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interpretation of the subject matter herein.

12 Insider Secrets to Raising Capital

publication is not intended for use as a source of legal or accounting advice. The
12This
Insider
Secrets
tocontained
Raising
Capital
Publisher wants to stress
that the information
herein may be subject
to
varying state and/or local laws or regulations. All users are advised to retain
competent counsel to determine what state and/or local laws or regulations may
apply to the users particular business.

The purchaser or reader of this publication assumes responsibility for the use of
these materials and information. The author and Publisher assume no responsibility
or liability whatsoever on the behalf of any purchaser or reader of these materials.
We expressly do not guarantee any results you may or may not get as a result of
following our recommendations.

Legal Notices
All rights reserved. No part of this publication may be reproduced in any form or by
any means graphic, electronic or mechanical including recording, photocopying or by
any other information storage or retrieval system, without the written consent of the
publisher.
This publication is sold as an educational reference only. While all attempts have
been made to verify information provided in this publication, neither the author nor
the Publisher assumes any responsibility for errors, omissions or contrary
interpretation of the subject matter herein.
This publication is not intended for use as a source of legal or accounting advice. The
Publisher wants to stress that the information contained herein may be subject to
varying state and/or local laws or regulations. All users are advised to retain
competent counsel to determine what state and/or local laws or regulations may
apply to the users particular business.
The purchaser or reader of this publication assumes responsibility for the use of
these materials and information. The author and Publisher assume no responsibility
or liability whatsoever on the behalf of any purchaser or reader of these materials.
We expressly do not guarantee any results you may or may not get as a result of
following our recommendations.

Growthinks 12 Insider Secrets to Raising Capital

Table of Contents
I. Introduction .................................................................................. 1
II. Types of Capital........................................................................... 2
III. Insider Secrets to Raising Capital ............................................. 5
Venture Capital Secrets.................................................................................... 5
Insider Secret #1 Narrow Your List of Venture Capital Firms .............................................. 5
Insider Secret #2 Never Send a Business Plan ................................................................... 7

Angel Capital Secrets ....................................................................................... 9

Insider Secret #3 Find Latent Angel Investors................................................................... 9
Insider Secret #4 Actively Find Angel Investors................................................................. 10

SBA/Bank Loan Secrets ................................................................................. 12

Insider Secret #5 Seek out Preferred Lenders ................................................................ 12
Insider Secret #6 Preparing Yourself to Get a Traditional Bank Loan ............................... 13

Creative/Alternative Financing Secrets........................................................... 14

Insider Secret #7 Vendor Financing................................................................................... 14
Insider Secret #8 Donations CAN Fund Your Business..................................................... 16

Grant Capital Secrets ..................................................................................... 17

Insider Secret #9 Foundation Grants are NOT Available to For-Profit Businesses ........... 17
Insider Secret #10 The Best Place to Find Grants for Your Business ............................... 18

Business Plan Secrets.................................................................................... 20

Insider Secret #11 How to Establish Credibility in Your Business Plan ............................. 20
Insider Secret #12 Your Financial Model Must Be Incorporated Throughout Your Entire
Business Plan........................................................................................................................ 22

Growthinks 12 Insider Secrets to Raising Capital

I. Introduction
Capital, funding, or money (they all mean the same thing) is the fuel that
allows businesses to grow. Without capital, businesses fail. With capital,
early stage companies can begin to grow, and mature companies can
achieve even greater scale.
For early stage companies, particularly those with little or no track record
of success, the challenge is to find the capital they need.
Because the vast majority of businesses fail, banks, venture capital firms
and other lenders and investors are often highly skeptical and not willing
to part with their dollars unless significant conditions are met.
However, there are ways to attract this kind of capital, and there are tons
of capital sources that are largely overlooked by entrepreneurs
This report identifies the three core sources of funding available to
entrepreneurs and business owners looking to start or grow their
businesses, and then presents key insider secrets for successfully
raising these types of capital.

