What is Raising Money?

Raising Money represents the external financial support that is often provided by banks or investors.

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Some key questions to consider before raising money:

  • When is there a need for outside capital?
  • How much is needed and for what?
  • What is the most favorable method to leverage outside resources?
  • How can we communicate the need to the right bank or investor?

Some levers that can improve your position:

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Practical Application:

  • Delay debt payments
    • Minimize what's owed without harming the relationship
  • Minimize cost of capital
    • Look for the lowest interest rate with the most favorable terms
  • Minimize equity given
    • Self-finance the growth (or use debt) as long as possible to make the pie bigger (the bigger the pie is, the smaller % each dollar is worth)
    • Vest equity to key hires over time to reduce risk of overcompensation (and them leaving)
    • Include a buy-back clause to be able to purchase back equity at a fair price at a future date

By identifying the symptoms of bottlenecks in the areas of your business, we can identify potential solutions to alleviate constraints.

  • Symptom
    • Ongoing demand is out-pacing the self-financed growth rate
    • There are unique opportunities that require more cash than is available in the bank
    • There is an opportunity to capture more market share strategically
  • Solution

    Apply it to your business (fill in the blank with one of the tactics above): 

    • If I were going to _________ right now, where would I start?
    • How have I found ways to _________ in the past?
    • Who in a business/industry similar to mine would I be able to ask about _________?
    • How could I inexpensively and quickly test _________?
    • When can I commit to testing _________, and how will I know if it’s working?

    If a need for outside capital has been identified (check your forecasted low cash point), you'll need to consider who you'd like to approach, and what needs to be communicated to that outside party.

    In general, consider using debt for predictable cash needs (ie, line of credit for inventory seasonality) and equity investments for more speculative growth/expansion.

    If you're approaching a bank, they'll likely need to see a few quantitative statements:

    If you're going to an investor, they'll likely also want to know more about the qualitative aspect of your business. A pitch deck tells the cohesive qualitative and quantitative story (ie, the value of your business and the % you're willing to give up for a certain $ amount) about where your business has been and where you plan to take it into the future. 

    Like hiring, it's essential to have a bench full of qualified opportunities in order to avoid having to rush into a less-than-ideal situation.

    Investopedia is a fantastic resource to better understand investment terms.


    Resources that can help you craft your pitch: