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n recent blogs, I have tried to address many of the questions raised by entrepreneurs looking for financing. You can download a guide that we prepared for entrepreneurs pitching to the Dragons in CBC Dragons’ Den.
In this blog, I will answer the two specific questions raised in the previous blog. How do you raise large amounts of money without giving up too much equity and how do you develop an exit strategy to maximize the likelihood of receiving investment?
How do you raise large amounts of money without giving up too much equity?
In a previous blog, I identified that you can decide how much money you need to raise from third-party equity investors, by first working out the negative cash flow for the first three years of the business, and then identifying sources of non-equity finance (debt, government grants, customer advances etc.). From this you can calculate how much cash in exchange for equity you need to raise. However, if you ask for all of this at the beginning, then your equity will be significantly diluted. If you obtain the same amount in stages, then you can give up a smaller amount of equity if you have increased the value of your company at each stage. This puts you in a better equity position and increases the likelihood of being able to attract further investment subsequently.
To read the full, original article click on this link: Obtaining investment without having to give up control of the company « The RIC Blog
Author: Andrew Maxwell
