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The Handbook of Financing Growth
Strategies and Capital Structure
KENNETH H. MARKS LARRY E. ROBBINS GONZALO FERNÁNDEZ JOHN P. FUNKHOUSER
John Wiley & Sons, Inc. ffirs.qxd 2/15/05 12:30 PM Page b ffirs.qxd 2/15/05 12:30 PM Page a
Additional Praise For The Handbook of Financing Growth
“The authors have compiled a practical guide addressing capital formation of emerging growth and middle-market companies. This handbook is a valuable resource for bankers, accountants, lawyers, and other advisers serving entrepreneurs.” Alfred R. Berkeley Former President, Nasdaq Stock Market
“Not sleeping nights worrying about where the capital needed to finance your ambitious growth opportunities is going to come from? Well, here is your answer. This is an outstanding guide to the essential planning, analy- sis, and execution to get the job done successfully. Marks et al. have cre- ated a valuable addition to the literature by laying out the process and providing practical real-world examples. This book is destined to find its way onto the shelves of many businesspeople and should be a valuable ad- dition for students and faculty within the curricula of MBA programs. Read it! It just might save your company’s life.” Dr. William K. Harper President, Arthur D. Little School of Management (Retired) Director, Harper Brush Works and TxF Products
“Full of good, realistic, practical advice on the art of raising money and on the unusual people who inhabit the American financial landscape. It is also full of information, gives appropriate warnings, and arises from a strong ethical sense. If you’re trying to find funds for your company, go buy this book.” Edward F. Tuck Principal, Falcon Fund ffirs.qxd 2/15/05 12:30 PM Page b ffirs.qxd 2/15/05 12:30 PM Page i
The Handbook of Financing Growth ffirs.qxd 2/15/05 12:30 PM Page ii
Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Aus- tralia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more. For a list of available titles, visit our Web site at www.WileyFinance.com. ffirs.qxd 2/15/05 12:30 PM Page iii
The Handbook of Financing Growth
Strategies and Capital Structure
KENNETH H. MARKS LARRY E. ROBBINS GONZALO FERNÁNDEZ JOHN P. FUNKHOUSER
John Wiley & Sons, Inc. ffirs.qxd 2/15/05 12:30 PM Page iv
Copyright © 2005 by Kenneth H. Marks, Larry E. Robbins, Gonzalo Fernández, and John P. Funkhouser. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008. Limit of Liability/Disclaimer of Warranty: While the publisher and the author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information about our other products and services, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002. Designations used by companies to distinguish their products are often claimed by trademarks. In all instances where the author or publisher is aware of a claim, the product names appear in Initial Capital letters. Readers, however, should contact the appropriate companies for more complete information regarding trademarks and registration. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: The handbook of financing growth : strategies and capital structure / Kenneth H. Marks . . . [et al.]. p. cm. — (Wiley finance series) Includes bibliographical references and index. ISBN 0-471-42957-0 (CLOTH) 1. Small business—Finance—Handbooks, manuals, etc. 2. Business enterprises—Finance—Handbooks, manuals, etc. 3. Corporations—Finance—Handbooks, manuals, etc. I. Marks, Kenneth H. II. Series. HG4027.7.H355 2005 658.15—dc22 2004024107 Printed in the United States of America. 10987654321 ffirs.qxd 2/15/05 12:30 PM Page v
To Kathy, Lauren, Lilly, and Jenna, in support of doing God’s will ffirs.qxd 2/15/05 12:30 PM Page vi ftoc.qxd 2/15/05 12:30 PM Page vii
Contents
Foreword xi Preface xiii Acknowledgments xix About the Authors xxi
PART ONE The Financing Process 1
CHAPTER 1 Introduction 3
CHAPTER 2 Business Performance and Strategy 6 The Business Plan and Strategic Initiatives 6 Shareholder Goals and Objectives 8 Current Financial Position 9 Forecasted Performance 10 Scenarios 10 Strategy 11 Updated Forecast 14
CHAPTER 3 Valuation 15 Why Value? 15 Approaches to Valuation 16
CHAPTER 4 Capital Structure 22 Assimilating the Drivers 26 Developing Liability Limits 40
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viii CONTENTS
CHAPTER 5 Sources of Capital and What to Expect 44 Bootstrapping Sources and Techniques 46 Individual Investors (Private Placements Not from Angels or Institutions) 57 Angel Investors 58 Commercial Banks 69 Asset-Based Lenders 74 Commercial Finance Companies 86 Leasing Companies 87 Private Equity 92 Venture Capital Funds 94 Mezzanine Funds 124 Buyout Funds 128 Strategic or Industry Investors—Corporate Venture Capital 135 Merchant Banks 137 Community Development Initiatives and Government Agencies 138 Micro-Cap Public Entities 153 Royalty Financing 155 CHAPTER 6 Equity and Debt Financings: Documentation and Regulatory Compliance with Securities Laws 161 Basic Definition of Debt and Equity 161 Debt Instruments 164 Loan Documentation 170 Equity Instruments 218 Equity Investment Documentation 222 Compliance with Securities Laws 251 CHAPTER 7 Expert Support—The Players and Their Roles 262 Counsel 262 Board of Directors 264 Investment Bankers 267 Accountants 272 Consultants/Advisers 276 Summary 277 CHAPTER 8 Closing the Deal 279 Process Check-in 279 Final Perspective 286 ftoc.qxd 2/15/05 12:30 PM Page ix
