10 silly things to do in your capital raising campaign

We posted an article “7 common mistakes in capital raising” , and has received many comments. Upon many readers' request, I would like to publish a 2nd article relating to capital raising, this time, I would like to relate to our experience not just in VC/PE capital raising market, but also in the public (IPOs, floatation, stockmarket) listed markets.

I call them 10 silly things; maybe I should rename them as 10 big mistakes or things people have ignored.

When comes to capital raising; you should never:

1) I have a 2 page Business Plan: Try to raise capital with a very simple 2 page business plan, I don’t know why, but people still do it! I met a client last week, and he showed me a business plan which is 5 pages with a spreadsheet with 6 rows! If you can’t put it into a proper business plan, please do not even start showing prospective investors or advisors. Having a very simple and non-informative business plan usually means you have no idea what you are doing or just being too lazy; which is not your intention of course.
2) No Sales Forecast: I was working on a $25m capital raising project for a telecommunications infrastructure project last year; and the management team could not produce sales forecast for next 3 years; despite of repeating requests, they just can’t produce it. This is usually the first part we look into, if you don’t have a sales forecast in your business plan now, please revisit your plan.
3) Ridiculous Sales Forecast: I wrote this in my 7 common mistakes last time, and would again want to reiterate this. I am reviewing a business plan this week, it shows 100%, 150%, 200% revenue growth without any notes or assumptions, it’s a finger in the sky wild guess.
4) Too many non-executive directors: I was an interim CEO for a funds management once upon a time. The company has 6 directors but no full time director, everyone was a consultant including myself. I have seen many business plans and prospectus try to “dress up” their management team by having high profile people as directors; other than drawing some directors’ fees, these people are often what I can  as “passenger directors”
5) Marketing is not Sales: For some reason, a lot of businesses think marketing = sales; without marketing, there won’t be sales, as simple as that. The difference is, you do have to allow budget for marketing activities; this is why we have “Marketing Director” as a position! I have seen so many financial forecast where they have not provisioned any marketing expenses at all, which is very silly in my view.
6) No Website: Guys, this is $1000 job (even less) to build a nice, 5 pager website. Without a website, it’s like a book without cover page! You may not think having a website is important for capital raising until you receive the investment capital, in fact, it should be the other way around.
7) No patent: Another common mistake especially for technology companies, it is very silly not to register any patent on your technology / innovations; especially if you are sending your manufacturing to overseas plants; we know how “creative” some of the manufacturers can be; if Apple’s iPhone can be copied within 48 hours, how long do you think your technology can be copied from?
8) One Man Show: I have encountered numerous occasions; and have been through the same path myself. Who runs the sales? Me, who runs the finance? Me. You can’t run a business like that, it is OK to state the truth that you are leading the company and being the sole director in the company; but do mention in your business plan that you intend to hire X number of people for sales & marketing; and outsource your administration or finance; and highlight them in your financial forecasts.
9) Forever Changing Business Plan: I ran into a young inspirational kid who wants to start an education company; and asked me for help. Within the next 7 days, he changed his plan 7 times; and actually said so in front of investors. It is a big mistake to say “if this does not work, I will do this”, it shows you have no confidence in your business.

This is very common for public listed companies, some companies keep changing their business directions; one company went from mining to technology then went back to mining again within 12 months, you can guess what happened to the share price.

10) Showing your inexperience in interview: Capital raising is like getting a job, you will from time to time; facing questions where you have no answers. Do not just have a wild guess or assumptions; you can mitigate these by telling them to get back to them with more details; or bring an advisor or someone else in the management team. I always found “team approach” interviews with VC/PE fund managers much more easier; and also more professional from the eyes of investors as well.

I hope you find my 2 cents worth useful in preparing your business plan or Prospectus and good luck in your capital raising venture. We have some capital providers guides for different industries on our website which you may find them useful in due course.