Raising Capital: Get the Money You Need to Grow Your Business

465 Pages·2005·3.36 MB·English

by  Andrew J. Sherman

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R C
AISING APITAL
SECOND EDITION
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R C
AISING APITAL
SECOND EDITION
Get the Money You Need to
Grow Your Business
ANDREW J. SHERMAN
American Management Association
New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco
Shanghai • Tokyo • Toronto • Washington, D.C.
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This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with
the understanding that the publisher is not engaged in rendering
legal, accounting, or other professional service. If legal advice or other
expert assistance is required, the services of a competent professional
person should be sought.
Library of Congress Cataloging-in-Publication Data
Sherman, Andrew J.
Raising capital : get the money you need to grow your business / Andrew J.
Sherman.— 2nd ed.
p. cm.
Includes index.
ISBN 0-8144-0856-7
1. New business enterprises—United States—Finance. 2. Venture capital—
United States. I. Title.
HG4027.6.S534 2005
658.15’224—dc22
2004022298
© 2005 Andrew J. Sherman.
All rights reserved.
Printed in the United States of America.
This publication may not be reproduced, stored in a retrieval
system, or transmitted in whole or in part, in any form or by
any means, electronic, mechanical, photocopying, recording,
or otherwise, without the prior written permission of AMACOM,
a division of American Management Association,
1601 Broadway, New York, NY 10019.
Printing number
10 9 8 7 6 5 4 3 2 1
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FOR MY WIFE JUDY AND MY CHILDREN, MATTHEW AND JENNIFER;
THEY ARE MY NEVER-ENDING SOURCE OF SUPPORT AND INSPIRATION.
IN LOVING MEMORY OF HELEN HUNTER AND GARY GOLDMAN.
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Contents
ACKNOWLEDGMENTS ix
PREFACE xi
PARTI GETTING READY TO RAISE CAPITAL 1
CHAPTER1 Capital-Formation Strategies and Trends 3
CHAPTER2 Understanding Legal and Governance
Structures 25
CHAPTER3 The Role Your Business Plan Plays 47
PARTII EARLY-STAGE FINANCING 63
CHAPTER4 Start-Up Financing 65
CHAPTER5 The Art and Science of Bootstrapping 87
CHAPTER6 Private Placements 101
CHAPTER7 Commercial Lending 119
CHAPTER8 Leasing, Factoring, and Government
Programs 137
PARTIII GROWTH FINANCING 161
CHAPTER9 Venture Capital 163
CHAPTER10 Anatomy of a Venture-Capital Transaction 187
CHAPTER11 Preparing for an Initial Public Offering 197
CHAPTER12 The Mechanics of an Initial Public
Offering 227
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viii CONTENTS
PARTIV ALTERNATIVESTOTRADITIONALFINANCING 255
CHAPTER13 Franchising, Joint Venture, Co-Branding,
and Licensing 257
CHAPTER14 Mergers and Acquisitions 291
CHAPTER15 Capital Formation Business Growth
Resources Directory 321
APPENDIX 337
INDEX 437
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Acknowledgments
There are always many more people to acknowledge than space per-
mits, and for Raising Capital, Second Edition, this is no exception. I
am grateful to my clients for trusting in my advice, to my partners
for their support, and to my family and friends for their love and
patience. A special thanks to my mentors and sounding boards,
Venne Harnish at Gazelles, Mark Stevens at MSCO, Bill Posten at
Eagle Rock Partners, John May at New Vantage Partners, Ralph
Crozier at Case Design, Michael Keller, Jason Levinson, Mary
MacPherson, Virgil Klunder, Milledge Hart, Nancy Cass, and Jim
Blasingame—The Small Business Advocate.
I want especially to thank Al Schaeffer and Debra Hamson for
being there and for twenty years being the best partners that any-
one could ever expect. The same goes for Jo Lynch, my assistant and
right arm for more than four years.
Once again, the team at AMACOM was excellent and a pleas-
ure to work with, lead by Jacquie Flynn and the masterful editing
of Doug Puchowski and Jim Bessent.
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