Business Articles, Capital Allocation, Executive Management, Leveraged Finance, Structured Finance

CEO’s Asset Allocation & Finance

There are Different Capital allocation strategies for CEO’s. However this post will dive into the different ways and avenues CEO’s have for Allocating Capital and what Equity vs. Debt is used for when raising Capital for growth.

Imagine your a CEO and you growing your public company, but find that your really not prepared for the capital it takes to buy a larger company. What do you do? That is a hard question to ask. However I can go through the different options a CEO has when using finance to Buy a company. And what being smart with asset allocation looks like? And what are the different options a CEO has with Leveraged Finance? Let’s get started! Uncle John Malone the Founder of Liberty Media teaching about Structured Financing below.

Did you read my post on the Six types of Assets?

Capital Allocation Chessboard

There are really only five Capital Allocation moves on the chessboard as a Chief Executive. First you have the option of investing into Research and Development or the Operations of your company. The next option is for you as the CEO to Invest into and or Acquire Strategic Assets or Companies. Next you could Issue Shareholder Dividends with Cash from the Balance Sheet. Or if your Cash is beginning to pile up like Bill Ackman’s Company Pershing Square from buying all those incredible cash flowing businesses you as the CEO have the option to implement a Stock Repurchase plan. And the very last? Pay off Debt that is causing your balance sheet to be inefficient. These are your options.

Invest into Company Operations
Acquire Strategic Assets
Issue Shareholder Dividends
Repurchase Stock with Cash
Pay off Debt

Did you catch my post about Special Situations Investing?

The Problem Issuing Additional Shares Diluting Current Shareholders Shares

Issuing Additional Equity Shares as a Capital Raise is foolish and blatantly unfair in my opinion to Shareholders. Because this dilutes current shareholders equity shares. In other words shareholders holding shares who are not able to provide additional capital will have their shares diluted equaling a reduction in ownership. To me that’s a touchy subject. I don’t feel that is fair to shareholders.

So what are the options a CEO has for Financing? That is a loaded question. Because we have 2 Finance Topics that need more explained real fast.

Structured Finance

Structured Finance is a entire topic unto itself about Finance LAW. However for todays article or post we will keep it brief. Structured Finance Refers to financing options for Restructuring a company out of Bankruptcy. You have Structured Finance options such as?

First we can share Structured Finance. What is Structured finance is all about? Financing a Business using Securitization, Tranching, Credit Enhancements.

Leveraged Finance

Leveraged Finance on the other hand is all about the Following: CEO’s. Pay ATTENTION!

Leveraged Finance (LevFin) refers to the financing of highly levered, speculative-grade companies. Within the investment bank, the Leveraged Finance (“LevFin”) group works with corporations and private equity firms to raise debt capital by syndicating loans and underwriting bond offerings to be used in LBOs, M&A, debt refinancing and recapitalizations.

The funds raised are used primarily for: Leveraged Buy Outs of Companies, Mergers and Acquisitions, Recapitalizations, Refi Old-Debt. If your a Investment Banking Analyst or Finance Student the links will help you find more about these different options Advisors, Bankers and CEO’s use to Finance Business’s Acquisitions or Debt.

Leveraged buyouts (LBOs): Financial sponsors need to raise debt to fund a leveraged buyout.
Mergers & Acquisitions: Acquirers often borrow to pay acquisitions. When a lot of debt is needed, it falls under the leveraged finance umbrella.
Recapitalizations: Companies borrow to pay dividends (“dividend recap”) or to buy back shares.
Refinancing old debt: There is an old investment banking adage that says “the best thing about bonds is that they mature.” Once a company’s debt matures, the company will need to borrow again to pay for the old debt.

One last part that is not obvious but crucial for CEO’s to understand. There is another method of Financing a Companies Sub-Division that may not correlate well with the Holding Companies niche in the Market Space. A way to keep finance separate is through the use of Tracking Stocks. Please read the Image below for more detailed description of Tracking Stocks.

Did you know? “Tracking stocks will trade in the open market separately from the parent company’s stock.” I was introduced first by and was educated about the use of Tracking Stocks by none other the Cable Cowboy CEO of TCI and Founder of Liberty Media Mr. John Malone.