Contents ix
PART TWO Case Studies 287 Case Study 1: High-Risk Asset-Based Loan/Refinancing 289 Case Study 2: Asset-Based Lender, Assignment for Benefit of Creditors 292 Case Study 3: Angel Investors 297 Case Study 4: Royalty Financing 300 Case Study 5: Commercial Finance—Trade Financing 302 Case Study 6: Mezzanine Investment 304 Case Study 7: Private Equity—Acquisition to Exit 305 Case Study 8: Private Equity—Restructuring 307 Case Study 9: Private Equity—Acquisition with Management Participation 309 Case Study 10: Private Equity—Public-to-Private Acquisition 312 Case Study 11: Merchant Bank Implements Buy-and-Build Strategy 316 Case Study 12: Strategic Investment 319 Case Study 13: Community Development Financing 322 Case Study 14: Debt with Revenue Sharing 326
PART THREE Financing Source Directory 329 Suggested Use of the Directory Section 331 Appendixes A Corporate Finance Primer 377 B Financial Statements 404 C Discount Rates 415 D How Fast Can Your Company Afford to Grow? 417 E Notes about Start-Ups 433 Glossary 437 Notes 467 Index 475 ftoc.qxd 2/15/05 12:30 PM Page x fbetw.qxd 4/15/05 12:36 PM Page xi
Foreword
rowth consumes cash! It’s what I refer to as the “First Law of Entrepre- Gneurial Gravity.” You run out of cash and the game is over. Each year, hundreds of companies fail because of insufficient funding. Others fail to thrive because of a lack of funding. The Handbook of Fi- nancing Growth will prove invaluable to those CEOs and CFOs searching for the right formula to fund their company’s growth. After all, optimal growth isn’t possible without the underlying capital structure to support it. The authors have put together a comprehensive sourcebook with a wealth of information on the funding process itself and sources of capital. Far from being simply a textbook, this book is a complete operator’s manual on the funding process. I know of few other books on corporate funding that are as comprehensive as this one. Every pertinent subject has been cov- ered here. The book begins with several chapters that describe the financing process, and then details sources of capital. An entrepreneur unfamiliar with the array of funding options available might at first think of only sell- ing stock (equity), or borrowing from a bank (debt). However, whole spec- trums of sources of capital exist and are described in detail in eight chapters and more than a dozen case studies. Not every capital source is right for every growth situation, so the authors are careful to describe the right ap- plication for each of these sources. The reader is shown how to develop a funding strategy that is right for his or her opportunity. Most importantly, the book is full of examples and case studies, giving a practical view to the process. My work at Gazelles and as founder of the Young Entrepreneurs’ Organization (YEO) has afforded me the opportu- nity to meet and work with thousands of entrepreneurs of growing firms. What they need is less theory and more practical applications of the ideas that can help them grow their business. And we learn best from the experi- ences of others (the very premise of groups like YEO), which is what the authors do best through their well-crafted “live” examples. The handbook’s authors have a wealth of practical experience in the financing arena. Kenneth Marks has been involved as manager, adviser, or board member with more than a dozen emerging growth and middle- market companies ranging from a venture-backed software start-up to a
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xii FOREWORD
middle-market insurance services provider. Larry E. Robbins is a founding partner of Wyrick Robbins Yates Ponton LLP, a premier law firm located in the Research Triangle Park area of North Carolina. Gonzalo Fernández is a retired vice president and controller of ITT’s telecom business in Raleigh, North Carolina. Subsequently he spent 15 years working as a fi- nance executive for emerging growth companies and as an accounting and business consultant to other companies. John P. Funkhouser has been a partner with two venture capital funds and operated as chief executive of- ficer of four companies in a variety of industries. Growing a business quickly and effectively is perhaps the greatest chal- lenge faced by an entrepreneur. The Handbook of Financing Growth is an effective tool for helping meet that challenge. I heartily recommend this handbook to you as a resource for improving the success of your company through effective financing and capital planning.
