Raising Capital

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Important concepts to understand when raising capital

1. Raising capital through the issuance of securities, although it may seem difficult in the beginning, is by far quicker, easier and more effective than seeking capital from institutional sources of capital, such as venture capitalists, investment banks and commercial banks.
2.  Conducting a series of securities offerings will increase the probability of raising substantial amounts of capital for start-up, early-stage and even seasoned companies.  If you compete on the basis of yield by offering notes, bonds or preferred stock with higher than average yields, you will attract individual investors.  This part of the capital market is known as the fixed-income market, which is 15 times larger than the equity markets (a lot more possible investors). 
3.  Position an offering as a new product or service launch where a research and development process precedes the actual production of the product, in this case the securities offering document.  The markets are demanding high yield with some upside participation of profits to enhance the yield relative to the risk involved with the security.
4.  Carefully evaluate all options for operating your company to lower the required amount of capital needed to achieve increased revenues and profitability. 
5.  Try to keep control. Generally speaking, it is better and wiser to have many investors in your company with relatively small amounts of capital, as opposed to a few investors with large amounts of capital.  By doing so you can control the terms of the deal; maintain voting control of the company; and build a growing pool of investor contacts, which you may need for additional future rounds of financing in the company's early existence. You should always be dealing from a "relative position of strength" when seeking capital.

- Steve Sink