Six Simple Tricks to Quick Successful Venture Capitalist Funding Approval with Good Capital Planning

Are you expecting easy flowing capital in the time-frame of your capital planning?

Successful issuers know from trends that the easy flowing capital of the 1990s and 2000s was an unusual phenomenon and is unlikely to return during the time-frame relevant to their capital planning.
They also know from trends that persistent and compelling marketing alone succeeds in motivating the highly fragmented private market for capital.
So, for you to succeed today on your capital planning, you must know how to set and meet deadlines even amidst the uncertainty in the market today.

What must you do in this regard?

Are you aware that strong investor relationships are a critical condition for success but only when combined with sufficient time for a persistent marketing campaign is a transaction able to succeed?

Now you get the information:

You need to find a process that is accelerated between your initial offering pitch to approval of funding. Otherwise, you know your critical deadline would be threatened and that suggests likelihood of failing on your capital planning. 

To this effect, you need to build a solid relationship with the right Private Equity firm which would require extended due-diligence to arrive to informed decision on potential opportunities, typically 4-6 months.

If you are planning to recapitalize your company, you need to set a realistic timeline that will allow the right PE firm to play its advisory role in the accelerated process of due diligence, helping you easily access funding not later than 8 months.

Since it takes this long, then early planning is good to ensure you have enough time for risk assessment and management preparation when choosing a potential investment opportunity for your investors, as provided by the PE firm that conducts your due diligence within the stated time-frame.

This time is also one of relationship building between your company and the PE firm that guarantees your ability to maintain professional conduct that will benefit your company when the funding you need is approved.

Get prepared for a quality presentation delivered to the appropriate investor that will result in a rapid decision.

While this is to be taken care of when planning the initial offering pitch, its preparation should be allotted sufficient time that will help you identify all the strengths of your company that will be of interest to the appropriate investor.

Get it well packaged as a deliverable to be made available at the right opportunity.

Understand at the same time that the investor will not only scan your presentation but pay attention to details.

Your time spent in preparing a quality presentation will pay off when the investor sees your presentation to be acceptable and believable, after spending sufficient time on reviewing it. 

Enough time allows private investors screen and conduct due diligence on potential opportunities.

Moreover, spending sufficient time on screening and due diligence is very important for the investor to determine that your company is sexy and safe to invest in before plunging any fund into it.

If you feel you are not conversant with the accelerated process of your initial offering, then do not just start any deal with an investor, ask first for advice which is essential to helping you prepare appropriately for your initial offering.

Advice is mostly cost effective, so consider having a budget that will fit into the need for advice.

Mostly, investors won't advise you, so your PE firm would be your best option for reasons that the firm has made professional provision for advisory services and would offer you a negotiable advisory fee.

You should give the appropriate PE firm assurance of proceeding on deal origination with you, for accessing the needed capital through its own investor base. 

This means you get all you want from a PE firm that offers you advisory service and equity capital in dual capacity as your investment consultant and your investor.

This is the best relationship you should consider building if you don't have sufficient knowledge of the accelerated process for your initial offering.

You should view the advisory fee demanded of you as a show of interest and indication of willingness to be committed to the terms of the relationship being built with the firm.

If you formerly feared advisory fees undermine the alignment of interest achieved through a pure success fee only model, consider changing your model if timing is critical in your case.

Mostly, you get the trust of the firm when you are able to pay an advisory fee, showing that you will not fail to pay the success fee when the fund has been approved.

You know this is the basic term of working with a PE firm.

You would be considered a monster waiting to eat up an investment, if you cannot work hard enough to pay an advisory fee, it shows you might be unable to manage the fund you will receive thus putting the investors to 98% risk of wasting any fund you receive; since you can't prove how committed and hardworking you are, if you can't pay an upfront advisory fee.

Thus, even after preparing and delivering a quality presentation, without proof of commitment through payment of advisory fees, no PE firm will take you seriously when coming to accelerate the process of your initial offering.

So, refusal to pay an advisory fee is a great disservice to your company's smooth accelerated process of initial offering.

Why waste all efforts of planning and pitch preparation if you will not show proof of commitment?

Remember that the PE firm will be risking everything if you fail to deliver returns after capital has been provided, and, this fear of failure is at the core of the justification for a demand of advisory fees.

Even though you currently don't have a huge budget for marketing campaigns, don't compromise your interest by failing to plan a budget for an advisory fee, even before consulting a PE firm.

Being able to pay an advisory fee shows the firm that your management team is credible and you have done proper planning for your initial offering, before advancing to seek help for an accelerated process that will help you reach your initial offering deadline.

The most thoughtful PE firm is willing to invest an order of magnitude more than the advisory fee in marketing the transaction and if you have committed to the process with your budget accommodating a negotiable advisory fee, you will be expected to negotiate in good faith and this is a critical pretext for success.

So I advise you to sharpen your negotiation skill and have a balanced understanding of negotiation, before contacting a PE firm. 

The PE firm's syndicates are negotiation professionals, so you have to prepare very well when contacting the firm for negotiating the advisory fee which will be paid upfront.

No one's interest is worth being comprised, but every good negotiator looks for his BATNA first, in order to forfeit the lesser important interests for the other party to achieve his most valued interest also.

Get informed immediately that if you succeed on any advisory fee negotiation, you have only agreed to pay a mere 5% of your success fee upfront.

And if that is the case, then you shouldn't be a week negotiating party; because the trick is that the success fee will be the result of multiplying the negotiated sum of advisory fee by 95% and this would be fair rate you know.

