JOHANES LIM CONSULTING

How to Hold Investor Interest
Having top quality documentation increases your chances of attracting and holding investor interest. These five documents are essential:

• Executive Summary. 3 - 5 pages.
• Business Plan. 50 pages maximum, and focused on the above questions.
• Due Diligence Material, including Market Studies, Research Papers, Patents, etc.
• Business Valuations Company and investor pre- and post-investment values.
• Deal Structures To sell minimum shares for maximum dollar investment.

Management factors most critical to investors:

• Can the team maintain a sustained effort? 67%
• Does the team have extensive market familiarity? 67%
• Is the entrepreneur a leader? 31%
• Can I get at least a 10 times ROI in 5 to 7 years? 28%

For a complete list of criteria:

• Enhance your chances for funding. Know what business you are in! Are you in Research and Development (R&D), Manufacturing, Distribution, Sales or Service? Each phase of business has its own financial dynamics, and you usually cannot be in all phases at once.
• Have a well rehearsed and polished presentation
• Remember that you are a "Salesman" for your business first, and a "Techie" last. You are selling the five items listed above, not your product or service.
• Develop a targeted list of investors
• Develop a list of private investors, venture capital firms, and target joint venture companies.
• Be Patient and Stay Focused
• Do not rush the investor! Be patient, and do not expect much positive response for three to six months in some cases.
• Keep your eye on the goal of lowering perceived risks to the investors, not the obstacles of how much and how soon you need the capital infusion.

Venture Capital Process

• Successful venture capital funding is a process of reducing perceived risk to the lowest possible level. The funding source has fiduciary responsibility to its investors. This requires a thorough "due diligence review" of all aspects of your business.
• Venture capital sources will often require you to justify every assumption made for a projection five years into the future.
• Your business plan must show the investment parameters requested, as well as a plan to liquidate the investor's position (the exit strategy) at a later date by either a payback formula, initial public stock offering (IPO), or plans for a merger/buyout by a major company.

7 necessary levels of research and planning for every startup:

• Feasibility studies to determine whether a given venture should be attempted.
• The preparation of the business plan for the first round, and subsequent rounds of investment and operations.
• Determining optimum debt and equity ratios, and developing a financial plan.
• The development of an operational plan to get the project up and running.
• Development of prospective funding sources for both debt and equity.
• Preparation of project evaluations for both pre and post investment analysis.
• Planning investor and owner exit strategies through mergers, acquisitions, IPO's, or LBO's

Documentation for Venture Capital Firms and Funding Sources
Focus on the Financial

• Many business plans fail to raise money because of the orientation of the business plan, i.e., the plan focuses on the product or service, not the financials.
• While we cannot promise your business will be funded, we can assure you that with our business plan review program, your entire presentation package will be developed so that your chances of being funded will be significantly increased.
• It is important to remember that there is more money looking for a good investment with moderate returns and medium risk, than there are "good deals".

Stages of Documentation

• There are several stages of documentation required by most funding sources during the venture capital process. They are usually tailored specifically to both the funding source being approached, and the stage of your business. The primary documents are outlined below:
• Market Feasibility Study: Basic research done principally by the entrepreneur to identify a market niche for the product or service to be offered. Identify the size, dynamics, competition, and other factors effecting the proposed business operation prior to investing large sums of money, or proceeding with a "missionary marketing" venture with little or no chance for success.
• Executive Summary: An outline of the complete business plan, usually only 4-8 pages long. It includes and describes principal markets, personnel, financial highlights, and the proposed deal structure. The Executive Summary is developed from the completed business plan, and summarizes the project.
• Business Plan: The business plan contains the complete plan for your business, including extensive market and industry analysis, sales and marketing strategy, operational plans and timetables, management organization structure and key personnel, risk analysis (including competitors and comparable industry numbers), and complete historical and pro-forma financial analysis (including income and expenses, cash flow, balance sheet and ratio analysis) for three to five years. The business plan financials should include low, medium and optimum projections for various market conditions.
• Business Valuation Study: A document that includes several business valuation studies showing business values before and after investment. Business valuations allow you to determine how much stock to sell for the money you are raising. This is extremely important when you are trying to raise money for a business that will be a candidate for a merger/acquisition, or an Initial Public Offering (IPO) at a later date. It is also required for funding by professional investors so that adequate returns on investment are shown.
• Investment Plan: Document outlining in further detail the timetable of required equity and debt financing, as well as the payback, or liquidation, of the investors' position under various scenarios. This is where the "Deal" is structured to make your business attractive to investors and lending institutions.
• Due Diligence and Supporting Documents: Include all additional information to support and supplement the business and investment plans. Do your own Due Diligence on the sources of funds and the funding sources prior to making a deal.
• Presentation Package: Your marketing package is used to present your program to others. It may be a short series of color slides or overheads, or a PowerPoint presentation, used when talking with investors or banks. Your marketing package is developed along with your business plan and can enhance chances of funding.

Your completed Business and Investment Plan is a blueprint for the success of your business. It should be a living document that is revised and updated periodically as conditions change, or when new markets and products are developed, additional funding is obtained, or economic conditions change