Raising capital for a startup or an exiting small business is without question one of the most challenging aspects of an entrepreneur starting a business or growing a business. The stories are manifold of entrepreneurs and small business owners becoming both frustrated and discouraged by the amount of time it takes to secure capital, the rejections they endure, and the lack of linearity and progress checkpoints over the course of the fundraising process. Complaints we hear repeatedly from entrepreneurs regarding fund raising include the following:

The Stress and Frustration of "Maybe." It is common for a prospective investor - either an individual investor or a venture firm - to show enthusiasm for an opportunity upon initial review and then to leave the entrepreneur in limbo - forwarding neither a definitive "no" nor a definitive "yes" to the investment proposition.

Here the golden rule is in effect - namely those that have the gold make the rules. While investors expect you as the entrepreneur to provide a very specific timeline in regards to growth metrics and return on their prospective investment, this expectation is too often not reciprocated in regards to an investment decision.

Lack of Urgency. A great challenge in raising capital for a private company is the lack of natural urgency. Because there are so many more sellers of private company stock than buyers, attempts by the seller to create urgency by setting time periods within which the investment must be consummated and/or limiting the amount of stock that can be purchased are often viewed by buyers as simply sales techniques and are not credible. The mindset among investors is often if it is an attractive opportunity today then it will still be an attractive deal next month. This is especially true for emerging company investments, for which the most likely exit is via a sale of the business or a public offering, events most likely to occur 3-5 years
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Top Seven Capital-Raising Mistake

In my experience of working with many aspiring entrepreneurs that have had great success in raising capital for their businesses, as well as our experience of working with as many that have struggled, here are some of the key mistakes I see most typically made:

#1. Vastly underestimate time commitment necessary for fund-raising.Companies vastly underestimate the time commitment necessary to successfully complete a financing. We recommend that a company seeking financing budget between 500 and 1,000 work-hours to the capital-raising process, spread out over a 6 month time period. The key processes include:
Perfecting the business plan, offering memorandum, and other company due diligence materials;
Developing a comprehensive, targeted prospective investor list;
Contacting this list and responding to investor due diligence requests; and,
Negotiating the transaction.

To see how easily the time adds up, our experience is that only about 25% of prospective investors showing an initial interest in a transaction actually progress to detailed company due diligence. Only about 10% of this 25% actually progress to a bona fide 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.

#2. Poor Presentation Skills. Far too often, investment discussions go astray because of poor oral presentation skills on the part of Company management.Active investors across the risk spectrum (startup equity to secured debt) are literally inundated with investment opportunities. It is not unusual for a principal at a high profile venture capital firm to review dozens of prospective investments every month. As such, it is imperative that your investment presentation be extraordinarily brisk, to the point, and delivered with flair and great enthusiasm.If the key presenters on a management team do not have these skills, then our recommendation is to either invest immediately in professional presentation and public speaking coaching, or to replace company principals with more impressive presenters. It is that important.

#3. Non-Detailed Use of Funds Statements. We have spoken with countless companies that get stuck on the simple question, "How much money are you seeking and why?" Our experience is that the most credible and impressive operating executives present sober and credible use of funds forecasts based on multiple funding scenarios. These forecasts are built from "the bottom-up," with specific revenue and costs estimates garnered from the company's historical financials and from forward-looking surveying of vendors, salary bands, property leases, etc.

#4. Poor Understanding of Cash Flow. Most operating executives have a relatively strong grasp of the marketing and operational components of their business, but tend to be weak in projecting and communicating the specifics of how they actually make money. And by making money we mean creating cash.Before an investor will place cash into a company, they must be convinced that this cash will be transformed into a company infrastructure that will eventually (and sooner rather than later) create much more cash than originally invested.Creating cash requires a rock-solid revenue and cost flow business model.Among others, key variables in the model include customer acquisition costs, pricing and gross margins, accounts receivables aging, realistic administrative costs, and taxation and depreciation. The better that a company understands and communicates these cash flow variables, the stronger and more credible will be the investment offering.

#5. Targeting the Wrong Investor Audience. We have seen countless companies waste precious time and money contacting unqualified and inappropriate prospective investors. Before an investment offering is undertaken, a comprehensive prospective investor list must be created, and all of the investors on that must be qualified as to track record of investing in financing stages (private, public, equity, subordinated debt, senior debt, etc.) and market sectors similar to the company in question. While there are always exceptions, contacting prospective investors that have not recently invested in a company "like yours" is, in our experience, almost invariably a losing proposition.

#6. Accepting Too Much Feedback. Capital-raising is a long and arduous process. As discussed in bullet #1, the vast majority of investment presentations made will result in some form of rejection. But in addition to rejection, the company will also receive - either solicited or unsolicited - advice and feedback on the "flaws" of their business. While this feedback is sometimes valuable, it iscritical to very carefully filter and evaluate this feedback before revising the business plan and presentation. By the time an investment offering is circulated, company management should be extraordinarily convinced and committed as to the validity and solidity of its plan. Be sure to measure all feedback, no matter how well-intentioned, against this conviction and commitment.

