Guy Kawasaki, Managing Director of Garage Technology Ventures, in his book The Art of the Start  put it like this: “Think of investor’s deal flow as a funnel. Two thousand business plans enter at the top of the funnel. Two hundred are moderately credible. One hundred are interesting enough to read. Forty undergo due diligence. Ten get funded. One makes a bundle of money.”

Imagine that, only five percent of all business plans submitted are interesting enough to read, two percent get to the due diligence stage and one half of one percent actually get funded. Those odds are incredibly long indeed. But the two percent that actually get to due diligence represents thousands of companies each year, so the effort is worthwhile.

So how can an entrepreneur or owner of a growing business improve the odds of being in that two percent? By understanding who, when, where and how to approach the capital markets and preparing to engage potential investors in a manner that sets the entrepreneur or business owner apart from others pursuing the same goal.

This involves:

1) Ensuring that the value proposition is credible and offers obvious opportunity to potential investors;

2) Understanding how the capital markets function, the roles played by the various participants and how to approach them;

3) Creating a compelling story that will grab the attention of potential investors;

4) Learning how to tell the story in a way that calls the potential investors to action; and

5) Learning to avoid simple mistakes that can turn off potential investors.

In the coming weeks, we will be exploring each of these points in much greater detail.  We look forward to your comments and feedback.

Contributed by Howard Fletcher, principal owner of Bayshore Management Partners (www.bayshorepartners.org), a consulting firm that advises entrepreneurs, owners of small businesses and CEOs of mid-size companies on the “Art of Raising Capital”.

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