Serial entrepreneur Tim Wallace, most recently founder and now strategic advisor for iPipeline, has raised a lot of capital over the years, in many forms and for many companies. He says raising capital is one of his strengths because he made it part of his job.
"I met with investors day one with every one of my companies, every single week, every single month, all year round whether or not I was looking to raise money because by keeping that message clear to that investor community about who you are, where you're going, what your capital requirements might be, when the time comes when you need the money you've created demand so that you're not going to sit there and waste six or seven more months to raise the money, you're going to raise it in 30 or 45 days because everybody knows the story. At that point in time, they're either all in or they're so interested you've got them frothing at the mouth."
iPipeline, he says, was recapitalized four times — at pre-money for about $18 million, two or three years later it was recapped it for $170 million, three years after that it was recapped it for $385 million, and then four years later it was sold for $1.625 billion.
"The management team never change, my ownership interest never changed," he says. "We just kept bringing in new capital because we needed that capital to accelerate our growth."
Even at XL Connect, which he founded, a lot of money was raised before it went public.
"I was always constantly making sure that I had the message to the right people," he says. "If you're an entrepreneur and you're starting to hit a radar screen because you are doing the right things — you're growing correctly — these people want to meet with you because they have money to deploy, and part of their job is to find the next company that they can make three, four, five, 10x returns for their investors."
But courting capital isn't just about communicating to investors. It's also about picking the right money, "because, as I like to say, there's smart money they're stupid money," Wallace says.
That, he says, is the hard part because there is a plethora of options. So, it's paramount to determine what resources the investors have, their strengths and what networking capabilities they have because that's what they're really going to bring to the table. They could help with operational issues, but for the most part they're going to leave it up to the founders or existing management to run the company as they're often primarily financial guys.
"It's really important to assess what they're going to bring to you versus just cash because if they're really well known within your industry, there's nothing like your strategic investor picking up the phone and calling the CEO of New York Life and saying, Hey, I got an investment that's coming down here I'd really like you to meet with Tim Wallace at iPipeline because they have this great insurance software. They can make those types of introductions, or they can help recruit other executives that you're going to need as you continue to scale that company."
Wallace spoke at last year’s Philadelphia Smart Business Dealmakers Conference about his vast experience founding companies and growing them into wildly successful businesses. Hit play on the video above to catch the full discussion.