Capital Attraction

Talk to just about any entrepreneur and ask them if more capital would help them grow their business faster. Almost always the answer is a resounding YES! That is even true of most of our CEO Space members who have raised lots of capital.

Capital, is just like jello: there is always room for more.

Most new entrepreneurs don't understand how capital works. They think that you get an idea, write some kind of a business plan, then peddle it to a few people with money and get funding.

And even though there are instances where that has worked, you wouldn't even take those odds for fun in Vegas. It's like playing your guitar and singing on a busy corner in Denver and hoping to be discovered. Such miracles have probably happened before, but you wouldn't bet your business on it.

The truth is, that most new entrepreneurs seek too much capital too early, before they have done the real work of building a capital attractive company. Chances are, they won't get any, but if they do, then they have another problem. Early capital from the wrong sources, without the right plan, requires substantial ownership.

And so, time and time again, entrepreneurs give up way too much for way too little. Nouveau entrepreneurs can actually give up millions of dollars in potential valuation for tens of thousands of early dollars. A little patience, some good old fashioned work, and a proven road map can easily prevent a terrible mistake.

The road to getting capital for your business.

CEO Space instructor Scott Degraffenreid has studied the relationship between all kinds of resources and the business who need them. What his study showed is that most companies, even those who are short of important resources, have other resources that are under utilized. He also discovered that in nearly all cases, businesses expend too many resources chasing capital. With less expense and a little more effort they could create a company that is capital attractive.

The implications of Degraffenreid's research is hugely important to your company. Quite simply, it shows that building a capital attractive company will allow you to raise more capital with less effort.

What makes business attractive to capital?

There are many, many ways to add to the capital attractiveness of your business. Some of them are simple and others require a little more effort and knowledge on your part. Here are a few that must not be overlooked.

• The core of your business must not only be a good idea but your plan must translate it easily and understandably into significant and believable revenue.
• The words and actions of the CEO must clearly demonstrate an understanding of, and the ability to manage, all the costs related to the potential revenue.
• The target market must be well defined and their need and desire for your product or service must be provable.
• The team you are building must have experience related to your business and must answer all questions related to whether or not you can do what you say you are going to do.
• The CEO must demonstrate the company's adamant protection of their intellectual property.
• A strategy for market success must be clear, easily understood, and at least some part of it proven by the success of other companies.
• And, of course, every company needs a 3-5 year plan, including viable, explainable financials.

A capital attractive company is successfully created as part of a comprehensive capital strategy, meaning there never has to be a "catch 22." Capital is raised as milestones are achieved and with every new infusion of capital the work of the company is aimed at making it more of a sure thing.

Just like becoming a better person, building a better business starts from the inside out.

Gale Connell