A capital raising romance

Just before Christmas I met with a chap who wanted to raise capital to help in franchising his business (which I will decline to name for reasons that will become obvious soon). I, however, thought it was a bit early to try to raise capital as his business wasn’t particularly systemised, exciting or potentially lucrative.

In fact, I wasn’t convinced that his business model actually worked. Therefore, I suggested I would introduce him to a friend who was an angel investor, who has had a lot of success in franchising and whose insights on business model innovation I valued. The chap I met disagreed with me about him not being ready for franchising yet and felt that lack of cash was the only thing holding him back.

So despite my vague doubts that he wouldn’t actually listen to any advice that wasn’t In line with his own ideas, I introduced him by email to my friend. A couple of days later, I was CC’d on an email back to my friend that had not much more than a Capital Raising Information Memorandum (IM) attached.

Having that sinking feeling that this wasn’t right, I did a quick check and here is what I discovered:

1. No other correspondence had occurred, so the first thing my friend knew after the introduction was he was sent an IM by email.
2. The IM was unasked for, which was slightly irritating to my friend.
3. I also got this in the email back from my friend: “The franchise offer on his site links you through to a ‘broker’ and then I couldn’t find his listing on their site, among the plethora of chicken cooking, lawn mowing and other ‘franchise-offers’ of (not much) note.”

I was really disappointed by this as an outcome, because I think capital raising is hard work, but impossible if you don’t treat it like romance. You need to:

1. Make sure you have something good to offer, not just mutton dressed as lamb.
2. Meet people who are potentially looking for exactly what you have got, not just put the hard word on everyone you meet.
3. Put in some groundwork developing the relationship, don’t just cut to the chase and ask “how about it?”

So, where is the love here?

Brendan Lewis is a serial technology entrepreneur having founded: Ideas Lighting, Carradale Media, Edion, Verve IT, The Churchill Club and Flinders Pacific. He has set up businesses for others in Romania, Indonesia, Hong Kong and Vietnam and is the sole Australian representative of the City of London for Foreign Direct Investment. Qualified in IT and Accounting, he has also spent time running an Advertising agency and as a Cavalry Officer with the Australian Army Reserve.