Conclusion for CEO Finance Options

I do hope you found value in today’s post about Financing Options for CEO’s and hope you will use this new information to make better informed decisions as Public Company and Private Company CEO’s running and navigating finance. There are so many topics that evolve around the Finance Capital Markets that it would be impossible to include all available information on one post on my blog. But I would like to leave you with a very valuable nugget of wisdom from Mr. Warren Buffett.

Warren Buffett the CEO of Berkshire Hathaway always buys and invests into companies that gush cash flow. In turn his Company Berkshire Hathaway is always stacking cash and using the Treasury Markets to store that cash flow for the Balance Sheet. You see Mr. Buffett is smart enough to never place his companies extra cash inside a Bank Account at a Bank. That would be extremely inefficient and he would not receive hardly any long term value placing money into these facilities. Mr. Buffett would actually lose money over time. So he uses the Treasury markets to gain a positive interest on the cash Berkshire holds.

I hope you found value and wisdom from the information provided today. Nothing in this post is Personal or Business Financial Advice. And should be construed as strictly entertainment and the options a CEO has when considering all options for Financing. I hope you will take a page from Mr. Buffett’s book and Mr. John Malone’s Book and use what I have provided to make better and more informed decisions using the complex Capital Markets. Often times? Financing Business basics and using unsexy practices are all it takes to outperform the market as a informed CEO. Thank you.

Godspeed

Business Articles, Corporate Finance, Finance Articles, Investing, Securities

Corporate Secured & Unsecured Debt Securities

Lending Money to Corporations using Corporate Secured and Unsecured Debt Securities could be a risky opportunity for Institutional Lenders and for the Banks and Private Credit Investors. If your not up to date on the legal hierarchy or priority of claims for repayment? Allow me to share that Priority list below. Familiarity with a Corporate Balance Sheet will likely make this list easy for you.

Liquidation/bankruptcy fees and charges – this does not include court fees.
Debts due to preferential creditors – those entitled to certain payments in priority over other unsecured creditors – including wages owed in the four months before the date of the insolvency order, as well as all holiday pay and contributions to occupational pension schemes.
In company cases, any creditor holding a floating charge over an asset, such as a debenture. This is where a class of goods or assets – eg the debtor’s stock – are named as security for a debt.
All unsecured creditors.
Any interest payable on debts.
The shareholders in company cases.

The hierarchy of Credit starts with Secured Creditors then Unsecured Creditors. However for this Post I would like to focus on deliberately on Secured and Unsecured Debt for Institutional Investing. This small list is meant to be used in order and will help Retail Investors, Students, and Business Executives who need to brush up on this topic of interest. As a value investor we are laser focused at looking on a Companies Balance Sheet and focus directly and early on a Companies Solvency. If the company is Debt heavy? This usually indicates we need to consider the use of the Debt in order to make a informed decision on “How we arrive at a Companies Valuation”. If the Company we are investigating has no Debt on the Books? This is a good sign. And tells us as Value Investors “This maybe a very profitable Business to investigate further.”

Secured Debt

Corporate Debt Securities are like any other Loan, and are backed by various types of assets of the issuing Corporation. This list is a Seniority list. Meaning they are Secured Debt options in order.

Mortgage Bonds

Just as a Individual would go to the Bank to ask for a Loan backed by the Home and Land as Collateral for the Mortgage, a corporation will borrow money backed by Real Estate and Physical Assets that belong to the Corporation. If the Corporation fails and is unable to repay the Long Term Debt Obligation “Mortgage Bondholders”. The Assets pledged are liquidated by Court Order when the Corporation is insolvent and goes through the Chapter 7 Bankruptcy process. For further explanation? This video should help.

Equipment Trust Certificates

Interestingly Railroads and Airline companies, finance the acquisitions of their Rolling Stock, Train Rail Cars, Airplanes, by issuing an Equipment Trust Certificate. The Company provides a Down payment of usually 20% Twenty Percent of the cost of the rolling stock, and finances the balance over the course of time. For example, 20 years time. Because equipment has wear and tear from daily use in the operations of the Business, the Railroad will pay off a portion of the loan on an annual basis. Interestingly at no time, theoretically, is the value of the assets (rolling stock, rail-cars,Jet Aircraft) worth less than the amount of the principal remaining on the loan. When the company finishes paying off the loan it receives a clear title for the equipment pledged from the Trustee. If a company does fail to make the payments for the loan? The lender can then repossess the collateral and sells it for his benefit. It’s the same concept of financing a new Car.