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II. Types of Capital

For the entrepreneur or business owner seeking to fund their company,
there are three main pools of capital from which to draw:
1. Debt capital
2. Equity capital
3. Creative/alternative financing
Equity capital is the term used to describe the capital that is given to a
company in return for a portion of that companys stock or equity. Angel
capital and venture capital are two key forms of equity capital.
Conversely, debt capital is the term used to describe the capital that is
given to a company in return for the companys promise to repay the
capital over time with a fixed or variable interest rate. SBA loans and
traditional bank loans are two key forms of debt capital.
Debt capital is nearly always secured with collateral; for instance, if the
business owner does not re-pay their loan, they could possibly lose their
house or business equipment if they used it for collateral.
Creative or alternative finance is the term used to describe nontraditional sources of capital, including capital that must be paid back,
capital which requires equity to be relinquished and/or capital that is
given to a company without any strings attached. There are many, many

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forms of creative or alternative finance such as grants, vendor financing

and donation-financing.
The key differences between debt capital, equity capital and
creative/alternative financing are as follows:
Type of
Capital

Term for person

or institution
who provides
capital

Capital provider
gets
equity/shares
of company

Company
accepting
capital must
repay loan

Company
accepting capital
must often put
up collateral

Debt

Lender

No

Yes

Yes

Equity

Investor

Yes

No

No

Creative/
Alternative
Financing

Depends

Sometimes
(but rarely)

Sometimes
(but rarely)

Sometimes
(but rarely)

Creative/alternative financing is clearly the best form of capital with

regards to the fact that oftentimes no equity is issued and the financing
does not have to be repaid.
With regards to debt and equity capital, at first glance, it seems that
equity capital is less risky to business owners. While that is true (since
there is no repayment and no collateral), equity capital is typically only
provided to companies meeting specific criteria (which will be discussed
later).
Also, with equity capital, the business owner foregoes a significant
portion of the value created if/when the company reaches a liquidity
event (e.g., has an initial public offering (IPO) or is sold to another
business).

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However, it is our experience that a small piece of a big company is

better than a large piece of a small company and that if equity capital is
available to your company at reasonable terms, it is often a good
decision to accept it.

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III. Insider Secrets to Raising Capital

Venture Capital Secrets

Insider Secret #1 Narrow Your List of Venture Capital Firms

Venture capitalists dont just invest in whatever companies they find

personally interesting.

Each venture capital firm invests based on

particular characteristics, including:

Market Sector:
Sector Many venture capital firms focus on specific
sectors such as healthcare, information technology (IT), wireless
technologies, etc. In most cases, even if you have a great
company, if you fall outside of the VC's sector preference, they'll
pass on the opportunity.

Stage preference:
preference VCs tend to focus on different stages of
ventures. For instance, some VCs prefer early stage ventures
where the risk is great, but so are the potential returns.
Conversely, some VCs focus on providing capital to firms to
bridge capital gaps before they go public.

Geographic location:
location Most venture capital firms only invest
within 100 to 200 miles of their office(s). By investing close to
home, the firms are able to more actively get involved with and
add value to their portfolio companies.

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Virtually all VCs have websites that make this information readily
available. Find investors that are a fit with your company for all three of
these areas. For instance, if you are a pre-revenue software company
based in Chicago, your best bet is to find a venture capital firm within
200 miles of Chicago that has experience funding pre-revenue software
companies.
If you dont do this, 1) you will waste your time, and 2) you will risk overshopping your company. With regards to over-shopping, the venture
capital community is fairly tight-knit. That is, most VCs know each other.
They work together on deals, sit together on Boards, meet each other at
conferences, etc.
One risk factor that this presents is that if one investor passes on a deal,
it oftentimes frightens other investors, as they start thinking if that VC
passed, he/she must have found something wrong with the deal. As
such, you dont want to present your company to VCs that will pass on
your deal because it wasnt a fit for them, and not because your
company lacks merit.

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Insider Secret #2 Never Send a Business Plan

Do NOT send VCs your business plan in your initial contact.

