by Seth Temko
The people I'm talking to are raising money. That's a good sign for you.
I was speaking with an entrepreneur in my office suite. He's coming out with a premium version of a cultural drink. He's at the initial stages with a first run production product and some regional distribution in Chicago. He is seeking $5 million and he has five competing offers to invest. This is an excellent position to be in. They've even started asking if he'll take more than $5 million.
He's been using a personal network and going to investing events. Word has gotten around. A month ago he was sweating it and this Friday he had a smile on his face. I knew the news was good. Five competing bids... good indeed.
A good friend with a multi-year start up has been doing part-time investing networking. She's been going to investor presentation events and investor socials. She's had a couple conversations and she's on her way to a term sheet. She'll bring in between one and two million.
So, what does this all mean? It means the stock market is doing well, yields on banks and bonds are pathetic and the economy has recovered enough that people are willing to accept more risk and invest in new and growing companies. You can look up government numbers, etc. but talking to those seeking investments is the truest way I know of to get the pulse of the investment community.
In my conversations I'm hearing about positive results for those seeking $1 to $50 million. It's not that it's easy. It hasn't been easy to raise funds since the crazy days of the dot com frenzy but raising funds is doable and with effort you can get competition for the investment. This is one of the best signs for those seeking funds. Multiple offers means you can 1) increase your raise amount (if you want to), 2) you can negotiate better terms (give away less of the company), 3) you can push for lump sum investment (as opposed to pieces for milestones), and 4) it will accelerate the time to complete the term sheet and get the funds.
It also reduces your risk of getting squeezed. This happens when your current business is running low on cash and is in risk of shutting down prior to funding. If this happens then a single investor can "smell blood" and stretch out the process to increase their negotiating leverage.
The money is out there. Happy hunting.