Did you catch my post here on: Pooled Investments What you need to know?

Collateral Trust Bonds

Sometimes a Corporation doesn’t have real estate, Equipment, or assets to pledge as collateral for a Mortgage or Loan. Instead the Board of Directors or Management can pledge Company Securities like Stock or other Negotiable Securities from a Parent Corporation into a Trust as a form of secured collateral. This is useful because the Securities are readily liquidated in case of default. Obviously the better quality of Securities deposited as collateral the better the Rating of the Bond. Sometimes these are also referred to as Collateral Trust Certificates.

Unsecured Debt Securities

Debentures

A Debenture is a Debt Obligation of a Corporation backed by only the Corporations word and general creditworthiness. Debentures are written promises of the corporation to pay the principal loan amount back its due date with interest on a regular basis.Debentures surprisingly are not secured by any pledge of property. They are considered safe when the Lender has trust or a credit relationship with the Corporation. This is sort of like a Revolving line of Credit for Commercial Banks and their clients who are the Corporations. Example: Similar to Consumers who use a Bank Credit Card and have great credit worthiness.

Guaranteed Bonds

A Guaranteed Bond is a Bond that is guaranteed as to payment of interest, or both principal and interest, by a corporate entity other than the issuer. The guarantee is only as good and valued if the company providing the guarantee has a strong business. Guaranteed Bonds were popular in the Railroad industry in which Major Railroad Companies sought to ease the trackage rights from a short line Rail lines, and would guarantee the smaller Rail Lines companies debt. A more recent example would be Exxon Mobile Corporation guaranteeing a subordinate companies debt issue.

Senior Debt

This is used to describe the seniority of a Debt Issue. Or the relative priority of repayment claim of a Debt that has been issued. Every preferred stock has a Senior claim to Common Stock. Every Debt security has a senior claim to preferred stock. Secured Bonds have a senior claim to unsecured debt.The term senior securities means bonds and preferred stock, because they have a claim senior to common stock. If you would like to see the Seniority of Debt and Equity? Please refer to the Chart Above below the opening paragraph.

Subordinated Debt

Subordinated Debt is just that! “Belonging to a lower class or rank.” Please refer to above list of Ranked Repayment Obligations.

Credit Ratings

It would be unprofessional of me not to include Ratings and Credit Ratings Agencies in this Post. When evaluationg a Bonds Ratings? You should refer to the Bond Ratings are defined by the Creditworthiness of a Companies Debt. These are issued by Standard & Poors and Moody’s and Jefferies Investment Bank. All these are fantastic Companies who hand Credit Worthiness of Debt Issues and Companies Debt History.

For Credit Ratings This Image Below Will show my Notes on Bond Ratings.

High-Yield Bonds

Since I would have a difficult time explaining in detail High-Yeild Bonds. Investopedia has shared and described High-Yield Bonds as?

High-yield bonds (also called junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. High-yield bonds are more likely to default, so they pay a higher yield than investment-grade bonds to compensate investors.1

Issuers of high-yield debt tend to be startup companies or capital-intensive firms with high debt ratios. However, some high-yield bonds are fallen angels, which are bonds that lost their good credit ratings.

In conclusion I hope you learned a few things about Corporate Secured and Unsecured Debt Securities. In the end Bond Investing can fail. So it’s vital to know the basics of Bonds and Credit. This Wall Street Journal Animated Video should help you understand this fact.

These are basics we use as Investing and Finance professionals. Feel free to share and if you learned something? Fantastic! “

This post is for Educational purposes only. And should not be construed, implied, or taken as Investment Advice.”

Godspeed! Thank You.

Accounting, Corporate Finance, Finance Articles, Real Estate

Four Loan Types Business Leaders Need To Know

When you need money as a Investor or Real Estate Developer? You will certainly use one of these Loan types. Entrepreneurs also need to know and digest what the 4 different Loan types are when Investing and using Debt vehicles or Borrowed money.

Kansas City Private Loans, Kc Mortgages and Kansas Missouri Financing Available.

Contact Me HERE NOW!

What you need to know?

What Is a Balloon Payment Loan

A balloon payment loan is a mortgage or loan in which does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon payment because of its large size. Balloon payment mortgages are more common in commercial real estate than in residential real estate.

