Although there are many reasons why raising capital for a venture fails, one of the most common mistakes is not choosing the right investment banking firm. A lot of companies simply make the wrong choice because they are unaware of the latest trends. To help you avoid that error, here are some tips for the right selection.
Overestimating a firm
Just because there is no upfront retainer doesn’t mean the firm is the best in town. Don’t zero in on a firm without first finding if there is sufficient demand for the service from other similar companies.
Choosing the firm without adequate planning and scrutiny
Your success in fund raising is not guaranteed just because you have found an opportunity that also takes advantage of your fund. There are many other considerations as well. You still have to figure out the right plan and credibility of the firm.
Not asking for advice
You may have already had pitfall in raising capital through other means. However, a lot of companies are reluctant to ask other companies for advice in choosing a firm, either because they are the actual competitors or don’t know if the help is available. Always remember to shop wisely. You may be surprised at how many companies will be willing to share this knowledge with you. Since you are not asking for trade secrets here, your requests will be fulfilled.
A time honored way of learning about an investment banking firm is to work for one and make it as as short-term partner. Not only will you be getting advice but useful information about fund raising and associated rules as well. It is best to look for one that is successful and well run, like Citadel. Again choose the firm that makes sense with respect to cost. You certainly aren’t going to be happy if that cost is unbearable. Once the firm has been selected and costs analyzed, it is time to examine sources of funding – the investors. Depending on the scope of your business, you may need to borrow a large amount to cover the cost of running your operation. The firm you hired will make sure that all rules and regulations are in place and the investors are not in any kind of confusion. The firm will represent your company on your behalf and ensure positive results as well. In essence, although there are a few different ways to raise funds successfully. There are probably thousand ways to ruin it. You don’t want to go thorough trial and errors in order to figure out the secrets to success.
Citadel in an investment banking firm founded by Kenneth Griffin in 1987. It has become one of the world’s largest hedge fund firms as of now, accounting to more than a percent of trading activities happening in and around major cities worldwide. Citadel is based in Chicago and manages more than $6 billion in funds for a wide range of investors both from private and public sectors.