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What is the Market for Your Capital Raise?

When considering how to raise capital today, a firm must know its place in the market. From start up concept to stable company, the various stages require different sources of money and approaches to secure the funds. Below we discuss the market place for early stage companies.

Early Stage – this pre-venture position is typically known as F&F, friends and family. Some have cynically termed it F,F&F – friends, family and fools. Most very young firms avoid venture capital, a source that is a "fallback" if all else fails. Venture funding usually means loss of control of the firm, a place to be avoided if possible.

Emerging Early Stage – this enterprise has produced some revenue and may be able to slowly grow into an expanded market place of addition sources. They are past the FF&F stage. Obviously, unless the initial investors have well-funded the company or provided enough collateral, a banking institution will not lend to this company. Some of these firms may choose venture capital resources, especially, if they are more tech focused.

Even at this juncture there are a surprising number of potential suitors. The difficulty is determining which capital sources match with the company seeking funds. At least the following can be approached as possible funders:

  1. Family offices.
  2. Mezzanine funds (assumes cash flows are positive).
  3. Revenue based funding, whereby a portion of future revenues are dedicated for payback.
  4. Hedge funds – for smaller deals with large upsides.
  5. Quasi-bank lenders.
  6. Real estate funds – assumes a real estate component to product or service.
  7. Purchase orders – financing is debt and more bank-like institutional players.
  8. High net worth.
  9. Fund dedicated to startups and early stage firms in particular industries.
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