Chain Leader

Vaughan Lazar

Show me the money!
May 29, 2008

It's time to do a change of hats this week! After spending a few weeks on the road, visiting new franchisees and scouting out potential locations, it's time to wear the cap of fund raiser!

One of the biggest challenges new organizations face has to be raising capital. Despite all of the press you garner and units you sell, none of it really matters unless you have the capital behind you to support your growth. 

I am only speaking from personal experience here. We looked at our funding strategy in three phases. Initially, we needed seed money for startup costs such as opening our corporate offices and building a support team on the sales, marketing, communications and training fronts. We developed our three-year projections to establish our goals for our first real round of fund raising via a private offering with La Salle, an investment banking firm out of Chicago.

My partners and I wrote the Reg-D filing and did all of our homework prior to speaking with these investment groups. Simply put, we knew that the more we brought to the table, the less we would have to give up. We had detailed store economics, planned allocation of funds, three- and five-year growth projections, and a VERY detailed business plan. Like any investment, it's all about risk-reward for these groups. So be sure to have all your i's dotted and your t's crossed. Unfortunately, there aren't too many investment bankers that are looking out for your best interest. So do your due diligence on all of your prospects. I was fortunate enough to have a friend in the business at La Salle, so we didn't have to knock on too many doors. 

The good news is that you don't need friends in the biz to get your hot new concept in front of the right people. There are local, regional and national Venture Capital Associations all across the country. These organizations act as a "catalyst" to bring together entrepreneurs with both private and institutional investors as well as leaders in the business community. They usually hold monthly or quarterly meetings where, typically, you can "pitch" your offering to these angel investors, fund managers and investment firms. 

We are getting all of our paperwork together for a second private round, and although we have the support of the firm we used the first time, we decided that we wanted to present to the National Investment Banking Association's quarterly conference in Hollywood, Fla. We were allowed the opportunity to make four separate presentations over two days to an audience comprised of equity underwriters, both public and private, debt-placement specialists, merchant bankers, M&A specialists, independent research professionals, corporate-awareness specialists, and representatives from the legal and accounting professions. This can also be used to "promote" your offering to other firms if you're already playing in a public arena. As a private company, these opportunities can really be that pot of gold at the end of the rainbow. 

The fine print to all of this is, what will you do with this money? Getting the money can be the easy part...

On another note, being first to market in the "green" world has also brought attention from some big players in the chain world. It's flattering and I'm sure, for some, it would be a great exit strategy or quick way to cash-out. However, when you're trying to change the world, and truly believe you can, then these thoughts don't even cross your mind.

Posted by Vaughan Lazar on May 29, 2008 | Comments (0)