Raising money is no easy task

SSN Staff  - 
Monday, July 1, 2002

Money makes the world go around.

We all know it. You have to have money to make money. Yup, there's no secret there. There's got to be an initial cash investment in any business in order to start one or grow one. And often there needs to be additional cash added along the road to take it to the next level.

So where the heck do you get money to do these things in the first place? In some cases it's your local bank. But in most cases, banks just don't take much risk and that's especially so right now. So you have to turn to internal industry funding sources.

There are a few different sources throughout the industry and when considering one, you'll need to look closely at your company, its needs, and find the right match for you. Raising funds is no easy task, be it from your local bank, from an investment company, from public offerings, or just your sweat and toil of every day life.

This said, I did have the pleasure in June of an inside view of what it takes for an investment company to raise funds. SLP Capital and Peter Flynn Associates entertained, educated, and negotiated with a handful of bankers and venture capital firms out in St. Louis, where SLP's corporate head quarters are located. They have a distinct advantage over an individual company who's trying to raise funds. They have years of data on the ups and downs of the industry. They know the rate at which companies and money will grow and the normal level of attrition in almost any business model in the industry. They know what companies are most likely to succeeded and not and have a complete support system built into their model to help any company that they invest in to bill their clients, collect money, and track costs. They also know many of the channels that have funds to invest, what they will look for before putting down cash, not to mention lots of CEO's and executives that will come and speak personally about their success, concerns and where this industry's headed. They build a compelling case for the industry and individual companies, as well.

I know there was a staggering amount of potential funding in the handful of investment companies that were at this event. I also know that the discussions held did net results. I witnessed one conversation, held in just a couple minutes that resulted in the investment of three to 15 million dollars to be spent on companies that fit XYZ profile. This all made it look pretty easy to raise funds, but that's just small potatoes in the world of investing, and that was just the wrap up of many years of conversations, negotiations and collecting and sharing data.

I will say that it seems that not a soul in this room but myself had shut off their phone. People jumped up and ran outside at the hint of a call. There was more wheeling and dealing in the hallways than I've seen anywhere in a long time...and the golf rounds hadn't even started yet! And we all know that there's more business done on golf courses than anywhere else.

It was refreshing, in these slow economic times, to see so many so confident, and ready to invest in our industry. There's lots of talk of changes, growth, and reorganizations. And I believe it. I think we're going to see incredible things in the next few years. And this is after we've already seen some incredible things!