The objective of financial public relations (FPR) is to increase the interest of the financial community in a company. The process enables the creation of new shareholders while maintaining the loyalty of existing shareholders. An added benefit of effective FPR is the increased awareness of a company’s products & services, resulting in increased sales. Increased sales growth is an important but often overlooked benefit of good FPR.

Micro-cap companies must always be finding new shareholders because there will always be sellers and the competition fighting for investor’s money is intense. It is becoming more difficult for micro-cap companies to create the exposure necessary to increase or even maintain market valuation. It will not matter how bright a companies future looks if the dan pena net worth investment community is unaware of the companies potential.

Effective FPR strategies will increase a company’s exposure to the investment community resulting in the following:

1. Improved volume, liquidity, share price and market capitalization
2. Improved visibility for the companies products or services
3. Enhanced ability to raise capital at better valuations
4. Improved analyst coverage
5. Improved media coverage
6. Improved ability to conduct acquisitions
7. Maximized shareholder value and others

   While we do provide “piece meal” FPR services, we have found that the best results come from comprehensive campaigns that take advantage of cross-marketing techniques that utilize the different strategies that are currently getting the best results.

   This approach allows our clients access to the “best of breed ” providers for all marketing strategies that might be utilized in a comprehensive FPR campaign. The time demands of FPR are enormous and these demands can take the resources of top management away from the day to day operations of a company and negatively effect the company’s growth. We have the ability to remove these time constraints by taking over the responsibilities of designing, structuring, coordinating and tracking all of the elements involved in a comprehensive FPR campaign.

Funding Rounds & Stages

Here is an explanation of the terms used in describing the different levels of financings. It seems everyone has a different way of describing what round a funding is but here is a general interpretation.

CAVEAT:

There are many rules and regulations that need to be adhered to that surround fundraising. In general terms, it is against the law to offer or sell stock/securities unless you are licensed to do so or qualify for an exemption and stock/securities must be registered with the Securities Exchange Commission (SEC) prior to offer or sale unless a qualified exemption is used. It is ill advised for a company to make an offering of securities or bring capital into an entity without competent legal and other advisors having structured the transaction in compliance with the pertinent regulations. All securities transactions are subject to the antifraud provisions of the federal securities laws.

Seed / Concept / Initial / Startup:

These are the initial investment rounds made in businesses at the very early stages of development. Founders and Angels are usually the investors at this stage but there are institutional investors that will get involved if the project meets strict requirements and the founders have a successful track record. Smaller amounts of capital raised with fewer investors are the norm at these stages. Seed capital is usually referred to as financing raised before a prototype is finished. Start-up capital is usually referred to as financing raised to help get a working prototype into production and fund initial marketing efforts.

1st Round / 2nd Round / Series A / Series B:

Companies and investment professionals will casually refer to fundings based on the number of financing transactions completed even though the legal documentation may refer to the securities in the issue as series B common, series A preferred etc. These and later stages are usually for larger amounts of capital and may have a greater number of investors involved.

Rounds 3rd, 4^th, 5^th, 6^th, etc. / Series C, D, E, etc.:

Rounds of financing that are after the 2^nd round.

Mezzanine / Bridge:

The last funding round that takes place before a company goes public or another major liquidity event takes place. The most common thought of liquidity event is an IPO but may also happen by being acquired or merging with an existing public company or selling the entity.

Debt Vs Equity

The differences between debt (bonds) and equity (stocks) are often misunderstood. The major critical factors that a company needs to evaluate when deciding which option is best are:

• The effect of dilution on existing shareholders (issuing more shares of stock)
• Operating restrictions imposed by a funding agreement
• Future growth constraints caused by debt service

Simply put, debt is borrowed money. Debt is a loan that has been made to a company and that the company has pledged to repay along with some consideration or return (usually a stated interest rate). Debt can be secured by collateral or unsecured and short term (maturity of one year or less) or long term (maturity greater than one year). Debt is a liability and is accounted for as such.

Simply put, dan pena net worth equity is an ownership interest in a company and therefore is not repaid like debt. Common stock is the most prevalent type of equity and allows the holder to vote on such matters as the election of directors. Shareholders of common stock also receive a share in a company’s profits via dividend payments and participate in any capital appreciation of the stock. Common shareholders of a corporation have a junior status to the claims of secured/unsecured creditors, bondholders and preferred shareholders in the event of liquidation.

The majority of the information in this site is devoted to equities but we will summarize the advantages, disadvantages and some of the terminology that is used in debt financings below:

Collateral – Assets pledged as security for a loan and the lender can foreclose on the collateral if the loan is defaulted on.

Nonrecourse Debt – Debt that entitles the lender to collect only against any assets pledged as collateral.

Personal Guarantees – Many times lenders will require the borrower to not only pledge collateral but also be personally liable if the debt is not repaid.

Straight Debt – Traditional borrowing based on a fixed or variable maturity and interest rate.

Subordinated Debt – This is borrowing that stands to be repaid after other debts but before equity shareholders receive consideration in the event of company liquidation.

Promissory Notes – Written agreement between the lender and the borrower that spells out the terms of the loan. Promissory notes are generally with recourse unless they specify otherwise.

Debt with Equity “Kickers” – In addition to the interest rate, some loans may have an equity kicker. Equity kickers give the lender the option to purchase stock in the entity that they loaned money to through warrants or a similar mechanism at a predetermined formula. The lender feels that by loaning money to a high-risk venture, they also want the ability to share in the capital appreciation of the company if it becomes successful but may not be willing to make an equity investment at the time the loan is made. Growing companies are in an endless pursuit of capital and while equity kickers may seem unconscionable they may be necessary to make a deal happen.

Convertible Debt – This is a hybrid form of financing that has been around for many years and allows the lender to convert a loan into equity shares based on a predetermined formula.

Advantages of Debt:

• There are many sources available
• Can be used for small and large amounts of capital
• May be less dilutive than straight equity offerings

Disadvantages of Debt:

• Growing companies may not want cash flow going to pay debt service which takes capital resources away from other business opportunities
• Associated interest rates, terms and covenants may be unfavorable
• Carried as a liability on the balance sheet of the borrower
• “Spiral” and other unfavorable convertible terms can be extremely dilutive

In conclusion, the pursuit of capital is never ending and is always difficult. The right amount of debt that is incurred versus the right of amount of equity that is sold varies industry by industry and company by company. The “Golden Rule” of finance plays an important role and the rule states “those that have the gold make the rules”. This means that many times the terms that the financing source is comfortable with will dictate the structure, rather than what a company would prefer. Debt should be used as an option when the terms are structured correctly but beware of hybrid arrangements that can be extremely dilutive. Dan pena net worth savvy entrepreneurs understand that successful capital raising is accomplished over time using a multi-stepped approach with a combination of both debt and equity.