VERNE HARNISH Founder, Young Entrepreneurs Organization and CEO, Gazelles, Inc.
Ashburn, Virginia March 2005 fpref.qxd 2/15/05 12:31 PM Page xiii
Preface
e share an enthusiasm and positive outlook for the growth and vitality W of America’s emerging and middle-market companies. This segment of the economy has unprecedented access to capital and resources relative to any other time in history. Today there is nearly $150 billion of equity capi- tal available, about $90 billion in private equity funds and another $60 bil- lion in venture capital funds—ready to be deployed.1 These figures do not include the billions of debt capital available from various lenders ranging from commercial banks to specialty finance companies. Within these pages, we introduce the full spectrum of funding alterna- tives available to emerging and middle-market companies, and we present practical strategies and techniques as you consider capitalization of your or your client’s company. Our approach to funding a company is process based—driven by the use of funds, the stage and industry of the company, and the investor objec- tives. We have written this handbook primarily from practical experience and empirical data; and we have included some basic corporate finance the- ory that is helpful as a foundation in understanding some of the topics dis- cussed within the body of the book. The focus is on companies with revenues ranging from zero to about $500 million, deemed start-up through middle-market. Representative companies are those in the INC 500 and the Forbes Small Business 100, venture-funded companies, and those many thousands of companies funded with friends’ and family money and hard-earned savings and sweat equity. We find many competent and successful businesspeople commonly misusing terms and having misconceptions about basic aspects of corporate finance. Many times we hear the leader of a company discuss the alterna- tives for funding the next stage of growth in the business and mentioning venture capital. The fact is that very few companies are a candidate for ven- ture funding and even fewer actually obtain it. Based on anecdotal data, we estimate the funding rate of business plans submitted to venture capitalists to be in the 0.2 percent to 0.5 percent range or 1 out of 200 to 1 out of 500
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xiv PREFACE
companies.* Even with such a low funding rate, do not give up! We also hear stories from entrepreneurs who just do not understand why their bank will not lend them the money they need to hire the next round of em- ployees required to support their growth. If only these folks understood the role of the bank or the type of companies that venture capitalists actually invest in; if they only understood the full range of financing alternatives and how to obtain the right type of funds for their needs at the right time. This handbook is meant to address these questions and to provide the ba- sics of corporate finance as well as to provide strategies with which to fund all types of viable operations at the various stages of the company life. In addition, we will drill down into the details to illustrate how to execute a financing plan. We desire to provide the reader a solid foundation and per- spective from which to address capital structure questions and the financ- ing needs of the company. You will note a series of recurring themes with regard to financing. These apply to those who are operating managers reading this handbook and to those advising and supporting the company; it is a bit of mother- hood and apple pie, but is central to successful fund-raising:
1. Establish and follow a process. 2. Start raising capital before you need it. 3. It’s relatively easy to get an audience with investors compared to get- ting funding. Be prepared for the tough questions and know your busi- ness (get your house in order): Know your market and competition (details). Know your weaknesses and have a solution. Define a clear use of funds (this leads to alternative capital structure and funding sources). Be able to explain your strategy. Identify relationships and levers (this sometimes reveals funding sources and partners). Prepare the management team and rehearse your presentations. 4. Select only a few prospects; otherwise you waste time and get a reputa- tion for shopping the deal. 5. Know what kind of money you need and how it plays into the overall capital structure of the company.
