west like immigrants from that country do. This allows him to raise the necessary capital to buy the things he needs to make a profit. Study the trends! What is likely to go up? Invest in what is likely to go up and you might find good results.

How to Convince People Who are not Investors to Fund Your Venture

For those of you who are looking for an easier way to raise capital for your venture, you can convince people to help fund it. First, try your friends or family. If you have that wealthy relative, ask him! One successful entrepreneur used marketing techniques and a coarse product prototype to convince people to give him money to build his company. After a while, he found an angel investor who later got him into contact with formal investors. His company is now a multi-million dollar company.

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Raising Angel Capital

Angel Investors vs. Venture Capitalists and Other Formal Investors

Typically, when you are looking for investors, you need to know what kind of investor you are looking for. There are two kinds of investors that invest in businesses: angel investors and formal investors or venture capitalists. What is the difference? Well, an angel investor is an investor who gives money from his own pocket. The typical angel investor is a wealthy individual who is in his mid forties and is either an entrepreneur himself or works in a senior management or in the executive team of a large corporation. Angel investors invest their own money, so their investments are not usually very large.

On the other hand, formal investors, such as venture capitalists and private equity investors do not invest their own money. On the other hand, they will work for a private equity or venture capital firm, which manages funds that are either from endowments, retirement funds or pension funds, or from the collective funds of wealthy families. The typical private equity firm or venture capital firm has significant funds, so formal investors, such as venture capitalists typically have deeper pockets than angel investors do.

The difference is that angel investors take much bigger risks than formal investors when investing. Primarily, the risk is that angels invest out of their own pockets, meaning that if an investment is a failure, it can be devastating to some angel investors. Furthermore, angels may invest for different reasons. Though there may be some angels who will want a seat on a company’s board of directors, many angels do not necessarily require that, but they do require quarterly reports of how their investments are doing. Because angels take big risks, they tend to expect a higher ROI or return on investment than formal investors.

On the other hand, formal investors often require a seat on a company’s board of directors as part of the deal for his investment in the company. The company’s board of directors is the governing body of the company and typically contains both company executives and investors who have stakes in the company.

What are Angel Groups

Angel groups are a group of angel investors who work together and invest all their funds collectively into a company. You can have an angel group that may have several angel investors who discuss potential opportunities and typically, angel groups will invest together. For this reason, if you are seeking large amounts of angel capital, you want to try to get into contact with an angel group that can provide a collective fund from each of the angels in the group.

What You Need for a Business Plan for an Angel Investor

Well, the truth is that business plans are different from one another. When applying for debt capital, you need one type of business plan, for venture capital, another, etc. With angel investors, your business plan is similar to the business plan for a formal investor. The difference is that with an angel investor, the business plan needs to show when the expected profits are to be expected and when what milestones are anticipated to be met. Venture capitalists and other formal investors will require more details about each milestone, what tranche is supposed to finance and how much each tranche is supposed to be.

Why Angel Investors Take the Risks They Do

The question about why angel investors take the risks they do can be a tricky one. Depending on the angel investor, their reasons can be all different. Some angels get high on taking big risks. Furthermore, when angels take big risks, every once in a while they make huge returns. Other angel investors are seasoned entrepreneurs who want to help new entrepreneurs who are just getting started. Angels already have the know-how and can show the ropes to the younger generation. This can be another reason why they invest in unusual fashions at times.

Another type of angel investors will invest in an industry they know well, or have close acquaintances with expertise in that field. These kinds of angel investors invest primarily in businesses which they are certain that they will receive a large ROI (Return On Investment). These angels may have the knowledge of a particular industry themselves or work together with close partners who know a particular industry.

particular industry themselves or work together with close partners who know a particular industry.

These are just a few examples why angels invest the way they do.

The typical angel investor is usually in his 40s or older and has been in business for quite some time now. They may have worked as CEOs for large or medium-sized successful businesses or corporations and have a large salary or retirement. Other angels are also entrepreneurs and will invest in companies who they believe can help their own interest.

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Venture Capitalists and Formal Investors

Venture capitalists and formal investors are also known as institutional investors and they are different from angel investors in that they do not invest their own money. Typically, a formal or institutional investor is a partner of a private equity, venture capital, or other type of an investment firm which manages a fund or a number of different funds. Typically, these funds are either pension funds, endowments, or the collective funds from very wealthy families. This means that formal or institutional investors have much deeper pockets than angels do. However, because institutional investors invest other people’s money, they are very careful in the risks they take with it. They may not invest in wild ways as some angels do and more often, institutional investors require a seat on the board of directors of companies they invest in.

What is Venture Capital and Private Equity

Basically, venture capital is private equity. Before we understand what venture capital is, we need to understand what private equity is. Equity is the net worth of a company, what assets a company has, which can range from real estate, vehicles, equipment, and other physical assets owned by a company as a whole is the company’s equity. In theory, when you invest in a company, you typically have a share in that company and if it goes up for sale, you can get part of the equity of that company.

