Hiring a banker…

August 26, 2006

We’re now in August, and Seth and I began talking about raising money from outside investors. We had begun conversations with potential technology vendors to outsource technology development to India or eastern Europe. It was going to cost anywhere from $150k to $250k depending on how complicated we wanted our technology to be. There was also another chunk of change for development costs associated with implementing our registered card program with a different third party vendor. This would enable us to allow consumers to register any/all existing credit/debit cards with us and get the rebates/discounts from our merchants directly on their card when they shop in brick & mortar stores. Other costs that we saw on the horizon were some key employee hires, paying us a little bit to cover rent, some travel costs, and maybe even office space if we could swing it.

So last week, we thought it was necessary to try to raise some money (about $500k), depending on whether or not we could create enough interest among investors.One of our advisers told us that it might make sense to hire an investment banker to help us raise money, since they have relationships with wealthy angel investors and VCs. I thought that wasn’t a bad idea and went out on yet another search, this time for a banker (at least just to test the waters and gain another education). Given I had come from investment banking, I was pretty familiar with the process of private placements (raising money for private companies from private investors), and found it interesting how I was not in the client’s seat on the opposite side of the table this time around. I reached out to a few of my old friends at Citigroup and found out that their private placement group would not work with anybody raising less than $25 million (obviously not us). I also got in touch with a few smaller investment banks that would not work with us unless we raised at least $15 million (again not us).

So I was advised to search for a banker/consultant with ties to the venture community who was not employed by a investment bank.Last week I put out a few calls to some of these individuals. The names came to me from a variety of sources. I once again tapped my personal network and sent out feelers to friends, colleagues, and business contacts to ask if anybody knew such a banker. One of the individuals at a technology outsource firm I had been speaking with suggested a friend of his who works with small companies. One of our advisers recommended a friend who used to work in banking and now runs his own consulting practice. A third referral was from a distant family member who had just wrapped up a round of capital for his own start-up in Boston and had a person up there he had spoken to. I reached out to all three and received two call-backs. I have a meeting with the NY-based banker next week. I’ll let you know how it goes…

JT

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