*The percentage of business plans funded increases significantly if the basic concept is reasonable and the entrepreneur finds a fundable formula. fpref.qxd 2/15/05 12:31 PM Page xv
Preface xv
6. Sample the market for acceptance and issues; listen to criticism and learn. Go to sources where you have relationships for quick and can- did feedback. Look for trends. 7. Be realistic regarding valuation, issues, strengths, weaknesses, and timing. 8. Have alternatives and be creative. 9. Follow the operating principles of “do what you say you are going to do” and “no surprises.”
All of this can be summed up into a single word: credibility. There is no substitute for solid operational performance. We believe we saw an in- frequent occurrence with the Internet bubble where companies (dot-coms) could raise capital without regard to business execution; those days have passed! There may be some reading this handbook who think they would be lucky to obtain financing of any type; we would challenge you to look at some of these basic issues to determine the root cause of your struggle. Many times the discipline of an institutional investor (equity or debt) forces management to address the hard issues and to better operate the business. If as an operator or leader of a company you can do this prior to obtaining outside financing, you may be in a stronger position to choose your financial backers and to defend a more aggressive valua- tion. Once again, we are talking about the credibility of management and leaders. Our target audience is the leaders, managers, investors, and advisers of and to these companies, and those aspiring to one of the many roles in building these firms. More specifically and by its title, this work is a hand- book, written for entrepreneurs, founders, presidents, CEOs, CFOs, mem- bers of a board of advisers and board of directors, lenders, investors, attorneys, accountants, consultants, investment bankers, commercial bankers, controllers, and senior management. In addition, we believe this handbook is a useful resource for students in college and professional edu- cation courses focused on entrepreneurial and growth companies. How- ever, unlike either the encyclopedic or the 1-2-3 Home Depot-esque guides that the term handbook connotes, this document strives to be far more than that. It’s a combination—part reference guide and part repository of practical information and applied research. The contents range from com- parative financing vehicle tables charted on the risk-return continuum to detailed capital-instrument definitions to a showcase for real case studies. In our collective opinion, the theoretical without the practical would po- tentially skew the reader’s perspective, or worse, offer incomplete informa- tion. To further drive key points home, we have continually tried to pepper fpref.qxd 2/15/05 12:31 PM Page xvi
xvi PREFACE
the text with comprehensive examples from both successful and unsuccess- ful companies. The financing growth portion of the title reinforces our focus on the growth aspect of a business, and which financing alternatives are most ap- propriate. Not only will capital structure differ by industry and by life cy- cle of a firm, but also by the risk tolerance of the executive team and investors. Peace of mind and security might be more appropriate in the short run than a perfectly optimized mix of debt and equity, or worse, a strategy that leverages assets to their greatest extent possible in order to maximize value. Of course, these same executives must concurrently bal- ance their psychological needs with investors’ requirements, internal rates of return, and actual shareholder returns. Part One of this handbook, “The Financing Process,” provides a de- tailed description of the steps followed in an ideal scenario. We start with an overview of strategy and the importance of defining the objectives of the company and the various stakeholders. Then we transition to a discussion of the use of funds and addressing risk issues. To support this section, we pro- vide a refresher or summary overview of corporate finance in Appendix A. Much of this content is derived from work by Aswath Damodaran in his text Applied Corporate Finance.2 Aswath Damodaran is an associate professor of finance at New York University’s Leonard N. Stern School of Business. He has received several awards, including the NYU Distinguished Teaching Award in 1990, Stern’s Outstanding Teacher Award in 1988, and the Professor of the Year Award in 1988, 1991, and 1992. He also offers training programs in corporate fi- nance and valuation at Deutsche Bank, Swiss Bank, Credit Suisse, J. P. Morgan, and Smith Barney. A