Private equity is equity that is held in private hands. This means that equity that is managed by a private equity firms is private and owned by a particular person, group of people, or organization.

Venture capital is also private equity, but the reason venture capital is set out separately from private equity is it is private equity that is earmarked for ventures. A venture is a new company which is just starting out. Venture capital is primarily invested as a series A round of funding in a new startup company. An investor who invests venture capital is known as a venture capitalist or a VC. Furthermore, an investment firm that invests venture capital is known as a venture capital firm or a vc firm.

Why do Formal Investors Want a Seat on Your Board of Directors

As mentioned before, formal investors do not invest their own money. Unlike angel investors, who might invest periodically as a hobby, formal investors are professionals. They invest as their job and because they are responsible for the money they invest, they have a huge weight on their shoulders. For this reason, they are very careful with their investments. They calculate the risks and the returns. Many entrepreneurs who submit mediocre business plans to formal investors will not be likely to get funding from them for this very reason.

Furthermore, as formal investors have a responsibility to their clients’ money, they want to have a controlling stake in the companies they invest in. This allows them to watch over their investments. Typically, when an investor asks to be on a company’s board of directors, it’s not necessarily a bad thing. Many formal investors have resources and ties with other entities and even corporations, and the entrepreneur in which they invest in can benefit from.

What you want to watch out for is that an investor does not demand too much control of the company. The board of directors is a legal entity and is also the body that steers the company forward. Those who have the most seats on the board of directors are those who have the most control over the company. This means that you want to have 60-40% ratio on your board of directors. Give your investors a seat on the board of directors, but in the same time, have the majority of your board be consisted of members of your executive team to keep control over your company

How do Venture Capitalists and Formal Investors Invest

Typically, getting funded by a formal investor can give you a large amount of capital for your company, the process of getting that funding may take some time. Typically, formal investors will take their time before investing the initial tranche in your company. This is a different and much slower route than the way an angel would invest. Angels can invest at a heartbeat at times, but that’s rarely the case with formal investors.

Upon receiving your business plan, if an investor is interested, he will look it over for quite some time. This process, in which an investor looks over your business plan is known as the due diligence process. During this process, investors look over every detail of your business plan with their partners and experts they have at their firm to calculate the risks and the returns. If an investor decides that the risks outweigh by far the returns on the investment, they are not likely to invest in your venture.

To ensure that you get funding from a serious formal or institutional investor, you need to survive the due diligence process. This means that you need to make sure that all numbers on your business plan are pleasing to the investors and their experts. You can bet money that any serious investment firm would have all the accountants, market experts and experts in a particular industry help them determine whether a company is worth their investment. The numbers need to match. In the end, formal investors do take risks, but they are more calculated than those of angels when making an investment.

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How to Contact Investors Cold

In many cases, people usually find investors through networking, connections with colleagues, friends, or other business partners. It does not have to be that difficult, however. You can also contact an investor cold. In the past, it could take a long time to find the right investor for your company. You need to look at several things before choosing to contact an investor cold. The first thing is his industry preference. You want to make sure that an investor’s industry preference matches the industry your business is in. The second thing you need to look at is at the investor’s stage preferences. Investors and investment firms are different. Venture capitalists, for example, have early stage preferences. Many VCs prefer to invest in a company in its early stages, primarily in series A or B. Some VCs may even invest in seed capital as well. Likewise, other investors who deal in private equity prefer to invest in an expanding company and needs capital for growth. Yet, others provide special capital, known as mezzanine capital, which is capital that bridges gaps a company experiences when it prepares for an IPO or initial public offering. A company prepares for an IPO, which means that it is preparing to be publicly traded on the stock exchange.

Contacting investors cold can be done, but you need some good marketing skills to do it successfully. The point is that you need to sell your venture to the investor to get him interested. There are several ways to do this.

Writing a Teaser Email

One of the best ways to get an investor’s attention, when contacting him cold is to send him a teaser email. Think about a teaser email like it is a sales letter. You are actually selling your venture to an investor. There are several things that you want to mention to an investor in a teaser email.

The first thing you want to mention is what your company does. What kind of product or service your company provides. Also, you don’t want to waste your time with sending a teaser to any investor. You want to do a preliminary search to see if an investor you are contacting invests in your industry and stage. You can do this with different investor database, such as our VCgate Funding Sources Database, which can help you search for the right investor. This can help you with your teaser email and narrow down the number of investors you want to send an email to.

How to Build Rapport with an Investor

In the same way in which you are making a sale and you need to build a good rapport with your customers, the same thing applies when you meet an investor. Contacting an investor cold should first be done with a teaser email, but if an investor is interested in your venture, he will contact you either via an email or by giving you a phone call. Investors can also give you their contact information, from which you can get their phone number and call them. This can be a great opportunity to build rapport with an investor. Why is this so important? Well, investors will invest in those people whom they like.

