We've helped a number of clients develop business plans and 
raise capital from "angel" investors, corporate entities and 
venture capitalists during the last 6-8 years. It's always a 
daunting process that can be full of pitfalls and require a 
tremendous amount of work - but it can be done! Here is some 
perspective gleaned from years of experience. 

The most important rule for raising capital to consider is: 
it's never easy to raise capital when you need to! Meaning, 
investors are inherently risk aversive, can be very picky 
(a real understatement!) and they are looking for the best 
deal with the greatest upside and minimal risk.

Rule number two - don't raise capital! Self fund your company 
(called bootstrapping in entrepreneur-speak) by finding 
customers that will purchase your products and services. 
This enables you to involve your most important business 
asset in your business from day one - customers! 

Rule number three - use the "FAF" or "VMC" methods. Raise seed 
(early stage) money from your friends and family and/or if you 
are really committed, pull some cash from a Visa or MasterCard. 
These methods can and do work for many entrepreneurs - be aware 
it can be very painful on the back end if your company does not 
make it! 

Angel investors can add so much to your company - they can 
bring "intelligent capital" to the business. Not only do they 
invest capital but will very often take an interest in helping 
you grow the company by taking a Board of Directors seat and/or 
temporarily assuming a senior management role. 

In my experience finding and recruiting a blue chip management 
team with advanced degrees and a strong corporate pedigree can 
sometimes kill a startup as quickly as no cash or revenue - yes, 
they look great in your business plan and venture capitalists 
love a "strong team."  But, you need "fly by the seat of their 
pants" manager/leaders who don't need to grind five sets of 
scenarios (analysis paralysis) before they can take action - 
hire entrepreneurial types who've excelled in small companies. 

Dealing with venture capitalists can be a significant challenge 
that is fraught with risk and no upside! Remember, they are 
highly skilled at the entire process, in most cases they've 
done it hundreds of times before. So, your on their turf when 
you step into this arena and you better do your homework 
properly (market size, revenue projections, cost of sales, 
marketing plan) and/or consult with a consultant, attorney 
or "angel investor" who has been through the process before 
to give you guidance. 

Round two in dealing with venture capitalists (assuming you 
are one of the 1% that submitted a business plan and/or were 
referred to them by another "VC approved" entity) can also be 
fraught with risk - know how to value your company (equity for 
capital), look at comparable deals in the marketplace and be 
prepared to negotiate hard and to give up more now than in the 
last 2-4 years.

Round three in dealing with venture capitalists or corporate 
investors. Don't (never!) be so desperate for capital that you 
agree to turn over the reins of the company if you don't meet 
specific performance milestones based on a first or second 
round of funding. There are too many variables in the 
marketplace for you too control and you're taking too much 
risk for not enough upside. If this is the only way you can 
raise money from this venture firm or corporate investor then 
walk away, in the end you will be better off. 

Here are some "cliff notes" on how to write a business plan - 
there is no set formula other than covering the basics about 
your company; i.e. technology, market analysis, marketing / 
business development, competitive analysis, management team 
and a five year set of (detailed by month from startup to year 
three) financials. The Executive Summary (first 3-5 pages) is 
the most important, as it is a summary of the entire plan and 
most investors read this carefully and scan the rest of the 
business plan. 

Don't get caught in the trap of endless rewrites based on 
investor feedback - put your plan through one or two reviews 
by your BOD members and or seasoned execs that will give you 
honest feedback. Once the plan has been reviewed and approved 
then go to market with this iteration and stick to it - 
investors should be investing in you ultimately, not an 
artificial business plan that more often than not is out 
of date by the time you get to market. 

Think about how you are going to market your company as you 
would any other product or service, blending traditional (fax, 
direct mail) with interactive processes (web site postings, 
e-mail, etc.). It's a numbers game, you have to aggressively 
market your company and be prepared to see a return of only 
1-3% versus your output - 1K in direct or opt-in email may 
only lead to 10-20 casual inquiries, generating 5-7 serious 
conversations, resulting in 1-3 term sheets (what we will 
invest for "x" equity) discussions.  

Finally, the last and most important rule of all is be 
tenacious, there is no substitute for absolute commitment 
to growing your company by raising capital or bootstrapping 
it! Your vision, guts and passion will very often carry the 
day when/where others may give up!!