Constant Amortization Loan

In this Method of lending an equal portion of the principle is paid at each period plus interest variable.(On the loans Remaining Balance)Paid in the beginning of each period. Example Photo of the Schedule of Paying the Principle and the selected terms or additional Interest.

Constant Payment Loan

Constant Payment Loan is what most who buy a house refer to as a Mortgage. However in the world of Real Estate this loan example is a simple Loan plus interest schedule you pay back over the life or duration of the Principle.

Here is a Example image of the Simple Calculation of Constant Payment Loan and Interest Schedule.

Interest Only Loan

An interest only Loan is the simplest type of Interest payment loan schedule. Meaning you pay a percentage of Interest on the Principal annually over the life or duration of the loan. Until the loan is paid off. Simple. But here is a image to demonstrate to those who may have trouble computing the schedule. If your anything like myself? I always need extra help. Your in good company.

Loans Interest payments are easy to compute as a Business leader if you understand the basics. This post will help anyone getting in Real Estate of needing to research what Repayment of Loan interest really means.

I truly hope you learned something today. As this post was meant to be lean and mean. I did not want to pose how to calculate the Interest payments. Because often times you will become confused reading the verb-age. So just youtube the Payment Calculations of the loan types. This post was just meant to show what and how things work in the world of Interest loans and Amortization schedules. Cheers to all the Bankers in Finance, and Mortgage Brokers out there. This Post was sparked after I learned that a good man and Titan in the New York Real Estate Community passed last Tuesday. Simply I was watching a Interview and heard Larry start to speak about the Loan types with Son Bill in casual Conversation. And decided I needed to follow up on the Finance Slang and types they were discussing. And Viola this post was born.

R.I.P. to the Good and Great Mr. Larry Ackman.

Godspeed and Cheers To Larry.
JS

Corporate Finance

Corporate Finance Skills | Financial Model Types

I imagine your like myself and wonder “How to be valuable and indispensable to business leaders?”

To drive home my point? I would like for you to take a piece of paper and write down all the skills you personally have, then I want you to write down these words Trust, Loyalty, Reliability. Most college students look for and want a comfy job. But honestly if you have no skills that make you a attractive candidate? You will likely have a very difficult time finding a Company that will want to train you from scratch. Not impossible. Just difficult. You will be out of luck. But what if there was a easier better way? There is Hombre!

If you want to be indispensable to Business Leaders? This post will help you begin that process. This post will detail several Corporate Financial Skills you need to master. Which will make you more attractive as top shelf talent for Corporate Business leaders. Keep reading. This post is written for you.

Can you keep your mouth shut? Can you faithfully complete the mission or Jobs handed to you? Are you loyal? If the answer is no to one of these questions? Your like a stump and deadweight. Your going to be avoided by like the plague. However if you have Financial Literacy, growing experience, and Corporate Finance skills along with a trustworthy good attitude, and you are reliable? You will be a hot commodity and business leaders will be seeking you out.

Got any Skills?

Often times when I am meeting Government leaders in City, State, or Federal office they recognize right away I am a take no prisoners no bull shit type of Entrepreneur. I always keep learning new and useful Bad Ass skills. This makes me a Killer to many Business leaders and Politicians. Being a Jack of All trades has it’s uses. Right now I am studying daily Python Coding Courses and zeroing my sights on Financial Modeling to sharpen my Corporate Finance skills. That means I am sharpening my Business spear. Doing whatever it takes to be a successful team player. And especially adding value for my personal Business Career. I am positive my Partners and Mentors Investment Firm will find my new skills valuable as we evaluate Transactions.

Corporate Finance Modeling

I shouldn’t have to share with all you Entrepreneurs that if your continuing to learn? Your going to be very valuable to Private Equity, Venture Capital, Mergers and Acquisitions Investment Banking, Banks, Big 4 Accounting firms or even within Mergers an Acquisitions. Learning new Corporate Finance Skills will separate your value from most other people. A good Analyst who has experience is highly sought after by large firms. So learning Financial Modeling does have it’s benefits.

“How to learn Financial Modeling?”

This skill alone will propel you above others easily making you a competent Analyst within the Corporate Finance space. I highly suggest you first become Financially Literate before pursuing advanced Corporate Finance Training. The video below, will share some basics Financial Modeling and demonstrate several Different Types of Models.