former instructor at the University of Cali- fornia at Berkeley, he has written several articles for many of the nation’s leading financial journals. We chose not to reinvent the wheel when it comes to the basics, but to use Damodaran’s extensive research in this area. We provide a theoretical and practical discussion surrounding capital structure (the design of the balance sheet—i.e., the mix of debt and equity used to fund shareholders’ objectives). We place emphasis on the spectrum of funding instruments, sources, and expected rates of return followed by suggestions on the use of third party experts. Lastly we address closing the deal, managing the rela- tionship with the investors/lenders, and exiting or repaying the funds. Part Two, “Case Studies,” provides real examples of transactions with companies in varied stages and industries; this provides the backdrop for a meaningful discussion. Part Three, “Financing Source Directory,” is an extensive list of actual funding sources. It’s accompanied by access to our online database. fpref.qxd 2/15/05 12:31 PM Page xvii
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In Appendix B, we provide a short tutorial regarding financial state- ments and reporting. Appendix C contains a note about calculating the dis- count rate used in valuing emerging growth and middle-market privately held companies. Appendix D is a reprint of an article titled “How Fast Can Your Company Afford to Grow?” illustrating how to determine the maxi- mum rate of growth for a particular company based on internally gener- ated cash flow. In Appendix E we present some observations and thoughts about financing start-up companies. Finally, an extensive Glossary provides a guide to the most common terms used in corporate finance and a practical definition for each. We want this handbook to be a reference and guide for you as you de- velop and execute the financing plan for a company. Further, upon comple- tion of reading this handbook, we intend that you will have the basic tools to structure a company’s balance sheet to meet its objectives, and the direc- tion to find the required funding. It is worth noting that where applicable we have adapted content from select writings of specialists in various fields. Though we are knowledge- able in every aspect of the financing process, we want to ensure the reader is receiving information from the most qualified sources with a contempo- rary perspective. In addition, we have reached out to the investment and lending communities as part of our primary research to capture current data, actual examples, and an industry-based perspective to counter our own experiences and biases. We are always receptive to questions and comments, so do not hesitate to write us at: [email protected], [email protected], [email protected], or [email protected].
KENNETH H. MARKS LARRY E. ROBBINS GONZALO FERNÁNDEZ JOHN P. F UNKHOUSER
Raleigh, North Carolina March 2005 fpref.qxd 2/15/05 12:31 PM Page xviii flast.qxd 2/15/05 12:31 PM Page xix
Acknowledgments
e gratefully acknowledge and thank the many contributors and sup- W porters of this work. In particularly we would like to mention Aswath Damodaran, Verne Harnish, Peter Pflasterer, Donald Rudnick, Andy Burch, Tom Holder, Buddy Howard, Chris Mercer, Mark Larson, Ian Cookson, Don Tyson, Dana Callow, Roy Simerly, Ira Edelson, Robert Winter, Matt Emerson, Frank Buckless, David Buttolph, Bruce Kasson, Bob Calcaterra, Linda Knopp, Campbell R. Harvey, and Neil Churchill. We are most appreciative of the support provided by the Tuck Center for Private Equity and Entrepreneurship of the Tuck School of Business at Dart- mouth, and the works and content by Professors Michael Horvath, Colin Blaydon, Fred Wainwright and Andrew Waldeck, Jonathan Olsen, and Salva- tore Gagliano; Ross Barrett of VC Experts, Inc.; and Patrick O’Rourke of BizStats.com. Many thanks to the hundreds of industry firms that con- tributed information to the Financing Source Directory in Part Three. We are grateful to our case study contributors David MacNaughtan, Robert Newbold, Robert B. Landis, David Warner, Sabine Zindera, Franklin Staley, Vito Russo, Donald Rudnick, George M. Richmond, James Rutherfurd, Leo White, John Hamilton, Valerie Raad, Rick Larson, Mark Wilson, Meg Barnette, and David D. Buttolph. We appreciate the guidance, confidence, support, and patience of Pamela van Giessen, editorial director, and Jennifer MacDonald, editorial program coordinator, both with our publisher John Wiley & Sons, Inc. Ja- nine Hamlin provided significant support with the creation of graphics. Fi- nally, special thanks to Frank J. Fabozzi for connecting us to Pamela.