You must realize that VCs are drowning in unsolicited business plans.
They are NOT going to read your business plan if you send it to them in
the initial email.
Actually, you shouldnt even send an Executive Summary or a PowerPoint
in this first email. So what should you say in your email?
Instead of sending your business plan, give the VC teaser points about
your venture. What do I mean by teaser points? Teaser points are 5
to 6 bullets (200 words or less) about your venture with the key points of
it.
The goal of the teaser email is to:

Create intrigue and excitement

Show that the market size is big enough

Show that the management team is unique

Prove that the venture is capable of generating significant

revenues over time

Create a sense of urgency (e.g., implying that you will get

financing within 90 days with or without them)

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If the VC is interested, they will email you back to request an executive

summary, PowerPoint deck, or even your full business plan.
In Growthinks upcoming Capital Raising Bootcamp,
Bootcamp, we will teach you
exactly how to raise venture capital for your business. Not only will we go
through our proven, 77-step method for raising venture capital and
growing a successful business,
business, but we will explain how to complete the
documents venture capitalists need, how to negotiate with venture
capitalists (and what to watch out for), and much, much more.
more.

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Angel Capital Secrets

Insider Secret #3 Find Latent Angel Investors

While the Small Business Administration and other organizations

estimate the number of active angel investors in the United States to be
250,000, the number of potential angel investors is much greater.
According to TNS Financial Services, there are 9.3 million households in
the United States with a net worth exceeding 1 million dollars. Three
million of these households, according to Merrill Lynch & Co. and
Capgemini Group, have investable assets of at least $1 million, excluding
their primary homes.
We consider this 9.3 million figure to be the best estimate of the number
of potential angel investors in the United States. The vast majority of
these individuals are latent angels, defined as individuals who have the
necessary net worth, but have not made an investment.
These individuals are often the best potential investors in a venture since
they have the funds, but arent bombarded with potential deals (unlike
angel groups and venture capitalists who are constantly bombarded).

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Insider Secret #4 Actively Find Angel Investors

Angel investors are not going to find you. You have to find them.
One great way to find angels is through active networking. Networking
(e.g., attending events, constantly expanding your network by asking for
more introductions from your existing contacts) works extremely well, but
does take time and diligence - so you must stick with it.
Heres a quick lesson regarding how Google raised its angel round of
capital. Founder's Larry Page and Sergey Brin told their ideas to others in
hopes that they would get great advice and connections. And sure
enough, it worked. Page and Brin discussed their concept with their
computer science professor David R. Cheriton. Cheriton then introduced
them to his friend Andy Bechtolsheim.
Bechtolsheim then wrote Google a check for $100,000.
You can also find angel investors through focused prospecting. For
example, understanding that many angel investors are retired
executives, you can find them by doing via searches on Google.
For example if you were seeking angel investors for an aviation company,
doing Google searches on retired Boeing executive and former Boeing
executive will produce names of potential angels.

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Likewise, you can find the names of executives and Board members of
local companies, contact them and see if they are interested in investing
in your company.
In Growthinks upcoming Capital Raising Bootcamp, we will take you
through the entire process of raising angel capital; from understanding
exactly how to find angel investors, to presenting your company to them
like a pro, to structuring the deal terms so the angel funding hits your
bank account without delay.

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SBA/Bank Loan Secrets

Insider Secret #5 Seek out Preferred Lenders

The United States government WANTS you to succeed. And as a result,

they lend money to entrepreneurs and small business owners through its
Small Business Administration (SBA).
If you are seeking an SBA loan, seek out Preferred Lenders. While
Preferred Lenders comprise only 2% of SBA lenders, they make 20% of
total SBA loans.
Preferred Lenders have received special designation from the SBA as
being the most successful lenders. With this designation, they are
allowed to make their own decisions regarding whom to loan money to,
without consulting the SBA first. This means that their loan processing
times are the shortest and you can get your money sooner. In fact,
Preferred Lenders can often write you a funding check within 24 to 48
hours!

