Determining the Right Amount of Investor Exposure

Posted May 14, 2007 by KYRands
Categories: investor fund raising, raising capital

In planning for a successful funding campaign, you must expose your investment opportunity to enough investors. 

The Kugarand Theory of Investing states that for every …

1 investor who invests,

3 say they will invest, and

15 investors were exposed to your investment opportunity to get to the three to get to the one Investor who actually invests.

For example, if your company is raising $1 million dollars and has a minimum investment of $25,000, then your company is seeking 40 investors,

($1,000,000 / $25,000 = 40).  For your company to get the 40 investors to invest, you will need to exposure 600 investors to your investment opportunity,

(40 x 15 = 600 investors).

Find out how many investors you will need to expose to your opportunity using this formula.

A = How much money are you raising?

B = What is your minimum investment amount?

A/B = C

C = Number of investments needed

C * 15 = Number of investors who need to be exposed to your investment opportunity

Now that you understand exactly how many investors need to be exposed to your investment opportunity, you can plan accordingly.

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Make Sure Investors Remember by Creating a Buzz about Your Deal

Posted May 13, 2007 by KYRands
Categories: investor fund raising, raising capital

There can never be any guarantees in the process of connecting your company with capital because there are so many factors that impact an investor’s decision to invest.  Unfortunately, even when a company has none of these obstacles, they can still fail in their quest for private equity funding because the interest of the investor wanes.   An institutional investor or venture capital firm may decide they need to diversify and will not invest in a specific sector, even though they professed interest right up to negotiations of a term-sheet.   A private investor may decide to invest in another project that rings a specific emotional bell or may have a personal matter that needs attention, sidelining any private equity investment transaction.  Often, entrepreneurs make the mistake blitzing through investors and never providing updates, so when the circumstances change and the investor is ready, they are onto the next new opportunity rather than the deal they saw two months before.  They either assume the company got their funding or have failed since they never heard from them again. 

To create a Buzz about your deal and generate momentum for your offering, you need to tap in to the investor network you are creating with investors.  Investors who liked the deal, but have not yet invested, are your BEST source for potential new investors.  Therefore it is important to keep interested investors updated with news about your company to increase the likelihood of investment.  Maintaining communication, with not yet committed investors, is imperative to a successful capital raise.

Communicate with existing investors so they can ‘brag’ to their friends (and potential investors).  Have an ‘elevator pitch’ with an easy verbal explanation, so that after the presentation, investors walk away able, and desiring to talk about this hot investment offering they just saw. 

Raising Capital: 5 Reasons an Investor Won’t Invest

Posted May 13, 2007 by KYRands
Categories: investor fund raising, raising capital

Tags: , , , , ,

When it comes to funding your company, it is important to understand the difference between objective and subjective investors. The subjective investor is some how connected to you. Often referred to as “Friends and Family”, but in reality they are business investors with a connection to you directly through a common connection like your friends and family. These investors, or friends, believe in what you are doing and invest in your business. At some point, a business who seeks private investors has to move beyond Subjective Investors to the world of Objective Investors.

 

Objective investors examine the overall business model and investment opportunity. Objective investors see dozens or more offerings each year. How do you think they determine which businesses to invest in? They look for reasons NOT to invest. By examining your complete business model and investment opportunity they can determine red flags.

5 Reasons an Investor Will Not Invest:

  1. Incomplete financials and/or business plan (market/sales strategy, operational information, barrier to entry not established)

  2. Complex or confusing message within the investor documents regarding business model or investment opportunity

  3. Structure of the offering, perceived cost of the investment relative to a high valuation or unclear exit and return to the investor

  4. Inexperience or incomplete management team, and/or attitude of the management conveying a sense of entitlement or resistance to advice & counsel

  5. Specific industry focus or niche marketplace that limits the potential number of investors

Many of the reasons for no-go investment decisions can be identified and remedied before the investment process begins. How can your company determine if you business model and investment opportunity is investor ready?