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About the Authors
Kenneth H. Marks (Raleigh, North Carolina) is the president of JPS Com- munications, Inc., a fast growth technology subsidiary of the Raytheon Company, and he is the principal and managing director of Marks & Com- pany Inc. (www.MarksAndCompany.com), which provides strategic advi- sory and corporate development services. He has been involved as management, adviser, or board member with more than a dozen emerging growth and middle-market companies ranging from a venture-backed soft- ware start-up to a middle-market insurance services provider. Mr. Marks was a director of a North Carolina–based regional invest- ment bank focused on raising capital for emerging growth companies. Prior to that position, he was the president of a small publicly traded company and president and CEO of an electronics manufacturer he founded and grew to $20 million in revenue. He is a member of the Young Presidents Organization (YPO); the founding YPO Sponsor of the Young Entrepreneurs Organization (YEO) in the Research Triangle Park, North Carolina, Chapter; a member of the Council for Entrepreneurial Development; and a member of the Associa- tion for Corporate Growth. He created and teaches “Managing Emerging Growth Companies,” an MBA elective at the Hult International Business School in Boston (formerly the Arthur D. Little School of Management) in connection with Boston College’s Carroll School of Management. He is the author of the publica- tion Strategic Planning for Emerging Growth Companies: A Guide for Management (Wyndham Publishing, 1999). Mr. Marks obtained his MBA from the Kenan-Flagler Business School at the University of North Carolina in Chapel Hill, and his undergraduate studies were in electrical engineering at North Carolina State University.
Larry E. Robbins (Raleigh, North Carolina) is a founding partner of Wyrick Robbins Yates Ponton LLP, a premier law firm located in the Re- search Triangle Park area of North Carolina. He is a frequent lecturer on the topics of venture capital and corporate finance and serves on the boards of directors of entrepreneurial support organizations, technology trade associations, and charitable and arts organizations. Mr. Robbins
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received his BA, MBA, and JD from the University of North Carolina at Chapel Hill. He was also a Morehead Scholar at UNC.
Gonzalo Fernández (Raleigh, North Carolina) is a retired vice president and controller of ITT’s telecom business in Raleigh, North Carolina. Sub- sequently he spent 15 years working as a finance executive for emerging growth companies and as an accounting and business consultant to other companies. He is a past president of the Raleigh Chapter of the Institute of Management Accountants. He received his BA in accounting from Havana University, Cuba. He wrote the book Estados Financieros (Financial State- ments) (UTEHA, México, Third Edition, 1977).
John P. Funkhouser (Raleigh, North Carolina) has been a partner with two venture capital funds, and operated as chief executive officer of four compa- nies in a variety of industries from retail to high technology. In his venture capital capacity, he was a corporate director of more than a dozen compa- nies and headed two venture-backed companies. The most recent company he led from a start-up concept to a public company is a medical diagnostics and devices business. Mr. Funkhouser worked in commercial banking with Chemical Bank of New York, in investment banking with Wheat First Secu- rities, and in venture capital with Hillcrest Group. He has an undergraduate degree from Princeton University and an MBA from the University of Vir- ginia, Darden Graduate School of Business Administration. flast.qxd 2/15/05 12:31 PM Page xxiii
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OnePART
The Financing Process ccc_marks_pt1_1-2.qxd 2/10/05 10:15 AM Page 2 ccc_marks_ch01_3-5.qxd 2/10/05 10:15 AM Page 3
CHAPTER 1 Introduction
or emphasis, we want to point out that there is no silver bullet in fund- Fing a company. As much as we would like you to believe that every fund-raising follows the same consistent process, it is just not true. How- ever, what we will do is provide a view that is fairly representative of the key steps that need to be considered and how to navigate the process. In practice you will find that some steps are conducted concurrently with others, and some steps are conducted rather informally. What we have attempted to do is explicitly show the key steps and provide guidance for each. With that said, Figure 1.1 provides an overview of the financing process from the perspective of the issuer and is comprehensive in that it indicates the steps for raising equity; debt placement will be a subset of this process depending on the transaction type. In many instances you will see the word investor used interchangeably for either an actual in- vestor or a lender; the line of distinction blurs depending on the charac- teristics of the deal. We have chosen to segment the process into the following categories for discussion. You’ll note that this is also the orga- nization of Part One of this handbook.