Here on ReadWriteStart we are often providing resources and tips for young companies looking to raise funding from venture capitals and angel investors. This week's recommendation for our Weekend Reading series, Money Magnet: How to Attract Investors to Your Business by Jacoline Loewen, is a book aimed at helping entrepreneurs learn how to deal with financing and how to make their businesses attractive to investors.
Author Jacoline Loewen is a Canadian business consultant and strategy writer who has aided companies seeking capital and private equity. In Money Magnet, Loewen provides valuable lessons she has learned from her career on raising capital in a style that is "informative, relaxed and easy to understand," according to book's description. Though the book was published in 2008, and most of Loewen's work involves multi-million dollar businesses, there are still some lessons startups can likely take away from the book.
Money Magnet is a bit like Fundraising 101. Loewen describes the various types of investors, how to meet and pitch to them, how to read term sheets and how to handle relationships with investors as companies grow. She also provides a run down of the important things investors look for from potential companies, as well as the "four brutal questions" they all ask. The first question most investors ask, she says, is "Are you the right people to make this happen?"
"The teams most likely to attract money will be those that demonstrate they will roll up their sleeves, get on with the unglamorous grunt work of operating plans and do things just a little bit better," writes Loewen. "Anyone new to running a company who has a good idea and now wants funding, probably will not get the money, no matter how smooth they appear. No one, except your mom, is going to fund your learning curve."
It's interesting that she singles out all entrepreneurs with no experience and says they will most likely not get any funding for their idea. Depending on the VCs they seek out, this may be true, but there are plenty of opportunities for inexperienced entrepreneurs to get funding, though the odds are leaning against them. The other questions she says all investors will ask center around the investment opportunity, sustainability and return on investment - questions which will all essentially prove your readiness to get the company off the ground.
Loewen's insider view into the investment process provides an unique perspective for startups looking to meet and woo potential investors. Most advice on the subject comes from either the entrepreneurs involved in the deals or the venture capitalists doling out the cash, so an angle from a consultant who has facilitated numbers of deals is certainly a fresh one.