Joint Venture Equity | Seven things You Must Know When Raising Joint Venture Equity
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Article by, Brent Virkus of Find the Capital and President and CEO of TRiTON Capital Advisory
Look we all know raising joint venture equity is not easy. This is actually a good thing. Because if it were easy, everyone would raise capital and start a business, buy commercial real estate as an investment, etc. Competition would be ferocious.
For this article, I’m going to focus on raising joint venture equity for your business. So to better help you with this process I’ve put together the 7 things you must know to raise joint venture equity today.
First…and Most Importantly Have "Thick Skin"
When raising joint venture capital, be prepared for a lot of "no's." Using my Google example, even when Google was ready for venture capital, the majority of venture capitalist said "no."
When an joint venture capital says "no," it doesn't necessarily mean that your venture is not a good one. It simply means that the venture is not a good investment fit for them. You must have "thick skin" and be able to bounce back from lots of "no's" and persevere.
When failing over and over again to create the light bulb, Thomas Edison famously said, "I have not failed. I've just found 10,000 ways that won't work." Have the same mentality with investors. That is, think, "I have not failed. I've just found 100 investors that aren't a good fit."
Second…Make Sure you do a Business Plan and Keep it Current
One of the most important things to show in your business plan is what you've accomplished in your business to date. And ideally, every month you are accomplishing more. So, be sure to update your plan with this progress.
Third…Always be a Master Marketer of your Deal
In raising money, the best company doesn't always win. Rather, the guy that knows how to best market his opportunity wins. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money.
Fourth…Understand That Funding Doesn't Take Place All At Once
No matter how great your project or idea is, you are probably not going to get a $20 million check right away. Rather, you will typically raise several "rounds" of capital.
You start with a smaller round or amount of funding. Then, as your business grows, you are eligible for larger rounds of funding. This is because your business proves itself over time and your valuation rises as you grow. This enables you to you to raise larger sums of money.
Fifth…Choose the Proper Source(s) of Capital Funding
Choosing the right source of funding is the key to Find the Capital’s success at raising joint venture equity. Some forms of funding are much easier to raise than others. And based on your stage of development, different forms of funding are more relevant.
To be specific, the funding sources available to a pre-revenue startup are very different than the sources available to a 3-year old company generating $1 million in annual revenues. For example: Google initially failed when it tried to raise money from venture capitalists. The key is to go after the right sources of funding at the right time.
Sixth…Build your Joint Venture Capital Source Relationships Early
The bottom line is the perfect entrepreneur/joint venture relationship is one where each has established respect and trust with the other well before an investment transaction is broached."
The key is to build these relationships early. So, even if you don't qualify for a $5 million round of joint venture capital today, start meeting with capital sources so they are more familiar with you when you do qualify a year from now.
Seventh…Don’t be Afraid to Change
While you must have "thick skin," that doesn't mean to be foolishly stubborn. What I mean by this is that if you hear the same feedback from capital sources over and over again, you shouldn't ignore it. Rather, you should adapt.
For example, if several prospective investors tell you they want to see a sample of your product or service before considering funding you, do what they asked for and create it for them. Don't just plow forward with contacting more and more investors in this case.
By adapting to the needs of joint venture equity partners, particularly when you hear the same feedback multiple times, you can make the requisite changes to raise the money you need.
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