The accelerated process of your initial offering is expensive but there is no better alternative to it when planning your company's recapitalization. If you don't use this approach, you might never find an investor even after being an unfavorable competition in the market.

If you know you want to succeed in finding capital for your company, don't waste time putting up any IPO notice.

The expensive accelerated process is the fastest and the best alternative for you.

This article does not discuss other alternatives since it presumes you have tried other alternatives but failed before deciding to use the alternative of the accelerated process that guarantees success in accessing capital within the time frame that meets your deadline.

This process is expensive because another firm is responsible for your success. The appropriate PE firm uses your advisory fee to launch an effective marketing campaign for your initial offering, by tapping its own investor base; which you won't have access to unless you have committed to the process.

It has taken the firm multiple decades to build its investor base through years of commitment to finding other companies that were able to commit to the process for success before you.

Those companies succeeded and you too can succeed, if you willingly commit to the process.

Since your success depends on your commitment, you should make the commitment first and by so doing you will be ready for success.

Here are six tricks to succeeding in negotiating a favorable advisory fee to be paid upfront as your commitment:

1. Plan with your management team; know how much you can comfortably afford for your success fee if you succeed.

2. Discuss your strategy of raising the success fee, independent of the fund you need.

3. Sum up your success fee by a fraction of 95% of the total amount you have planned to pay; that will be convenient to your team, to provide same at a deadline, with or without an installment plan provided by the firm.

4. Record the balance of the fraction as your negotiable advisory fee.

5. Once you have arrived at this metrics of success in the accelerated process, contact the appropriate PE firm to pitch your initial offering and keep your deliverable presentation handy before contacting the firm.

6. Once the firm asks for your presentation, send it without delay and state at the sign-off page the amount you are able to pay upfront as advisory fee.

You've learnt six simple tricks. Wait & see in 3 weeks, you will get a mail or phone call congratulating you for having won an approval for the commencement of the funding process, sign a contract.

The accelerated process for initial offering

If you have won an approval, you should get ready to respond to make your first payment through the option provided by the firm.  

As soon as you are able to make your initial payment, you will be required to schedule a due diligence meeting for the next four to six months, and once completed, you will get the confirmation to proceed to the next stage of fulfilling terms in the contract you signed before paying your advisory fee.

This is where you know your funding is approved, and you pay the success fee as soon as you are funded.

At this point, you are ready for a negotiation, the next stage is find your PE firm.

Look out for the next article on the criteria for finding a reliable venture capitalist for your capital planning success.

But if you can't wait for another week before pitching your initial offering; if you have concluded on your public offering planning; if you want to launch the accelerated process for your initial offering; and, if you have any urgent need for capital that means you cannot wait…

Then click here to mail your presentation and a reliable PE firm will review your presentation and pitch.

After the review, you will be getting a response in the five business days from the day of your submission. Click here to mail your presentation now.

Feel free to make contributions to this article, ask questions, observe any error and make corrections. Your feedback will be highly appreciated.

Interactive Section:

The following are participation tips and special points to note for discussion on this article.

Instruction:

Find out which of the following assertions are incorrect. Mention the correct number behind the assertion you wish to correct and state reasons why you think it is wrong, then make comments to support your chosen assertion with stated reasons for your corrections.

Assertions to consider:

1. It is necessary for private companies to understand the relationship between the capital market operators, before planning an initial offering.

2. Only a public issuer can sell stocks which is a capital market instrument preferred by investors because of its huge returns.

3. A private company can also become an issuer, but only after its initial offering which is dependent on its capital.

4. Capital planning for a private company considering an initial offering is generated through bonds which are also among the capital market securities and can be either corporate, municipal, government or any other bond.

5. The government bond is the most secured bond in the capital market and the government bond market is very big and its liquidity is also beyond comparison.

6. Capital can also be got from a Private Equity firm; an option known as venture capitalist; because of the interest in the firm in owning a large share of company which it provides funds through its investor base.

7. Choosing venture capitalist funding option is usually the fastest way to raise fund for a private company that is considering an initial public offering.

8. Venture capitalist funding is also an option for public issuers that have lost the trust of investors in a period of repression and want to recapitalize before another public offering.

9. Venture capitalist funding is also a good option for private and public issuers that have mismanaged a bond and need a bailout capital that will reassert their ability to pay back their debt.

9a. Other bond markets will not respond to their appeal at that critical moment and the assets of the company could be lost to the initial bond market, if care is not taken to recapitalize before the end of the bond duration.

10. The venture capitalist funding is actually the best option for recapitalization or capitalization prior to an initial offering or after an unsuccessful public offering.

11. Venture capitalist funding is the best way to access other forms of equity such as growth equity and transportation equity, and is strongly recommended for all companies and institutions owning any form of capital market instruments, especially stocks and bonds.

Conclusion:

Once the company provides the initial offering pitch and a quality presentation stating its need of the firm and the PE firm approves it, the company will be required to sign the contract documents after a successful negotiation and the funds will be released, once due diligence is complete and the company gets a high rating for its investor appeal.     

You might begin considering this option today, then you need to get a few days trail of what is involved.

This article has articulated the points you need to note about access to capital and the topic discussed has been " Six Simple Tricks to Successful Funding Approval with Good Capital Planning"

The next article will stir discussions on the criteria for finding a reliable venture capitalist for your capital planning success and will equally give a formal response to your observations and contributions to this article.

Now make your contributions.

And see you in the next article.

Francis B. Isugu

Continental Marketing Strategist,

Bold Step Capital Securities Inc.