How to learn Financial Models?

To learn financial models most times a person must just learn step by step within a training program explaining the different Financial Model types and how each model is used. There is not easy way to learn except by doing. This guide can help explain financial models to you.

The Three Statement Financial Model in Detail VIDEO

“The Different Types of Financial Models”

If your anything like myself learning new skills does not come naturally. However with perseverance, time, personal effort and luck? The books, and content you study do tend to start making sense. That growing experience is a investment into your future success. And so let’s make a investment into that future success right now and here on my blog. These are the different types of Financial Models you need to learn if you want to be in Corporate Finance.

The fundamental building block of all financial models is the three statement model. This model includes components that lay out

Assumptions
Income Statement
Balance Sheet
Cash flow statement
Support Schedules
Charts and Graphs

When you look at this model in Excel you will immediately see the Income Statement, Balance Sheet, and Cash Flow Statement are laid out for the purpose of analyzing historical results, Establish Forecast Assumptions, Building the Forecast, Set the foundation for more advanced modeling.

What are Corporate Finance Financial Models?

Corporate Financial Models take mathematical values that are used to calculate assumptions to value businesses and their assets and also for forecasting and budgeting purposes related valuations, debt, equity and other values within business

Discounted Cash Flow Model

The Next type of Model is the (DCF) Discounted Cash Flow analysis model. Or DCF model. This includes all the three standard statement model plus a extra little section all about free cash flow and evaluation.

Components of the DCF Model

Everything as the three statement model
Free Cash Flow (Firm or Equity)
Terminal Value
Weighted Average Cost of Capital
Net Present Value Using XNPV
Internal Rate of Return using XIRR

What is the Purpose of DCF Model?

The Purpose of the DCF Model is,

Valuing a Project, Business, or Investment Opportunity
Determine “How much to pay for a Acquisition?”
Assess the Impact of strategic initiative
Internal FP&A
Raising Capital

What is DCF mean in Financial Models?

A DCF means Discounted Cash Flow Model

Budgeting and Forecasting Models

A Budgeting and Forecasting Model is prepped and used to manage operations in House. It’s usually a monthly type model that monitor the cash inside of a business on a monthly basis. It’s basic forecasting.

The Components of this Model?

Assume Monthly Finances
Drivers of Operations
Three 3 Financial Statements (Previously Mentioned)
Ability to “Roll Forward” the Financial Model
Charts and Graphs for Visual demonstrations

The Purpose of Budgeting and Forecasting Model

Internal Executive Level Planning
Budgeting and Forecasting
Measuring Results and Performance
Strategic Planning
Evaluating Performance of Business

The Valuation Model

The Valuation Model does include a (DCF) and a comparable analysis of a type of Valuation. But also includes these components listed.

Components of Valuation Model?

Comparable Company Analysis
Precedent Transactions
DCF Model
Football Field Chart

What is the Purpose of the Valuation Model

Value a Business
Summarize the Valuation Methods
Create Outputs, charts and graphs for presentation
Present Analysis for Investment Banking & Private Equity Transactions

What is a Valuation Model in Corporate Finance?

Valuation Models in Corporate Finance value the business, summarize the Valuation Methods, Create Outputs, Charts, Graphs and Presentations for demonstrating value of a Business

Introduction to Corporate Finance Course: VIDEO

This is an Advanced Model for Mergers and Acquisitions (M&A)

A M&A Model is a very advanced Financial Model. To start in detail? The M&A Model has the three statement model and plus the DCF Model. And will include Operating Scenarios and Valuation Models and more.

Components of the Mergers and Acquisitions Model

Includes Three Statement Models and DCF Model
Operating Scenarios
Consolidated or Pro Forma Model
Transaction Assumptions Including (Synergies, Financing, take over premium)
Sensitivity Analysis
IRR and Share Price Impact
Accretion- Dilution Analysis

The Purpose of the Mergers and Acquisitions Financial Model?

Primarily the purpose is to evaluate M&A Transactions, Determin how much to pay for an asset or transaction and more.

Valuing a Target Business
Determine how much to pay for a acquisition
Compare Cash Vs. Share consideration
Evaluation Synergies and take over premiums
Asses the net impact of the Acquisition
This is used mainly in Investment Banking and Corporate Development

What is a M&A Financial Model?

