Raising capital for your business - how long does it take?
This time is devoted to conducting market research to investigate the opportunity, developing a comprehensive financial model, determining the most effective way to formulate a business strategy, and writing and correcting a business plan.
This process includes creating a list of key investors, visiting each investor's website to review investment criteria and past investments, and identifying the right contact person in the company.
Most companies greatly reduce the time required to complete financing. In fact, a company seeking financing must allocate between 500 and 1,000 working hours to the capital increase process, spread over a period of 6-9 months.
The main operations in the capital increase process include
1) master the business plan, submission of the memo and other due diligence materials to the company,
2) to develop a comprehensive and targeted list of potential investors,
3) contact this list and respond to investor due diligence requests, and
4) Negotiate the deal.
Completing a business plan typically requires at least 200 working hours. This time is devoted to conducting market research to investigate the opportunity, developing a comprehensive financial model, determining the most effective way to formulate a business strategy, and writing and correcting a business plan.
The next step, which is to develop a comprehensive, targeted list of potential investors, is also time consuming. There are thousands of potential investors, each with different tastes in the types of projects that interest them. Some invest by market segment (for example, healthcare versus telecom), stage (initial versus later), geography, or a combination of these. Many hours must be devoted to identifying the right investors for your business. This process includes creating a list of key investors, visiting each investor's website to review investment criteria and past investments, and identifying the right contact person in the company.
To see how easy it is to count time, keep in mind that only about 25% of potential investors who show an initial interest in a transaction actually move on to detailed business due diligence. Only about 10% of these 25% develop into a good money supply, of which only 25% actually result in an investment deal. So completing a financing deal requires, on average, networking with approximately 160 pre-qualified potential investors.
The due diligence process, where investors screen an investment, can be very time consuming for a company. Investors often require many documents, some of which can be easily retrieved from files (such as past tax returns) while others may take longer to prepare (such as additional market analysis, customer lists with previous purchases, contact information, etc.). Finally, it can take a long time to negotiate a transaction depending on the complexity of the transaction and the number of parties involved.
Many companies fail to raise capital because they do not realize how much time is required to do so. The companies that understand these requirements and budget accordingly are the ones most likely to continue to persevere and end up with the capital they need.
This process includes creating a list of key investors, visiting each investor's website to review investment criteria and past investments, and identifying the right contact person in the company. To see how easy it is to count time, keep in mind that only about 25% of potential investors who show an initial interest in a transaction actually move on to detailed business due diligence. The due diligence process, where investors screen an investment, can be very time consuming for a company.
