A Fund Raising Saga: Why should you raise funds?

After answering What does fund raising mean? and When can you raise funds? at the beginning of the week, I'm going to try to answer a question that surprised me a bit, even though it's very well-justified: Why should you raise funds?  

It's so ingrained in my being as an obvious fact that I never felt the need to say it out loud: Raising money is an entrepreneur's  duty nowadays.

I'd even go further to say that it's a triple duty:

•    A duty to your shareholders,

•    A social duty towards your employees,

•    A duty to your country, who supported and helped you create your business.

1. A duty to shareholders who provide you with capital, which is the first liability of the company. This liability is actually what the company owes its shareholders. On the other side, there are the company's assets: R&D, the clientele, market position, the brand and the team, of course.
   
   The head honcho of a modern business (far gone are the days when the family business was created by a patriarch and passed on from generation to generation) often convinces one or several  associates to take part in the adventure as well and, sometimes, collect funds from their entourage. He's indebted to these people. He can't afford to sit there and say "I made my business grow, I pay myself a fat salary, we don't share the profits because we use them to grow even more, the company isn't worth much because it relies 100% on me, etc."  This wouldn't be an honest attitude to have with your shareholders.
   
   A modern entrepreneur's profession is to create value, not simply for himself by securing lifetime income, but for his shareholders as well.
   
   Raising money means developing your business, making sure that at a given moment, others are going to give you money  that will have two purposes: allow your company to grow faster and put a price on the company.


2. A duty towards your employees. First of all, this is mandatory if you want to attract the best talent out there. The talented don't join businesses that stagnate! They team up with companies that have a story to write.  And you need to convince these talents, recruit them and offer them opportunities to express themselves. You need to give them R&D resources to develop the best possible tools, resources to design the optimal material architecture, the ability to recruit other talented colleagues. When you have a really good idea, you need to carry it out as good and as fast as possible or else someone else, somewhere else will do just that! 


3. A duty to your country. I can already see some startled faces and eyes wide open.
   France (us being a French company) is a country that imposes enormous social and fiscal expenses on businesses, but it's also a country where anyone trying to launch a business receives a lot of help from the government.
   
   Therefore, it's wise, and even essential, to take advantage of any possible and imaginable aid out there to create your company. But after a few years, it's pay-back time. The numerous advantages that are offered need to balance out the cost of a job that hasn't been created, or the cost of paying someone's unemployment. 
   
   If you listen to the famous historian and economist Jacques Marseille, every unemployed person costs 50K€/year, or the triple annual income of an average Frenchman.
   
   So let's divide that by 2 to tone those numbers down. That means that a company that received 300,000 Euros in government funding has to create 12 jobs and keep them going. If they only hired 4 or 5 people, then the funds, which are provided by the general public (yep, we're talking about taxes and not money provided by investors or tax breaks for the company) aren't being used properly and the company is clearly abusing the system. And these rules would apply in any country.
   
   At Oxatis, we received a certain amount of government aid. For example, we are in an  underprivileged area of Marseille and a third of the employees we hired had to come from this area...and they were right to impose that requirement (I'm certainly grateful).
   
   We created 40 jobs and we didn't receive 40x25,000, or 1M€, from the government. Therefore, every job that we created saved the government money, and we could do that because we raised money to finance our growth. The help we got to jump start the business at the beginning was very welcome, but that kind of aid should not be taken advantage of!

These are the reasons why you should raise funds. Yep...it's a triple duty. Provided, and it goes without saying, that you use them wisely!

Which brings me to Monday's theme and the last chapter in this saga: What do you do with the funds once you have them?

Comments

[Keshawn]

hey i did everything you said. Thanks
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