to Find the Right Investor
How to Write the "Black Book"
How to Target Investors
Our Target Client
How to Get Started
Harvard Capital Group funds deals both directly and indirectly. Here, William
Knoke, founder of
Harvard Capital Group, unveils his secrets for raising venture capital and
The key is getting the highest valuation, least dilution and the right
investors. This will not happen if it is not carefully planned from the
Whether you are seeking $3
million or $100 million, the target investors will change, but the core process
is the same...
Entrepreneur: I’ve heard that the Harvard Capital Group helps guys like
me raise money. We need several
million dollars to get ready to go public.
You’ve come to the right place, particularly if you’re a high tech
company. But it’s not just how
much money you get, but whose money, and how much of the company you have to
right; I do want to hold on to control. But
why do I care where the money comes from?
Finding the right investors is key.
You want investors who have deep pockets, are sympathetic when you
fall short of projections and can introduce key contacts as you grow.
For most companies, the best investors are strategic partners.
a “strategic partner”?
strategic partner has a vested interest in your success that goes beyond a
cold cash return on his investment. Generally
these take two forms: The corporate
partner and the venture capitalists.
corporate partner is typically in a related industry, but not a direct
competitor. Perhaps you have a
technology or ideas that complement theirs.
If you succeed, they succeed. They
can give you lots of help beyond money. Best of all, they are often more concerned with broad
strategic issues than return on investment, which may leave more on the table
Entrepreneur: How about venture capitalists?
corporate partners, “VCs” have deep pockets, and offer guidance to help
you grow. Whereas the corporate
partner generally wants to develop your product, the VC wants to develop your
company. Either way, you’ll get
lots of quality help, and the possibility to go public later.
Entrepreneur: I heard that VCs are ruthless.
have changed. If you look at all
the IPOs coming out on the market today, the founders are almost always there,
and the VCs have a minority stake. Today
talent is valued higher than capital.
Entrepreneur: What else
do VCs or corporate partners bring to the table?
Having the right partner puts a “Good Housekeeping Seal of Approval”
on your company. Customers and suppliers notice, and your IPO will be that
Entrepreneur: So which
is better, the corporate partner or the venture capitalists?
have to decide right now, the best fit will naturally fall out when we work on
your Black Book.
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a “Black Book”?
A “Black Book” goes beyond a business plan.
It explains the business and its potential, and spells out the terms of
the deal. No two Black Books are
alike. In dealing with strategic
partners, it has to pass muster from several viewpoints.
As a marketing document, it
must be concisely written, interesting, and with thematic focus.
As a business document, it must be logically consistent so that
marketing, production, organizational and financial policies hang together in
a focused strategy. As a legal document, it must contain full disclosures and an
appropriate financial structure. As
a financial document, the numbers have to work out for the investor.
It’s a Rubric’s Cube that has to yield full color from whatever
angle you look at it.
Can we use the business plan we’ve already prepared?
certainly will use that as a starting point, but it’s seldom the endpoint.
Usually, business plans are lacking in specifics on deal structure, for
instance. And even in those rare
cases when the strategy is well thought through, the genius is so obscured by
jargon or acronyms that only another rocket scientist can gauge its merit.
The strategy has to be bullet proof, and articulated with razor sharp
clarity to an audience often from another industry.
Our goal is to get the highest possible valuation.
Why do I care about valuation?
A high valuation means that you give up less of the company for the same
$5 million investment. That gives
you a bigger piece of pie, and keeps you in control longer.
do you increase valuation?
There are 99 ways, but one key way is to eliminate “anomalies.”
An anomaly is any aspect of a deal that causes a potential investor to
raise a brow. It can be deal
presentation (misspellings, sloppy thinking, contradictory financials).
Most often, it is deal substance (capital structure, patent
protection, management). We need
to identify them, and reduce their impact.
Every business plan has them, and most are pretty easy to offset.
Entrepreneur: What if
we can’t eliminate the anomalies?
you can’t eliminate an anomaly, find a way to turn a disadvantage into an
advantage. For example, many
start-up companies have great technology, but score a zero in sales and
marketing. Generally, we deal
with that by acknowledging the problem, and adding that some of the proceeds
will be used to get a marketing person, and look here in Appendix C for three
hot-shot resumes of people we’ve been talking to.
I’ve never seen a problem that did not have a solution.
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Entrepreneur: How do I
know you will be insightful about my company?
seldom been in a meeting with a high tech entrepreneur where I wasn’t told
afterwards that I was the first person to quickly zero in on the two or three
variables that were relevant to their success.
I’ve gotten some good tools at Stanford University
earned a BA in Economics cum laude) and Harvard Business School (where
I have an MBA).
my real education came from being an entrepreneur myself, having been a
key officer in a high-tech company that the Wall Street Journal listed
as one of the top ten performers in the U.S. I’ve
also known what it’s like to be undercapitalized and have to struggle to
meet payroll. I’ve been in your
an investment banker, I’ve also worked a number of “Wall Street” deals,
and in many industries. I
particularly enjoy high technology because at the cutting edge, the unknown
answers are more complex, and the potential for creative solutions is
Entrepreneur: But can
My book Bold New World: The
Essential Road Map to the 21st Century became an
international bestseller, now in ten languages. Other investment bankers have told me our Black Books are
among the best in the industry.
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Entrepreneur: How do
you target the investors?
By the time we finish the Black Book, we also have a crystal clear
idea of the investor profile. How
much money do we want? How
important is control? Who can
help us grow the best? Who will
give us the highest valuation?
then prepare a long list of potential marriage partners.
We have a pretty good network of contacts, and supplement this with our
proprietary database of corporations and institutional investors.
For corporate partners, we usually go straight to the CEO.
We also have a pretty effective methodology to get to the CEO if we did
not already have a relationship.
happens when the VC or corporation expresses interest?
there are multiple meetings. They
want to meet your management team and understand the special magic of your
ideas. This is where a well-written Black Book pays off.
Any deal has to pass several hurdles:
product, technology, marketplace, finance and strategic fit.
If somebody gets through a well-crafted Black Book, they are coming to
see you for the right reasons. We
can quickly focus on specific hot-button issues toward closing a deal.
What do you do once we are funded?
to maintain a relationship with you to help with your
IPO, and to
transact your first merger or acquisition.
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Target Client Profile (for
kinds of clients are you looking for?
We do not
accept all companies as clients. Our
ideal profile is defined below:
the product/service sufficiently differentiated from others to dominate
its own niche?
Is there broad patent protection already in place or a
there potential for rapid sales growth once the product is launched?
Here we are looking for a minimum of $1 million in annualized
revenue within a year after product launch or funding.
there already a strong management team in place, or else the potential
to put one together quickly that can work together?
the Company have sufficient resources to stay in business without
funding for the next six months (with a minimum of $20,000 in cash)?
willingness to engage in an initial public offering (or acquisition)
within five to seven years to allow incoming investors to “exit.”
located in Western U.S.
can look at any industry, but prefer one of those below.
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do we get started?
If you want to take the next step,