Solicit Corporate Investors with Confidence

Top time-saving tips for identifying corporations that invest in entrepreneurial companies.

"I can't raise money for my business!"

This is line I read and hear from startup entrepreneurs and business owners everyday.

When I ask "why do you think you can't raise money" I invariably get an earful of frustration and contempt. Cash-starved innovators complain that "they won't return my calls, read my plan or give me enough time to really explain my business." I also learn quite quickly that "they" is code for a small sampling of big name venture funds ("VCs") like Kleiner Perkins that are an unlikely fit for most proposed ventures in the first place.

Fortunately, mega venture funds are not the only watering hole for ambitious entrepreneurs. There are other venture funds and there are other viable, perhaps more flexible sources of financing for technology and non-technology companies.

So where is this funding oasis? Corporations. They need to be on every entrepreneur's radar screen for potential funding support.

Today, corporations invest in growth-oriented businesses as a member of a syndicate of angel or venture fund investors or they invest directly in promising companies. Corporations can also be tapped for "in kind" or non-cash contributions of equipment, technology, office space and more.

In most cases, corporations write checks not only for financial gain, but to ensure that they have easy access to technologies and businesses that might advance their own competitive standing as well. Washington Mutual, for example, actively invests in well-managed, revenue-generating companies that complement the bank's strategic plan.

Here are some tips for soliciting corporations:

• Corporations that operate dedicated venture funds review opportunities like traditional VCs. As such, entrepreneurs can use the same business plan that they would send to VCs, however it's advisable to customize cover letters and executive summaries to highlight venture relevance to parent corporation's strategic interests.
• VCs have schooled entrepreneurs to make a list of potential companies that might buy-out their proposed ventures in 5 to 7 years. This list of corporations should be the starting point for entrepreneurs seeking direct (meaning non-VC fund) investments from corporations.
• Solicit all potential corporate targets at the same time to save time. Don't rely on any single corporation for venture funding. Nurse each corporate relationship along until deal closing.
• Corporations will take longer to review investment opportunities than VCs, particularly if the deal involves operating contributions from the corporation.
• If you don't have a specific contact names, seek out VP's in strategic planning or new business development roles. If your company's value to a corporate investor is cost savings, identify the names of general managers and senior finance officers. Try search engines and corporate press releases to come up with contact names. Also, don't over look the value of secretaries to quickly guide you through a corporate maze. Be respectful and grateful for their assistance.
• Talk to your target before sending written materials. From my investment banking days, the best corporate investments I ever structured started out as friendly, high level talks to identify areas of mutual interest. They were collaborations not transactions.
• First presentations for direct investment should be focused and professional. Ask questions. Success is learning just as much about a corporation as the corporation learns about the proposed venture.

By far, the best advice I can give to entrepreneurs is to know the numbers of your proposed venture as well as the numbers of the target corporation. Take the time to read annual reports, press releases, CEO interviews and trade press news for hints to corporate needs.

Let's face it; senior corporate officers have high expectations for business know-how. They won't stake their careers on the whims of entrepreneurial "kids." Entrepreneurs who demonstrate they are serious do have a serious chance of getting corporate funding. It's there for entrepreneurs who think and act smart.

Take Command Action Step

Place a confidentiality notice on all key documents before sending them to corporations or investment bankers. Be cautious about the flow of information to potential partners. Don't "give away the store" in the form of patent filings and proprietary information during early communications. Rather, outline the objectives and benefits of a proposed alliance. Then wait to determine the corporation's interest level before spending the time to develop formal legal confidentiality agreements or disclosing too much key data. You can do it!

Do you need time-saving tips to help fund and grow your business? Ask Susan How! Write to small business funding expert Susan Schreter at susan@takecommand.org