Many companies donít understand the time obligations for raising capital for business. A company should budget 500 to 1000 hours to raising capital, as well as a 6-9 month time period.
The main processes are:
1. Making the plan perfect, offering memorandum and other industry materials
2. Putting a prospective investor list together
3. Contacting the investors and answering requests
4. Negotiating the deal
Finishing a professional business plan can take up to 200 hours. This is time dedicated to market research, developing a comprehensive financial model, laying out the business strategy and writing and proofing.
The targeted prospective investor list takes time. Consider that a multitude of investors will have different tastes and ventures that pique their interest. Some will invest by market sector, stage, geography or a blend of all three. Hours are put in to deciding on an investor. First comes a master investor list, which entails visiting/researching their websites for investment needs, past deals and most appropriate contact. Only about 25% of prospective investors show any interest follow through. Only 10% of these will provide and/or offer any funding, and only 25% will become actual investments. Completing a transaction might entail researching and contacting 160+ likely (and pre-qualified) investors.
Investors looking over the investment can be time consuming. They might request many documents that can be found on file but others which have to be prepared. Negotiating a transaction can take a lot of time, depending on its intricacy and the individuals concerned.
Many companies donít raise capital because they're completely unaware of the time restraints or the hours involved. The ones who do are the ones that get the capital and carry on.