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Insider Secret #6 Preparing Yourself to Get a Traditional Bank Loan

Traditional bank loans have very low interest rates and are often perfect
for entrepreneurs and business owners. The challenge is getting these
loans.
One insider tip for getting these loans is to establishing a history with
your bank before you really need the loan.
Banks (like equity investors) like to invest in business owners with which
they have a pre-existing relationship. This relationship breeds trust and
confidence that the business owner will spend their money wisely.
As such, its a good idea to establish a credit history with your bank six to
twelve months BEFORE you need the loan. Even if you simply take out a
$5,000 loan and show that you are able to make payments each month
for a year, your business will be more likely to receive the larger loan you
seek later.
In Growthinks upcoming Capital Raising Bootcamp, we will walk you
through the process and allow you to quickly and easily raise SBA and
bank loans for your business. We will teach you about all of the types of
bank and SBA loans that are available for your business, how
how to choose
the right one, and a stepstep-byby-step process for quickly and easily securing a
loan for your business.

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Creative/Alternative Financing Secrets

Insider Secret #7 Vendor Financing

Vendor financing is often a great, yet highly under-utilized, source of

business funding. As the name implies, vendor financing occurs when a
company receives funding from one of its vendors or suppliers.
Vendor financing is actually one of the most popular forms of debt
financing for companies. Vendor debt financing is often known as trade
credit, and is when a vendor sells you a product or service and you dont
have to pay right away, but rather the debt either needs to be paid in full
within a certain period or periodic payments with interest are required.
However, sometimes vendors provide both interest-free or equity-based
financing for the following reasons:

To gain a built-in customer base. By funding your business, you

will buy more, and they will sell more, (now or in the future) of
their products and/or services.

Loyalty: you will be more loyal to the vendor.

Learning/market research: the vendor will have you as a closer

customer and will learn ways from you to improve their products
and services.

Equity upside, if they make an equity investment and your

company has a significant liquidity event in the future.

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One famous example of vendor financing is that early on, shoe maker
Kenneth Cole sought out a struggling Italian shoe manufacturer knowing
that they needed clients and would probably be wiling to offer financing.
The Italian shoe manufacturer funded the then fledgling company.

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Insider Secret #8 Donations CAN Fund Your Business

Believe it or not, donations have been used to fund many companies

including for-profit ventures.
The most notable of donation-funded ventures is perhaps Wikipedia
which has raised several million dollars in donations to date.
In the for-profit space, an example of donation-funded is Peter Cooper,
founder of FeedDigest. In 2004, Cooper added a PayPal button to his
website and asked users of his website to donate money.
His visitors subsequently donated enough money to allow him to grow.
Soon after, an angel investor wrote him a check for $100,000.
In Growthinks upcoming Capital Raising Bootcamp, we will reveal to you
28 proven, but largely unknown and unused, creative and alternative
financing strategies to fund your startup or growing business.
business. We will
identify and explain each of these methods and provide, as appropriate,
stories of companies who have successfully raised
raised funding from each
source.

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Grant Capital Secrets

Insider Secret #9 Foundation Grants are NOT Available to For-Profit

Businesses

There are many private and public foundations and philanthropy

programs for funding projects that improve quality of life, or allow people
to work towards achieving goals they would otherwise not be able to
pursue without assistance.
However, with few exceptions, the grants offered by private or public
foundations are NOT available to for-profit businesses. So, do NOT waste
your time looking at these grants.
However, the U.S. government, along with state, and local governments
DO fund for-profit ventures through grants.
Within the federal government, there are 26 grant-making agencies.

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Insider Secret #10 The Best Place to Find Grants for Your Business

The first step in locating the appropriate grant for your company is
answering the following question: What industry does my business
serve?
The answer to this question will tell you where to begin your search for a
grant.
Lets use an example business called Wendys Windfarm to walk through
the process. Wendys Windfarm serves the Energy industry and the first
place to begin a search is the Federal Governments Grant Website
www.grants.gov.
Once there you can click on the Menu Option entitled Find Grant
Opportunities. Once you have clicked on that, you can choose to search
by category this is where you recognition of industry comes in handy
click on Energy.
Once you click that link, you are able to view the date that the grant
ends, the name of the opportunity, and the agency distributing the grant.
Likewise, to find the grants that are available to you and your business,
you can conduct an Advanced Search. Using the Wendys Windfarm
example, you would select the following:

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1.

