Whether established or just starting up, every firm needs readily available capital. Professor of Accounting and Control S. David Young and co-authors Philip Kotler and Hermanawan Kartajaya believe that marketing concepts offer the best overall solution for attracting the types of funding that most independent businesses require. In this well-structured and highly readable book, they offer an expert overview of the most commonly available and reliable capitalisation sources for American and other Western entrepreneurs and corporate managers.
After providing an overview of what such investors typically look for in a business venture, the authors detail the far more numerous and often case-specific options now available. They consider the forms of risk assessment investors engage in, pointing out, for example, "an investment in a risky, high-tech venture, when combined with US Treasury bills, may offer the same net risk profile as Procter & Gamble".
While explaining the essential differences between the functions of capital and commercial investor markets, the authors succinctly clarify how such players focus on companies that apparently offer the best potential for generating shareholder wealth. While the world's capital markets are now bigger than ever, the competition for capital has never been more intense. As a result, "the process of raising capital has become as much a marketing function as a finance function."
Young, Kotler and Kartajaya describe how raising capital generally varies substantially within a firm's life cycle, from start-up, to expansion, to growth and maturity, to "decline" in terms of revenues, profits and cash flows, (though cash flows may still be positive).
Part Two offers a more detailed analysis of how investors and lenders interact. The roles of "business angels", venture capitalists (VCs), as well as banks and other major financial institutions are compared and contrasted. Considerations include what makes for a good candidate for angels. Where do such investors get their investment ideas? How can a business attract business angels, and what are the inherent risks involved?
The book offers an in-depth study of how venture capitalist firms operate, including the standard four-stage funding process. It advises regarding how to prepare for and present one's proposals at an initial meeting with a venture capitalist. What is "due diligence" in the VC context, and how are such examinations conducted? How do VC negotiations typically proceed, and how could investors hope to best close their deals?
One of the fastest growing of the recent wave of investment sources, the leveraged buyout, is also scrutinised, involving how such vehicles function, and what the concomitant risks might be. The authors then consider how banking loan arrangements in the West have changed dramatically in recent decades - much to the chagrin of most banks, who are now forced to be far more accommodating in what have become, for most, intensely competitive arenas. The book describes the types of checklists most banks now rely on, including the "Four Cs". Part Two concludes with considerations of commercial paper and bond vehicles, including the "junk bonds" that earned such notoriety in the 80s, but which remain attractive options for many firms.
Part Three centres on the tools necessary for attracting and keeping investors and lenders. One is urged to stay creative, particularly in appreciating and using "segmentation" effectively, as well as the proper allocation of resources for a given venture, and how to lead one's investors credibly via imaginative positioning tactics. The cases of Starbucks and Berkshire Hathaway are offered as prime examples of how best to win market share through "differentiation", "marketing mix" and "relationship selling".
Part Three ends with a discussion of business value, involving how to "avoid the commodity trap" when branding one's products, the "dissatisfaction trap" vis-à-vis services, and the "function-orientation trap" commonly afflicting business processes.
In the epilogue, the authors focus on how a businessman might best get his marketing right, describing how "in practice, strategy, tactics and value must all be balanced. They will then work together to win the investor's mind, market and heart shares".
John Wiley & Sons, 2004