Starting 5

searcher profile

April 07, 2023

by a searcher in Chicago, IL, USA

While chatting with an investor on the process of assembling my cap table, I recently got the advice to treat it like a basketball team. In basketball, you need to identify the positions you need to fill to create a balanced and effective team. Similarly, when raising, you need to determine which combination of investors will bring the most value to you and your company.

0
7
120
Replies
7
commentor profile
Reply by an investor
from Northwestern University in Naples, FL, USA
This is a common point of discussion for searchers who are fortunate enough to find themselves in the envious position of being oversubscribed for their search. In this scenario, you should consider the various phases within a search (searching, negotiations, diligence, lending, fundraising) and the major areas of responsibility during ownership (marketing, sales, operations, finance, accounting, people, IT, etc.). Additional “positions” that you could consider are: who can make introductions, who has expertise and connections in your target industry, who has expertise in selling a business, has any investor done add-ons, who can you talk to when you’re unsure, who will tell you the truth even if it’s unpleasant, who can help you manage your internal stress, how accessible are these investors, and how will these people react if things go much better or worse than you expect?

For searchers struggling to raise funding, you may be tempted to take money from whoever will offer it. While this may get you to the starting line of your search, you increase the risk of not acquiring or buying a bad business in a tough industry. It is often better to take longer to raise money while building the right team of investors and advisors than to launch a search without a bench or supporters to rely upon.
commentor profile
Reply by a professional
from Rice University in Jeffersonville, West Norriton, PA 19403, USA
PE/VC's have mythicized the creation of a cap table - as it directly impacts valuation, investment plateaus and resulting % of ownership. My firm Alchemy Early-Stage works to demythologize cap tables, and the ownership evolution with each capital raise round. Feel free to DM me to set a call to chat the basic best practices regarding cap tables.
commentor profile
+5 more replies.
Join the discussion