Mergers and Acquisitions Finance Models determines how much to pay for a Acquisition, compare cash vs. share consideration, evaluation synergies and take over premiums, asses the net impact of the acquisition, and is used mainly by Investment Bankers and Corporate Development.

The Leveraged Buy Out Model

The leveraged Buy Out Financial Model is a extensive 6 stack of models to give you the absolute best analysis available for layered analysis.

The Components of the LBO Model

Three Statement Model and Operating Model
Operating Scenarios
Transaction Assumptions (Financing, Debt, Tranches, Takeover premiums)
Debt and Interest Schedule
Levered IRR analysis by investor criteria
Sensitivity Analysis

The Purpose of a Leveraged Buy Out Financial Model

Value a target Business
Determining How Much To Pay For An Acquisition?
Asses How much leverage can be used
Maximize the Equity IRR
Evaluate the Scenarios and Sensitivity
Obtain Financing and make a investment decision

This post was written in hopes to give you several main types of Financial Models used in Corporate Finance. I sincerely feel if you learn all of these and continue to learn as a Entrepreneur, as a Corporate Finance Analyst or Investment Banker? You will be valued and needed inside Private Equity, Investment Funds, Investment Banking, Wall Street Boutiques and even Big Firms like Blackstone and the Big 4 Accounting firms. Please take what you want from my growing experience. And Use it. It is a privilege you shared a little of your time here and found my blog useful. Thank you. And to all the Business leaders inside the Corporate Finance or Business Space? If you are needing some Professional Skills that I can provide? Please contact me “HERE” . I would be happy to help. Thank you for reading. Godspeed.

Business Articles, Finance Articles, Venture Capital

Ten Common Problems Entrepreneurs Face With Venture Capitalists

Yesterday I found myself chatting with a local Kansas City VC Attorney and he shared some personal experiences that really shared a few challenges Entrepreneurs face when seeking Venture Capital Partnerships. These insider secrets and failures really snapped a few things into perspective. The VC’s must be very selective and use strategic selections to keep and sort the deal flow that is not a waste of time.

If you really think about it? Venture Capitalists are bombarded with so much junk? Often real opportunities must be challenged and sorted. And the only way to accurately find the real opportunities? Is to create impossible standards and a crucible of challenges. The following is common things Venture Capitalists say to Entrepreneurs who are seeking Capital Partnerships or Investments.

Investor, Partner, or Venture Capitalists

Are you seeking a Partner or Money Investor? Is a question VC’s will likely directly ask you. However if you don’t know what your seeking? Your going to end up disappointed and likely roadkill. Fair warning. When a VC say’s they are Value investors? That means they like to fix things and make money.

However some will add money and other things like connections, guidance for improving operations and more. Some just give you money and say go get busy without guidance or mission support.

Did you catch my last Article and Post on “How Entrepreneurs Stay Safe When Investors Invest?” Read this article before accepting investment money from anyone. Back on topic an Back to business.

Often times when your in the Boardroom with a VC you should already know what you want, how much money your asking for and a laundry list of other details. If your there and unprepared? It’s likely your going to be disappointed like I shared earlier and roadkill. You should always be prepared and have a battle plan that is at least 6 months out.

Impossible Odds and Certain Rejection

2. Thank you for coming in and presenting your vision and business. However my partners just won’t let us move forward right now. (They say this because you weren’t convincing or exciting. They were just curious.)

How to handle this?

I would Thank them for your time. And leave. All things considered? Your going to face lots of rejection. Thousands of people who reject you and your business vision. However it’s likely you will work for face to face meet for over a year. And when you get in that boardroom with a Investment Committee? It was all for nothing. You fail and you move on. Your value process should be creating a huge pipeline. That’s your edge in a market filled with rejection and time wasters.

Scheduling Problems and Impossible Follow Up?

3. Trouble Scheduling a Meeting? Ok. So your a Entrepreneur your working hard and your finding it nearly impossible to have a meeting scheduled with Investors. What is happening? Well two things are happening. A. The Investment Team is watching you and looking at your background and your business vision. They also won’t tell you they are doing this. But expect it to be happening covertly behind your back. B. They want to see if your easily distracted and they want to test your mettle so to Speak. Don’t give up. Be polite. Be Confident. And under no Circumstances be a jerk or look weak.

