Raising Capital for Your Business ? How Long Does it Take? -

Home
>
Entrepreneur
>
Raising Capital for Your Business ? How Long Does it Take?

Raising Capital for Your Business ? How Long Does it Take?

Most companies vastly underestimate the time commitment necessary to successfully complete a financing. In actuality, a company seeking financing needs to budget between 500 to 1000 work-hours to the capital-raising process, spread out over a 6-9 month time period.

The key processes in the capital-raising process include 1) perfecting the business plan, offering memorandum, and other company due diligence materials, 2) developing a comprehensive, targeted prospective investor list, 3) contacting this list and responding to investor due diligence requests, and 4) negotiating the transaction.

Completing the business plan typically requires at least 200 hours of work. This time is dedicated to conducting the market research to validate the opportunity, developing a comprehensive financial model, determining the most effective way to lay out the business strategy, and actually writing and proofing the business plan.

The next step, developing a comprehensive, targeted prospective investor list is also very time consuming. There are thousands of potential investors, each of which has very different tastes regarding the types of ventures that interest them. Some invest by market sector (e.g., healthcare vs. telecommunications), stage (seed stage vs. later stage), geography, or a combination of these. Many hours must be dedicated to determine which investors are the right fit for your venture. This process involves creating a master investor list, visiting each investor's website to view investment criteria and past investments, and determining who is the right contact at the firm.

To see how easily the time adds up, consider that only about 25% of prospective investors who show an initial interest in a transaction actually progress to detailed company due diligence. Only about 10% of this 25% actually progress to a bonafide offer of funds, of which only 25% of these actually result in an investment transaction. So completing a financing transaction requires, on average, contacting approximately 160 pre-qualified prospective investors.

The due diligence process, where investors scrutinize the investment, can also be very time consuming for the company. Investors often request many documents, some of which can be easily retrieved from files (e.g., prior tax returns), while others may take more time to prepare (e.g., additional market analysis, customer lists with past purchases, contact information, etc.). Finally, negotiating a transaction can take a significant amount of time depending upon the complexity of the transaction and number of parties involved.

Too many companies fail to raise capital since they are unaware of the significant time requirements to do so. Those firms who understand these requirements and budget accordingly are the ones most likely to persevere and end up with the capital they need.

As President of Growthink Business Plans, Dave Lavinsky has helped the company become one of the premier business plan development firms. Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share.

In The News:

INTERNATIONAL: An 'entrepreneurial society' has costs
International Herald Tribune, France - 14 hours ago
Entrepreneurialism is fundamental to capitalist development, economic growth and renewal. However, some innovations created by entrepreneurial activity can ...

Entrepreneurialism And The Dwarf House
Corsavoo.com, France - Aug 25, 2008
To become an entrepreneur is enjoyable when you have a passion for a business idea you are passionate about. However, if you have to become an entrepreneur ...

Home Based Early Childhood Educator
Seattle Times, United States - 21 hours ago
... client/customer service orientation, embracing a team player orientation, entrepreneurialism, and maintaining a professional demeanor. ...

Bringing a 'cultural revolution' to automakers
MLive.com, MI - Aug 11, 2008
Now, we need to foster a climate of entrepreneurialism that popularizes risk and encourages innovative thinking. For the auto industry, Martens believes ...
â€¢ Shift to hybrids means automakers need 'cultural revolution ... MLive.com
all 3 news articles

Domestic drilling keeps our money here, builds economy
Idaho Press-Tribune, ID - Aug 24, 2008
Republicans understand that free markets, capitalism and entrepreneurialism make the world go â€˜round. A principle lost on the Dems. ...

Readers have trouble with reality
Asheville Citizen-Times, NC - Aug 17, 2008
Most American ingenuity and entrepreneurialism is spent figuring out how to get $30 million bonuses from companies the bonusees have just run into the ...

Secrets of entrepreneurial success revealed
Easier (press release), UK - Aug 11, 2008
Meanwhile, a wealthy background appears to deter entrepreneurialism, with more than nine out of ten successful business people describing themselves as ...

Alliance and Leicester Reveal Entrepreneurial Secret
CreditChoices.co.uk, UK - Aug 12, 2008
â€œEnterprise is the lifeblood of British business and it is vital that we continue to support entrepreneurialism and the small business community. ...
Entrepreneurial traits revealed GrowthBusiness.co.uk
all 4 news articles

Moneyweb
Why your geeks are moonlighting
Moneyweb, South Africa - Aug 6, 2008
With the Web 2.0 boom came a rising spirit of entrepreneurialism within the geek community that we seemed to have missed during the dotcom bubble. ...
South African Markets - Factors to watch on Aug 6 Reuters
all 3 news articles

Don't reverse US history of prosperity
Statesman Journal, OR - Aug 7, 2008
... that, while the poor are living at levels of comfort beyond the expectations of kings and emperors of pre-American days, the entrepreneurialism that has ...

entrepreneurialism - Google News