Robb's opinion is biased, of course. He is just such an advisor and therefore has a vested interest in the topic. Still, he concedes that advisors are more necessary in some situations than they are in others. While there are lots of exceptions to the rules, Robb says if you fall into one or more of the following categories, an outside consultant is the way to go.
1. You have few contacts. If you don't know anyone who is in the business of investing in emerging-growth companies or if you have never made anyone a pile of money from investing in one of your companies, then you're just the type of entrepreneur who will get the most out of having an outside advisor in on the deal.
"To successfully raise capital, you must have a champion in the community," Robb says, "someone who is willing to say 'You know me. Look at this-it's a damn good company, and I am putting my reputation on the line.'" When you're able to show them you have that kind of backing, top investors will be willing to look at your deal. When you don't have that kind of support, the chances of someone taking an active interest in what you're doing are greatly diminished.
2. You're in a time crunch. If your business is busting out all over the place, the fact is, you don't have the time it will take to successfully raise money on your own. "You need the extra arms and legs just to qualify leads," says Robb. Truthfully, however, some early-stage businesses can sit on the shelf for a few months without suffering many drawbacks whatsoever to their competitive position because nobody is out there attempting to offer the same products or services as they are. For companies in that situation, time is not an issue they need to concern themselves with. Likewise, a profitable business seeking expansion funds may also qualify for the slower do-it-yourself approach.
In relation to the time aspect, you have to consider the speed with which you need to get your hands on fresh capital. "If you need money fast, within three to six months, get a consultant," says Robb.
Macrae concurs. "It can take three to four months just to get a memorandum together," he says. "And in today's environment, a company can get itself into trouble much faster than that. Speed matters more than ever."
3. You don't have experience. Finally, there's the experience factor. "If you have never raised capital before, get help," says Robb, adding that you will likely get a much better deal with someone who has been through the process than if you're getting an education on your first deal.
"When I raised money for the first time," says Macrae, "there were so many things we did not know: valuations, how to put together a board, how to manage expectations. In particular, we did not have a capital plan for how we would get more cash in when we needed it and found ourselves unexpectedly in a crisis mode. Having professional help could have saved us a lot of that pain."