Home Articles Diary of an entrepreneur raising capital: I think, therefore IM

Diary of an entrepreneur raising capital: I think, therefore IM


Oodles.com founder Steve Sherlock has set himself the goal of raising a multimillion dollar Series A funding round by the end of January 2010. He is documenting his trials and tribulations and seeking feedback from readers on AnthillOnline.com. This is the fourth post in his series.

Week 3: I think, therefore IM

I mentioned in previous posts, this is not my first capital raising but it is definitively the biggest and potentially most important. Despite additional pressure, I’ve found the process of writing the business plan this time a lot easier and I’m much more confident.

Some of this is due to previous experience, but mostly it’s because my company Oodles, thanks to its new digital wallet for frequent renters, has now significantly differentiated its model from potential competitors in our space.

This differentiation ties our whole pitch and business plan together. It gives us a real story to tell potential investors and provides a sense of urgency to the capital raising and execution, so as to head off the risk of someone copying before we get sufficient traction.

The flip side to being different is the likelihood that a unique product is also untested in the market and therefore more risky. In our case, luckily we’ve had our innovations in the market place for the past few months and have compelling metrics to support and validate the strategy.

My focus this week has been on drawing up the first draft of our Information Memorandum (IM). Unlike the business plan, I haven’t found this particularly easy at all.

The IM is effectively our business plan combined with a more formal document that covers various legal issues, including subscription information, escrow period, dividend policy, etc. In order to better understand what is required, I attended a seminar on raising venture capital a couple of months ago (co-incidentally organised by Anthill). As a delegate I received access to an IM template, which is what I’ve relied on.

Much of what is required in an IM I’ve found to be over my head. So to check I was on the right path I sent the draft to BusinessPlans.com.au, and I’m glad I did because they told me what I already suspected — i.e. it wasn’t very good. The problem is that I tend to focus on the technical side of our product offering, which is a good way to send a potential investor to sleep — or at least that’s what I’m advised.

I’ve decided, therefore, to pay BusinessPlans.com.au to overhaul the IM document.

In my next post I’ll pass on what I’ve learnt from the consultation process, and explain some of the more technical aspects of the IM.

While I’m willing to get help from others to make sure the IM is of a quality standard and addresses all the issues that a professional investor will expect be addressed, I still believe it was imperative that I wrote the business plan (as opposed to a consultant).

In my view, the person running the business has a much better understanding of all the key differentiating factors that need to be communicated.

Steve Sherlock is co-founder of Oodles.com, one of Australia’s leading online car rental aggregators.