1. What tips can you offer Brian Razzaque for creating a business plan that will attract the capital SocialToaster needs to fuel its growth?
Answer: Creating a business plan is important for attracting investment in a company regardless of the type (equity or debt) of capital being provided through the investment. The key to creating a great business plan is creating a document that answers all of the questions a potential investor would be interested in. Investors are not interested in flashy, non-substantive plans, but they want to know there is a substantial market opportunity (supported by evidence), and why your company is the right company to capitalize on that opportunity. Investors want to know your financials from the past five years,…show more content… Equity considerations
SocialToaster has come up with a great idea to help companies better utilize social media marketing. It has grown very quickly but now needs funding to be able to take the next step. There are two types of funding you can receive to fund the $500,000 for short term growth, and $2 million for your increased sales force, account managers, technical staff, and marketing efforts. These two types of funding are debt and equity.
Equity represents the personal investment of the owner(s) in a business, and debt represents the financing that an entrepreneur borrows and must repay with interest. There are advantages and disadvantages of both, and depending on the entrepreneur, they may prefer one over the other.
The primary advantages of equity are that the company does not have to pay back the money used to fund the business, as is the case with debt, and the owners are entitled to a portion of the company’s earnings, assuming they make a profit. However, the money is riskier because the owners assume the risk of losing their funds if the business fails. If approaching an investor for equity funding, the entrepreneur(s) would have to give up a portion of the company (which equates to a portion of the company’s earnings) in exchange for the…show more content… The next phase of equity investment, through which you will be able to raise your necessary funds is through angel investing. An angel investor will be able to provide the necessary funds, in exchange for an equity stake in your company. However, they may be willing to contribute the money for less equity than a venture capitalist because angel investors typically have a personal interest in the companies with which they invest. Below are the avenues you should pursue for attracting the necessary funding through equity (ordered from the first avenue to the