Rapport building is exactly what is mentioned above. You want to have a good rapport with a prospective investor. Get him to like you! Start by having a light conversation with him! Many people often open up when you ask them how they’re doing and having a small informal conversation. Once you see that you have their trust, you can get down to business. Building rapport can do wonders in helping you get the funding you need for your venture.

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How to Write Your Business Plan

Your business plan is the most important document that pertains to your business venture. Think of it as if it were a road map of your business and the progress you plan to take when starting it up. Your business plan is definitely NOT the first thing you want to show to a prospective investor. You need to remember that your full business plan has all your trade secrets, patents, and proprietary technologies and theories. If you contact a competitor’s investor, this can be a gold mine for him. Your business plan should be done in two parts, your executive summary, slide presentation, and then the full plan. You want to show them to investors in that order.

Your Executive Summary

Your executive summary is a brief overview of your business plan. The executive summary is only supposed to highlight the key points of your business plan that you feel would get an investor’s attention. You do not want to go into too much detail with your executive summary and most importantly, you want to keep it short. Typically, an executive summary should only be one or two pages long. At the most, your executive summary should be no more than three pages. This is a document that the investor should be able to read quickly and get the point.

One thing you need to keep in mind is that investors are very busy people and do not have much time to read a prolonged document. Many investors are either attending board meetings of portfolio companies, studying new potential investments, or meeting with prospective entrepreneurs which they plan to invest in. For this reason, your executive summary needs to be short and to the point.

Business Model and Expected Mile Stones

Your business model is a very important part to your business plan. The business model should also be presented in some detail in your slide presentation. The business model is the model that you are applying to your business. Your business model should also show a group of different milestones that you plan to follow. These milestones should have an anticipated date of when you plan to complete them. You might also want to prepare a budget which can cover the cost of meeting each milestone. This can determine the amount of each tranche an investor can fund you if he decides to make an investment in your venture.

Charting Anticipated Profits and Expenses

Charting anticipated profits and expenses is very important, but can also be a very challenging task. This is a task that you do not want to consider doing yourself, unless you are very good at numbers. Many entrepreneurs hire accountants or CPAs to chart expenses that their companies can incur when meeting each milestone. Things you need to think about when charting expenses can be a number of the following:

A) Seed expenses basically represent what seed capital is supposed to cover. These are the basic expenses you incur when you are just starting out. These expenses can include buying or renting real estate, office space, manufacturing space and equipment, and items alike.

B) Salaries should also be covered in anticipated expenses. Salaries should be done in several different categories. The first category should be the executive salary. This is your salary. This should determine the amount from the profits you get into your pocket. You did all the work in building your company, so you should give yourself and your partners the biggest reward. The next salary category should be the management category. This should determine the salary that managers who you employ get paid. The third category should be the general employee salary. This should determine the hourly wages of your employees.

C) Production expenses are also very important things to include. How much is it going to cost to produce your product? How much will raw materials cost and how much will it cost to run the production line? All these should be included in your expenses

D) A rainy day fund should also be kept in mind when doing all the financials in your business plan. You never know when something can go wrong and whether you might need to have some extra expenses. You always want to have good reserves when planning for your profits and expenses.

Profits are also important to estimate. After all, if you are developing a business plan to obtain funds from an investor, he will want to know what his return will be on his investment and when it will maximize out. Typically, investors invest in a new company from five to seven years. If you anticipate an earlier profit, you’d better be able to have sound proof behind it. Investors often know the industry better than you and they have their own experts. Most ventures are not get rich quick schemes and investors know that. When doing all the financials on your business plan you do not want to look naive or like you are trying to pull a con job. This can ruin your reputation among the investment community and make it even more difficult for you to get funding in the future.

Drafting your Marketing Plan

Like any company who wants to get into business and produce, you need to make yourself known. For this, you need to develop a marketing plan. A good marketing plan needs to develop several marketing and advertising strategies that can get your product known to the public.

A high pitch concept can be one of the most effective ways to get the public’s attention about your product. Basically, a high pitch concept is a very short synonymous phrase that likens your product to something that is already known, but at the same time for a different use. For example, everyone knows that the Cadillac or a Rolls Royce is a high-class car. For this reason, many marketers will compare the products of their clients as the Cadillac of safes, or the Rolls Royce of watches to get the product known to the public and get them to buy it.

Internet marketing is another great tool to get your product out in the public stream. The fact is that most marketing done today is over the internet and it has become a multi-billion dollar business. With internet marketing, you need to know a few things, such as affiliate marketing, SEO (Search Engine Optimization), and more.

There are many other different forms of marketing out there to try out and you shouldn’t be afraid to do the market research. Many entrepreneurs hire market specialists who study trends and, based on their research, develop an effective marketing strategy.

To find out more about good business strategies, you should visit our website at www.VCgate.com and see all that we have to offer. Our guides on raising angel investor funding and venture capital can be an effective tool to help you in getting the money that you need. Furthermore, we provide the world’s best funding sources database, with access to over 5,000 investors, venture capital and private equity firms, angels, merchant banks, and more. Come and check us out!

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