#7. Going It Alone. Raising money is one of the most, if not the most, challenging undertaking an organization will ever make. The pitfalls and hazards are everywhere, and the consequences of failure are devastating.Capital is the fuel that drives business. And without fuel, your venture will sputter along, then stop, and most likely be eventually abandoned. With the consequences of failure so dire and the challenge so great, it only makes sense to seek out the absolute best professional assistance to maximize the probability of financing success. A quality investment banker, specifically skilled in equity and debt placements, is one of the most important advisory relationships a company can establish. While law and accounting relationships are extraordinarily valuable, they are, in essence, cost centers for a business. A quality investment banking firm, in contrast, is the ultimate revenue center -- vastly increasing the likelihood of financing success and taking the vast majority of its compensation on a contingent basis. The key, of course, is to find an investment banker of true quality. Unfortunately, there are a lot of unscrupulous individuals and firms offering capital-raising advisory assistance. Our recommendation is to always check references and also make sure that the individual or firm is properly licensed with the NASD and the SEC. A transaction participated in by an unlicensed firm can subject all individuals and firms party to the transaction to significant fines and sanctions.

these are some of the most common mistake aspiring entrepreneurs like you and exiting entreprenuer like you make when raising capital for your business
making these mistake can lead you not to get the start up capital you need for your business
So how can an entrepreneur level the playing field, mitigate the balance of power and accelerate the fundraising process

6 more Capital- raising mistake

The business landscape is littered with aspiring entrepreneurs who have stumbled in their search for rasing startup capital for their business. Many requests are unaccepted. Those who pass the test sometime have unacceptable strings attached. Some deals that close come back to bite the business owner in the form of debt, insufficient revenue share or worse.here are some more of the mistake entrepreneur and aspiring entrepreneur make when raising startup capitalfor their business
1. Half-written business plans-- There's nothing worse than going into a meeting unprepared. If you haven't put the time and energy into writing a full business plan complete with elements, such as a business description, financial projections and a competitive market analysis, the people with the cash won't put the time into evaluating your proposal..
2. Focusing too much on the idea and too much on the management-- It's not enough to convince great a idea that you've invented the next must-have gadget or can't-miss fast food store concept. You also need a team that can generate the revenues to repay a bank loan or provide an exit strategy for a Venture capital or angel investor. Many business owner ignore the second part of the equation; that can doom their money quest.
The greatest racehorse in the world still needs a great jockey to a win a race. The same principle applies in business. Showing that you have recruited a top-notch salesperson, a skilled marketer, an accountant with startup experience, other key personnel, and even outside experts like an attorney or business coach who can supply professional guidance is essential to finding a funding source.
3. Not asking for enough money-- In a 2004 U.S. Bank study of reasons for small business failures, 79 percent cited "starting out with too little money" as one of the causes of their collapse. That's often because entrepreneurs who are wet behind the ears don't realize that they should calculate their borrowing needs based on their worst-case scenario instead of their best-case forecast.
An old accounting axiom says that everything will take twice as long and cost twice as much as you expect. While that may be an exaggeration, new business owners are frequently too optimistic about how soon they will begin to fill their cash pipeline and how fast the money will flow. If you're underfunded, you won't have a cushion to tide you over in the event of slow initial sales or unexpected market conditions.
4. Having too many lenders or investors-- One of the hazards of securing financing from multiple sources is managing too many relationships and expectations. It takes time away from your core business. These not-so-silent partners may have conflicting interests or demands and the consequences can be devastating.
This is particularly true when you raise money from friends and family. One hairdresser I know borrowed money from seven or eight relatives to open her own salon. The business was successful, but there were perpetual battles over how the profits should be distributed. The arguments couldn't be settled to everyone's satisfaction, so the salon was forced to close.
5. Failing to get the proper legal agreements-- This is arguably more important than a prenuptial agreement for a couple with significant individual assets. Every lender or investor eventually will need his money back, and a legal document covering everything from the terms to the timing can avoid the kind of acrimony just described.
6. Poor cash flow management-- Too many new business owners burn through their seed money too quickly and fail to reach cash flow-positive status in a timely manner. Some causal factors, such as late product deliveries and economic downturns may be beyond one's control, but the executive team is clearly at fault for others, such as unnecessary spending and overly optimistic expense/income forecasts. Financial sponsors don't take kindly to that sort of mismanagement. And if they turn off the tap, all of your hard work may go down the drain.
There are other pitfalls to avoid, but the bottom line is this: Play by the lenders' rules to get them to open their checkbook, but protect yourself at the same time. There's no point in launching a business that will eventually sink under the weight of your investors' demands. If your business plan is good enough and you approach the right people, you should be able to whistle all the way to the

Part of the problem lies in the nature of the startup endeavor. Freshly minted entrepreneurs are typically major risks for lenders because they lack business experience, collateral to secure the loan or both. Neither family, friends, banks, venture capital firms nor angel investors are interested in losing their investment. You can't blame them for not wanting to take a risk on a venture without a reasonable probability of return.
On the other hand, many financing efforts fail because of avoidable mistakes that are made in pitching potential lenders, structuring the agreement or managing the money once the deal is done.
Steering clear of these missteps can increase your chances of success, both in obtaining startup funds and keeping the money flowing. Be sure to avoid these blunders
these are some of the most common mistake aspiring entrepreneurs like you and exiting entreprenuer like you make when raising capital for your business
making these mistake can lead you not to get the start up capital you need for your business
So how can an entrepreneur level the playing field, mitigate the balance of power and accelerate the fundraising process
http://www.facebook.com/pages/How-to-start-and-succeed-in-small-business/137075066463972

@comceptkid ....... Follow this thread

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