It’s the truth. Raising money is hard
work. It’s one more full-time job for a CEO who already
has several full-time jobs. So, are you making it
harder on yourself that it need be? Let’s consider
one of the classes of professionals, semi-professionals
(and unprofessionals) who offer to help “do” your
raise -- the “finder.”
The “finder.” This
sounds like a guy who stumbles upon opportunities,
making money from his luck and occasional knowledge
of phone numbers. Sometimes, that’s the case. Some
finders, though, are true professionals. Finders --
to my definition -- do not ask for retainers. They
work on a commission and are paid as they succeed.
Some finders will ask for both a cash commission and
warrants. While the term “finder” is
often used derisively, I believe that as a group
they are an important part of a fund-raising plan.
We
are privileged to work with finders around the
world who are honest in their dealings and successful
for their clients. Professional finders have relationships
with investors they know well; they are always
prospecting for new investors to add to their portfolios.
Typically,
finders spend little time with your business plan
and other support materials. If they don’t find
your presentation or business plan acceptable, they
will tell you to fix it. Their focus is on
getting you to investors -- not on strategies and
plans.
Whatever you call them --
finders, machers, investment bankers -- these “connectors” can
make the difference between success and death
for a company. At all times -- and especially
during these times -- I encourage you to speak
to many and engage -- non-exclusively -- those
whom you feel comfortable with and will work
to help you and your company.
And because
you should engage them non-exclusively and
because they cannot commit to any investment
-- they can only bring you an investor for your
consideration. I
beg you: Don’t get overly focused
on the fees that they request from you.
Get focused on the investors that they bring
you and the total cost of the deal -- their
commission and warrants are part of the
total cost of the deal. I see companies
spending more time negotiating with finders
than they spend talking to investors. That’s
the wrong balance.
You can only understand
what a deal costs when see the valuation
offered and the full set of terms presented.
The finder who asks you for 7% cash plus 7%
options is a bargain when he brings you
the money that you need at the valuation
that you want. Focus on the total cost
of the deal.
Remember, you can always (and
you must) say “no” to a bad
deal -- and a bad investor. Say
"yes" to your finder and deal with the
investor when he is at hand. Stop thinking
that the finder is getting lots of money “just
for making a phone call,” and start
thinking that you will be thrilled to
write him a big check.
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