Using the Internet to Find Capital
The Internet is a very powerful tool for finding money to finance start-ups, expansions, buyouts and acquisitions. You can use the Internet to find debt, equity and venture financing.
In order to make the most effective use of the Internet for raising capital, we recommend that you do the following:
1. Develop a good business plan as described above. Don’t even think about looking for money unless you have a sound business plan and a powerful Executive Summary.
2. Take the free on-line course available from Industry Canada on their Strategis Web Site called – Steps to Capital Growth. This 12 module course will teach you how to develop your business plan, how to develop an investment proposal, how to find and negotiate with investors, and many other useful tips.
3. If you don’t already have one, set up a website for your company or venture. The Web site will serve several useful purposes:
- It will enable you to provide information about your company, management team, business plan and financing requirements to potential investors around the world. All your promotional materials and letters to investors should refer them to your Web site.
- It should reassure the potential investor that you are a legitimate and trustworthy individual/company. In order to do this, you must place as much information about your company and its management team on your site as possible. Include profiles of your key managers and their past successes. Include photographs – many people still believe they can tell how trustworthy you are by looking at you. State how long you have been in business. Mention memberships in important business and trade associations, e.g., Chamber of Commerce, Better Business Bureau, etc.
- It is another mechanism to let potential investors know that you are looking for money. Therefore it is important that your Web site be registered with the various search engines, and that you get links from other compatible sites.
4. Once you are ready to seek financing, here are some places on the Internet to look.
- Industry Canada on their Strategis Web site has a comprehensive list of Canadian financial institutions as a component of their Steps to Capital Growth course.
- Western Economic Diversification (Canada) has a list of government programs for small businesses.
- Business Development Bank of Canada has a number of financing programs ranging from equity investments to “patient capital” that may be applicable to business.
- Canadian Venture Capital Association represents Canadian firms that have venture capital. Their site gives you contact information, types of investments member firms are interested in, and places they will invest.
Here are some other factors you should keep in mind when using the Internet to find money for your business. These include:
1. Some listing services are free, some are inexpensive and others are more expensive. In our experience, we can’t say that the more expensive ones are better than the free ones. We suggest you use as many as you can afford, and keep track of where inquiries come from.
2. Expect to have inquiries from many financial middlemen who will offer to find you the money (for a fee of course). Fees will range from 1% to 10% of the money raised. Some will want an up-front processing fee and/or a retainer. Others will want an exclusive agreement. We tend to stay away from exclusive agreements as the more people you have looking for money for you, the better your chances of finding it are. We also don’t like to pay up-front processing fees or retainers unless they guarantee they will find us the funds (they never will). If you plan to accept their money, be clear beforehand about all their fees and percentages.
3. You will also get inquiries from private and institutional investors. These are the ones you want to talk to. Respond quickly to their inquiries.
4. Be prepared to overnight courier copies of your business plan to all corners of the world. You may want to consider putting significant parts of your plan on your website so people can get information from there.
5. Do your due diligence before you accept any funds. Your country’s embassy can help as can local financial institutions and professionals. This is particularly important if the investors are from another country. Beware of any deals where you are required to pick up cash. Don’t become a victim of any money laundering schemes.
In today’s global financial economy, there are billions of dollars looking for good investment opportunities. The Internet can have you find these investors. However, care and diligence are required.