Funding Activity Category: Energy

2.

Search By Eligibility: Small Business

In Growthinks upcoming Capital Raising Bootcamp, we will teach you

exactly how to raise money for your business via grants. We will show you
where to find grants, how to develop and submit a winning application,
and what to do once you have won your grant.

Growthinks 12 Insider Secrets to Raising Capital

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Business Plan Secrets

Insider Secret #11 How to Establish Credibility in Your Business Plan

Your business plan is your roadmap for growing your company. It also
serves to communicate your companys value proposition to your
employees, advisors, partners, customers and investors. Business plans
are the vehicle by which you get in the door, and are the documents
most heavily scrutinized by investors and lenders.
To establish credibility, it is critical that your business plan does not
overestimate market sizes, underestimate competition, or project results
over-aggressively. Rather, your plan must present a realistic game plan
for achieving success, including:
Highlighting past accomplishments: The best indicator of future
success is your companys past track record. The business plans of
previously funded companies must show what milestones they
have achieved with those funds. New companies must show how
the past successes of the management team will enable the
company to overcome expected challenges.
Understanding and defining the relevant market: Improper sizing
of your companys target market is a telltale sign of a poorly
reasoned business plan. For example, though the U.S. healthcare
market is a trillion dollar market, there is no company that could
reap $1 trillion in healthcare sales. Rather, a more meaningful

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metric is the relevant market size, which equals the companys

sales if it were to capture 100% of its specific niche of the market.
Defining and communicating a credible relevant market size is far
more powerful than presenting generic industry figures.
Understanding and catering to customer needs: Investors,
partners and lenders have a laser sharp focus on the relationship
between a company and its customers. In your business plan, you
must clearly communicate how your products and services meet
specific customers wants and needs, and identify which target
markets most exemplify these needs. Your business plan must
also outline an easy to follow and credible roadmap of how your
company plans to penetrate your market.
Proving barriers to entry: Your business plan must include
strategies that demonstrate that your company can and will build
long-term barriers around your customers. Claiming a first mover
advantage is simply not compelling enough.
Developing realistic financial assumptions: Many investors,
partners and lenders skip straight to the financial section of the
business plan. It is critical that the assumptions and projections in
this section be realistic. Plans that show penetration, operating
margin and revenues per employee figures that are poorly
reasoned, internally inconsistent, or simply unrealistic greatly
damage the credibility of your entire business plan. In contrast,
sober, well-reasoned financial assumptions and projections
communicate operational maturity and credibility.

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Insider Secret #12 Your Financial Model Must Be Incorporated

Throughout Your Entire Business Plan

The Financial Plan and projections section of your business plan explains
how the execution of your companys vision will reap great financial
rewards for the investor or partner and/or give the lender confidence
that they will eventually be paid back. As such, it is the section that they
often spend the most time scrutinizing.
Among other things, the Financial Plan must numerically detail the
revenue model through past (if applicable) and pro-forma (projected)
Income Statements, Balance Sheets and Cash Flow Statements.
It is critical that the figures used in these statements flow from the
analyses in every other section of the business plan.
plan For instance, the
relevant market size (Industry Analysis) should be reflected, as should
competitors operating margins (Competitive Analysis), customer
acquisition costs (Marketing Plan), employee requirements (Operations
Plan), etc.
Integrating your financials with the rest of your business plan gives
investors and lenders a greater confidence and understanding of your
business and your ability to successfully execute on the opportunity.
In Growthinks upcoming Capital Raising Bootcamp, we will teach you
exactly how to create an expert business plan that raises capital and
positions you to grow a successful business.

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