People in general will watch your behavior and read in detail your communications. If your nice and sincere and completely committed? It will show in your perseverance. To many people call once or twice and are frustrated and never call back or follow up. This is the game they are playing. And it’s ridiculous at times. There is always a reason they don’t answer. It’s been my experience. People will Lie, deceive, and play games. However playing games and protecting their portfolios is how they stay above the fray in the business world.

How are you treated when your invited for a interview?

4. Are you meeting a Vice President of Development or are you meeting in a Board room with a Committee of Partners and Principals? This will gauge the level of interest the Private Equity Firm, Venture Capitalists will have in you as the entrepreneur or new business team.

A. If they place you in a small room with a VP of Development and a smile? This means it’s likely your not very attractive. B. If they invite you in to a large nice board room with coffee and a team of Partners and Principals? Your deal is fucking HOT!!! Act accordingly.

Is the Equity and Finance Structuring Trustworthy?

5. We are going to be fair with structuring Debt, and equity positions. (Unless your good good trust worthy friends? Don’t trust this whatsoever.) You should be taking steps to protect your interests and your equity. Have your own personal corporate Attorney negotiate the structures and equity positions that are best for you. If they threaten to walk away? You walk away first. You don’t want to beg or plead for anyone to ever be your capital partner or be the reason you wasted 20 years on a business that ended up not paying you a healthy equity piece.

The business world is extremely unfair at times. Make sure you know that the Attorneys for the VC will rob you without a gun. Or try to freeze you out as slave labor. Act accordingly. Your welcome.

The Lie Of Performance Based Equity Buy Back

6. Based on Performance you can earn back more equity down the line. ( Meaning if you perform at impossible levels? You will earn back equity in the company.) This should be pretty obvious. You want to do your background checks and put in the effort of interviewing previous successful and unsuccessful Venture Capitalists partners or entrepreneurs. You always want to work with well known names and Business leaders known for integrity and know for taking care of their people.

You don’t want to find out later you are on your own with a ship that is sinking. And your investment partners don’t care either way. They will just come in with corporate raiders and destroy the sinking ship. Leaving you with a failed experiment and a new sad life story. Be smart.. Be prepared, Be vicious in your approach for success.

Control Your Expectations

7. Our procedures for getting our partners funding as VC’s takes a month or two. ( This should be suspect) If you are lucky enough to sit down with a Venture Capital fund? It’s likely that they level of interest is moderate. But based on most of the experiences you should already have from others who have worked with them? You should know that its more likely that your in for a 1 year wait. Or longer. Prepare and keep a full pipeline. Often times after a few month’s they may call you back and follow up. Just to dig and see if your still interested for a sit down or if you have quit. More than likely your in for a year or two wait with VC’s. Be prepared to survive and fill up your VC Pipeline.

Feigning Interest as Investors

8. OH YA WE ARE INTERESTED!!! ( Honestly it’s more likely they are interested in your product or Intellectual property. Can they replicate it? Can they be the first knock off?) Be informed the game is largely rigged for Entrepreneurs. The only hope you have at fairness is from a Banker and someone you know treating you well. Don’t expect VC’s to invite you in and automatically partner and write you a check. Or work with you for the success of the project. Often they are not well organized and are ver opportunistic. Make sure your professional deck is clean, clear, concise with a time line. Don’t wait around. Be proactive and never ever get excited just because they called you back. Lower your expectations. But be pragmatic. You will thank me later.

Financial Modeling, Number Charts, and BS Statistics

9. You think all the financial models and assumed projections will impress their Accountants. WRONG! It will be dissected, interrogated, your math will be questioned for all failures. And you will have to answer slick impossible questions. But the good news is if you happen to have a CPA worth their salt? You can avoid the interrogation and punt to the Accountant or Analyst on your team.

Start at Failure and Build up from there

10. Just expect everything to be almost impossible with downsides and failures around every corner. If your able to prepare and research and interview all possibilities before hand? You may just have a fighting chance. Thank you for reading. I know this post seems impossible. As it was meant to be this way. Honestly most entrepreneurs need to not only change their expectations. But also settle in for a long, disappointing ridiculous ride. That is my experience and you should be aware the world of business is a cruel and unfair place. Make sure you are prepared for certain failure. And do prepare a mindset of certain failure. Armor your expectations and this will ensure your success one day.

Godspeed