Unfortunately, when it comes to raising capital, particularly equity capital, many entrepreneurs aren't as sure of themselves as Tuorto was. The business of finance is so intimate, and so tied to their own wealth, many entrepreneurs try to raise money on their own when they should seek outside help.
According to Source Capital founder Steve Glazer, who has 20 years of experience in securities and investment banking, raising capital relies heavily on three ingredients. "Two of these--contacts and expertise--can be acquired by entrepreneurs fairly easily," he says. But the third is the one that bodes well for his line of work. "Manpower is the real issue. Entrepreneurs must ask themselves: `Can I do this myself? Can I do two full-time jobs at once?' And the truthful answer for most people, if they are running a growing company, is no."
Another acid test to take when considering whether you need the help of a financing consultant is the amount of capital you need to raise. The majority of firms, including Source Capital, seek companies raising $3 million and up, for reasons chiefly related to compensation. Glazer says if you're raising $1 million or less, you're probably on your own. This doesn't mean you won't be able to find someone to help you; it just means it's less likely because anyone who is skillful enough to raise that amount of funding for a private company will be spending their time working on much larger deals.
And if you're in that awkward range of $2.2 million or so? "[The owner] typically hasn't done a complete enough analysis of the future," says Glazer. "What we find is if a company needs $2 million today, it will almost always need $5 million more next year."