Business Financing

Business Financing: Pacific Venture Club The Pacific Venture Club has been a resource for financing entrepreneurial ventures since 1988. In that time, we have been involved with virtually every successful form of capital-raising, from private investments to public offerings. The Pacific Venture Club’s President Robert Coleman was an advisor to the California Department of Corporations for the creation of their SCOR (Small Corporate Offering Registration) program intended to allow entrepreneurs to raise money directly from the public. Mr. Coleman also taught classes on capital-raising throughout California and was a lecturer for San Francisco State’s Graduate Entrepreneur Program on the same topic.

The following articles discuss the process of raising capital from investors. The Internet provides new opportunities for capital-raising that have never existed in history before. We suggest you start with the article “Using the Internet as a Resource to Find Investors” first.

Article: Raising Venture Capital in a Difficult Economy

Raising Capital in a Difficult Economy If you are an entrepreneur in a startup or growing company, I don't have to tell you that these are economically difficult times. Entrepreneurs have been hit from every financial front imaginable: the venture capital industry has been devastated, the decline in real estate has reduced home equity loans, and the banks themselves have teetered on the edge of the abyss. Even the consumer credit card industry, the last resort of financing for many entrepreneurs, has tightened up considerably. Many credit card companies have drastically slashed consumer credit as a means of protecting themselves.

Although it may seem counterintuitive, these are actually not bad times to raise money for entrepreneurs. There are several reasons for this.

Article: Using the Internet as a Resource to Find Investors

Using the Internet to Find Investors There is no question in my mind that the Internet is the greatest resource ever invented for entrepreneurs who want to raise money from investors. Never have so many tools existed for entrepreneurs to locate investors. You can extend the premise of Chris Anderson’s famous book “The Long Tail” to include investors: for every project, every idea, no matter how unusual or niche-focused, there is somebody somewhere who will want to invest in it.

Balancing Investor Financing with Investment Costs

Entrepreneurs often look forward to receiving capital from investors without fully taking into account the resources required to raise money. Much like how kindling helps start a fire, using early investments to raise more money gives the Company necessary fuel.

Steps to Take Before You Raise Money

Excited by the prospects of investment capital, many entrepreneurs rush headlong into trying to raise the money as quickly as possible. Often, such an approach produces disappointing results. This usually happens because the entrepreneur doesn't fully understand what will be involved to make it all work. Imagine that you were told of an enormous gold mine lying unclaimed in the middle of a desert wasteland. Even though you want the gold, it would be foolish of you to load your pickup truck and race off into the desert without knowing a few things: how far away is the gold, how hot will it get, how much water will you need, etc.

Direct Public Offerings in the Internet Age

In the early 90’s, Direct Public Offerings (or “DPOs”) were the current rage in capital-raising. The SEC and some states streamlined the process for issuing DPOs, which lowered the resources required to get offerings out to the public. Direct Public Offerings allow entrepreneurs to sell investments in their businesses directly to the public, bypassing the traditional machinery of underwriters and exchange listings common to larger companies. With DPOs, any company could offer securities to the public without involving the investment banking community. More importantly, companies could legally advertise for investors. A number of successful DPOs were launched, from brewpubs to specialty retailers and beyond.

What Is An Offering?

If you want to raise money for a company without having assets to borrow against, chances are that you will want to consider an offering of securities as your primary strategy. A securities offering generally occurs when you raise money from a group of investors who are expecting you to manage and spend their money; they are taking a gamble that you will succeed in generating a profit. Whether the offering includes debt, equity, or a combination of the two, no other unsecured financing program provides the versatility and success rate of a securities offering.

What It Really Takes To Raise Money from Investors

There are very few subjects littered with as many half-truths, myths, and outright lies as the subject of raising business capital from investors. These falsehoods result in tremendous difficulties for entrepreneurs; the majority of enterprises seeking investment capital simply fail. Yet, by knowing and applying a few principles, you can drastically increase the likelihood of success for your financing program.

Hit or Myth

Before we discuss the things you should know to raise capital successfully, let's cover some of the most common misconceptions. Although the following beliefs are widely held, they are generally not true and may result in serious problems if you follow them.

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