Direct Public Offering Mistakes: A Must Read!
Private Placement Memorandums and Direct Public Offerings, the most common mistakes made.
When gearing up to raise capital it is typically a business owners first instinct to simply throw together a business plan and find the cheapest company to put together the private placement memorandum and then seek funding. What these professionals don't realize is that they are doing things in reverse and often times a PPM is not a standalone solution to financial needs.
The first problem is the most companies will first write a business plan and cheap PPM and look for a capital solutions last, when strategically speaking, one should first find a full service solution who has a database of investors ready to fund properly structured corporations with well authored business plans and private placement memos. After you find a company that has a ready network of seasoned investors you will often find that this firm will also structure your business and documents so that you are able to attract the attention of these investors. Next, don't make the mistake of hiring just anybody to write your biz plan. You need to find a professional author who is well rooted in the art of technical writing and has a solid comprehension of your industry.
Now it's time to write the PPM. Here is a warning that will most likely go in one ear and out the other but you must never choose the cheapest service for your PPM you will regret it and this is a guarantee. Investors see these documents all day everyday and they know a template when they see it. Don't believe for a second that you will get a viable private placement memo that will actually achieve funding for anything less than $3,000; it's just not going to happen. There is too much work involved in putting a fund-able strategy together and you'll never find an experienced firm to do it for cheap.
The moral of the story is to first find an investor finder solution with a solid network of investors, second have this company write your business plan and private placement memorandum to fit the needs of their investor base and lastly, talk to this consultant about helping you perform a DPO (Direct Public Offering) to their group. This is what separates the men from the boys in the venture capital consulting industry.
Legitimate consultants who stand behind their work will take your PPM directly to their investor base and help you raise capital quickly. In return for this service the company may want a modest equity position in addition to their fee but it is always worth it and typically they will take the final step and have their investors pay to take your company public. This is the ultimate for any company that is seeking a long term funding solution.
Remember the order: 1. Find an investor finder 2. Have that company write your biz plan and PPM 3. Convince the firm to perform a DPO for fast funding 4. Offer some equity to sweeten the pot so that they take you public!
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Angel Investor Mind Control: Is This Process Real?
Discovering the 'thumbscrews' of investors is crucial to getting them to take action. In over a decade of dealing with global investors there are several elements that I've discovered to be universal truths about the mind of the private investor (angel investor, accredited investor).
When talking to an investor for the first time, it's more important to listen than to speak. It's more important to ask questions than answer them. It's more important to discover their needs and wants than to exclaim your own. Your first conversation with an investor should be all about piercing the armor and finding the trigger points that prompt a reaction that gets to the center of their 'childlike' state.
What I mean by this is, investors, just like anyone else, has insecurities that are rooted in their childhood and what they are outwardly today, is typically a polar opposite of what they are on the inside. For example, an arrogant, chest beater seems proud and obnoxious on the outside but the reality is that they are over compensating for an insecurity that is rooted in an individual or collection of childhood incidents.
Maybe they were made fun of as a child, maybe they're father was verbally abusive, maybe their teachers would single them out in class opening them up to playground mockery. When talking to these individuals it's important to listen to their voice and intonation when the conversation topic changes. Take notes on their psychological adjustments to the conversation. After you feel you have discovered the triggers that induce the 'pleasurable' responses, end the call, and set your second phone appointment with them.
On that second call, you want to have your conversation ready to go using the triggers you found in the first conversation. Play off of those insecurities that you found, become their best friend without being chummy but it is your mission on this call to be the "guy that understand me" to the investor. You want the overall tone of this conversation to have the response from your target along the theme of, "wow, this guy gets me" , "I can see investing in this company".
By using this method and not coming across as 'fake', you have become an investment opportunity and a shrink all rolled into one. You want to be the one person that this investor can lower his guard to because everything he says, you seem to be the one person who understands him at his deepest level. You seem to naturally be tuned into his insecurities, emotions, needs and wants. Sound strange? Try this out on the next investor you talk to, I guaranty you will be shocked with the results.
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